10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 31, 2005

OR

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-32224

salesforce.com, inc.

(Exact name of registrant as specified in its charter)

Delaware	94-3320693
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

The Landmark @ One Market, Suite 300

San Francisco, California 94105

(Address of principal executive offices)

Telephone Number (415) 901-7000

(Registrant’s telephone number, including area code)

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 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 is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  ¨    No  x

As of July 31, 2005, there were approximately 107.6 million shares of the Registrant’s Common Stock outstanding.

salesforce.com, inc.

INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets July 31, 2005 and January 31, 2005	3
	Condensed Consolidated Statements of Operations three and six months ended July 31, 2005 and 2004	4
	Condensed Consolidated Statements of Cash Flows three and six months ended July 31, 2005 and 2004	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults upon Senior Securities	48
Item 4.	Submission of Matters to a Vote of Security Holders	49
Item 5.	Other Information	49
Item 6.	Exhibits	49
	Signatures	50

2

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

salesforce.com, inc.

Condensed Consolidated Balance Sheets

(in thousands)

	July 31, 2005			January 31, 2005
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	25,140		$	35,731
Short-term marketable securities		109,270			83,087
Accounts receivable, net		50,184			48,874
Deferred commissions		8,513			7,556
Prepaid expenses and other current assets		6,714			3,467
Total current assets		199,821			178,715
Marketable securities, noncurrent		98,300			87,120
Restricted cash		3,307			3,191
Fixed assets, net		17,280			7,637
Deferred commissions, noncurrent		2,030			2,057
Other assets		2,937			1,779
Total assets	$	323,675		$	280,499
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,941		$	2,525
Accrued expenses and other current liabilities		32,085			32,467
Income taxes payable		864			216
Deferred revenue		117,311			95,900
Current portion of capital lease obligation		606			563
Total current liabilities		154,807			131,671
Capital lease obligations, net of current portion		489			721
Long-term lease abandonment liability and other		1,171			1,596
Minority interest		1,806			1,380
Total liabilities		158,273			135,368
Commitments and contingencies
Stockholders’ equity:
Common stock		108			105
Additional paid-in capital		226,618			217,248
Deferred stock-based compensation		(3,996	)		(5,908	)
Notes receivables from stockholders		—			(727	)
Accumulated other comprehensive loss		(2,160	)		(999	)
Accumulated deficit		(55,168	)		(64,588	)
Total stockholders’ equity		165,402			145,131
Total liabilities and stockholders’ equity	$	323,675		$	280,499

See accompanying Notes to Condensed Consolidated Financial Statements.

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salesforce.com, inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

	Three months ended July 31,						Six months ended July 31,
	2005			2004			2005			2004
Revenues:
Subscription and support	$	65,638		$	36,017		$	123,828		$	67,133
Professional services and other		6,305			4,564			12,292			8,287
Total revenues		71,943			40,581			136,120			75,420
Cost of revenues (1):
Subscription and support		8,013			2,699			13,349			4,981
Professional services and other		8,224			5,483			14,853			9,564
Total cost of revenues		16,237			8,182			28,202			14,545
Gross profit		55,706			32,399			107,918			60,875
Operating expenses (1):
Research and development		5,470			2,074			9,772			4,201
Marketing and sales		34,688			22,525			69,190			42,940
General and administrative		11,355			6,635			20,778			12,208
Lease recovery		—			—			(285	)		—
Total operating expenses		51,513			31,234			99,455			59,349
Income from operations		4,193			1,165			8,463			1,526
Interest income		1,724			353			3,178			497
Interest expense		(31	)		(5	)		(44	)		(6	)
Other income		666			5			710			25
Income before provision for income taxes and minority interest		6,552			1,518			12,307			2,042
Provision for income taxes		1,310			202			2,461			272
Income before minority interest		5,242			1,316			9,846			1,770
Minority interest in consolidated joint venture		(202	)		(146	)		(426	)		(163	)
Net income	$	5,040		$	1,170		$	9,420		$	1,607
Basic net income per share	$	0.05		$	0.02		$	0.09		$	0.03
Diluted net income per share		0.04			0.01			0.08			0.02
Weighted-average number of shares used in per share amounts:
Basic		106,614			64,524			105,918			48,106
Diluted		117,974			107,749			117,181			104,079
(1)    Amounts include stock-based expenses, as follows:
	Three months ended July 31,						Six months ended July 31,
	2005			2004			2005			2004
Cost of revenues	$	160		$	187		$	310		$	357
Research and development		91			80			179			169
Marketing and sales		365			408			727			822
General and administrative		322			425			578			629
	$	938		$	1,100		$	1,794		$	1,977

See accompanying Notes to Condensed Consolidated Financial Statements.

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salesforce.com, inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Three months ended July 31,						Six months ended July 31,
	2005			2004			2005			2004
Operating activities
Net income	$	5,040		$	1,170		$	9,420		$	1,607
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest in consolidated joint venture		202			146			426			163
Depreciation and amortization		1,468			679			2,589			1,427
Amortization of deferred commissions		3,326			3,875			6,728			7,468
Lease recovery		—			—			(285	)		—
Expense related to stock-based awards		938			1,100			1,794			1,977
Changes in assets and liabilities		3,098			7,965			11,310			8,952
Net cash provided by operating activities		14,072			14,935			31,982			21,594
Investing activities
Restricted cash		(22	)		760			(116	)		754
Changes in marketable securities		(31,518	)		(73,361	)		(38,033	)		(86,185	)
Capital expenditures		(3,372	)		(484	)		(12,529	)		(762	)
Net cash used in investing activities		(34,912	)		(73,085	)		(50,678	)		(86,193	)
Financing activities
Proceeds from the issuance of common stock, net of issuance costs incurred		—			113,768			—			113,768
Proceeds from the exercise of stock options and warrants		5,290			92			7,442			1,734
Principal payments on capital lease obligations		(171	)		(157	)		(311	)		(215	)
Repurchase of unvested shares		(24	)		(7	)		(28	)		(43	)
Collection of notes receivable from stockholders		—			—			727			—
Proceeds from subsidiary stock offerings		—			40			—			40
Net cash provided by financing activities		5,095			113,736			7,830			115,284
Effect of exchange rate changes		281			(53	)		275			(55	)
Net increase (decrease) in cash and cash equivalents		(15,464	)		55,533			(10,591	)		50,630
Cash and cash equivalents at beginning of period		40,604			5,560			35,731			10,463
Cash and cash equivalents at end of period	$	25,140		$	61,093		$	25,140		$	61,093
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest	$	31		$	5		$	44		$	6
Income taxes, net of tax refunds	$	—		$	222		$	(116	)	$	266
Noncash financing and investing activities
Fixed assets acquired under capital lease	$	122		$	1,699		$	122		$	1,699
Conversion of preferred stock into common	$	—		$	61,137		$	—		$	61,137
Net exercise of warrants	$	2		$	—		$	48		$	—

See accompanying Notes to Condensed Consolidated Financial Statements.

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements

1. Summary of Business and Significant Accounting Policies

Description of Business

Salesforce.com, inc. (the “Company”) is the leading provider, based on market share, of application services that allow organizations to easily share customer information on demand. It provides a comprehensive customer relationship management (“CRM”) service to businesses of all sizes and industries worldwide. The Company began to offer its on-demand application service on a subscription basis in February 2000. The Company conducts its business worldwide.

Fiscal Year

The Company’s fiscal year ends on January 31. References to fiscal 2006, for example, refer to the fiscal year ending January 31, 2006.

Basis of Presentation

The accompanying condensed consolidated balance sheet as of July 31, 2005 and the condensed consolidated statements of operations and cash flows for the three and six months ended July 31, 2005 and 2004, respectively, are unaudited. The condensed consolidated balance sheet data as of January 31, 2005 was derived from the audited consolidated financial statements which are included in the Company’s Form 10-K for the fiscal year ended January 31, 2005, which was filed with the Securities and Exchange Commission (the “SEC”) on March 25, 2005. The accompanying statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s fiscal 2005 Form 10-K.

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in the Form 10-K and include all adjustments necessary for the fair presentation of the Company’s statement of financial position as of July 31, 2005, its results of operations and its cash flows for the three and six months ended July 31, 2005 and 2004. Other than for the lease recovery, all adjustments are of a normal recurring nature. The results for the three and six months ended July 31, 2005 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending January 31, 2006.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions in the Company’s consolidated financial statements and notes thereto.

Significant estimates and assumptions made by management include the determination of the provision for income taxes and the fair value of stock awards issued. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Additionally, the Company holds a majority interest in Kabushiki Kaisha salesforce.com (“Salesforce Japan”), a Japanese joint venture. As of July 31, 2005, the Company owned a 63 percent interest in the joint venture. Given the Company’s majority ownership interest in the joint venture, the accounts of the joint venture have been consolidated with the accounts of the Company, and a minority interest has been recorded for the

6

salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

minority investors’ interests in the net assets and operations of the joint venture to the extent of the minority investors’ individual investments. Additionally, the Company records gains and losses resulting from the change of interest in Salesforce Japan directly to stockholders’ equity as additional paid-in capital.

Segments

The Company operates in one segment.

Foreign Currency Translation

The functional currency of the Company’s major foreign subsidiaries is generally the local currency. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are recorded as part of a separate component of stockholders’ equity. Foreign currency transaction gains and losses are included in net income for the period. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date as quoted on the Pacific Stock Exchange. Revenues and expenses are translated at the average exchange rate during the period. Equity transactions are translated using historical exchange rates.

Concentrations of Credit Risk and Significant Customers and Suppliers

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, restricted cash, and trade accounts receivable. Although the Company deposits its cash with multiple financial institutions, its deposits, at times, may exceed federally insured limits. Collateral is not required for accounts receivable.

The Company’s accounts receivable and net revenues are derived from a large number of direct customers. No customer accounted for more than 5 percent of accounts receivable at July 31, 2005 and January 31, 2005. No single customer accounted for 5 percent or more of total revenue during the three and six month periods ended July 31, 2005 and 2004.

As of July 31, 2005 and January 31, 2005, assets located outside the Americas were 8 percent of total assets. Revenues by geographical region are as follows (in thousands):

	Three months ended July 31,				Six months ended July 31,
	2005		2004		2005		2004
Revenues by geography:
Americas	$	57,689	$	32,506	$	108,601	$	60,842
Europe		10,038		5,828		19,421		10,460
Asia Pacific		4,216		2,247		8,098		4,118
	$	71,943	$	40,581	$	136,120	$	75,420

The income from operations outside the Americas, excluding intercompany transactions, totaled $3,349,000 and $479,000 during the three months ended July 31, 2005 and 2004, respectively. Additionally, the income from operations outside the Americas totaled $5,186,000 and $360,000 during the six months ended July 31, 2005 and 2004, respectively.

As of July 31, 2005, the Company serves all of its customers and users from a single, third-party Web hosting facility located in California. The Company recently entered into additional agreements with another third-party provider that will provide for Web hosting facilities on both the west and east coasts of the United States. The

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

Company does not control the operation of any of these facilities, and they are vulnerable to damage or interruption. The Company has an agreement with SunGard Data Systems, a provider of availability services, to provide access to a geographically remote disaster recovery facility that would provide the Company with access to hardware, software and Internet connectivity in the event the Web hosting facilities become unavailable. Even with this disaster recovery arrangement, the Company’s service would be interrupted during the transition.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents, which primarily consist of cash on deposit with banks and money market funds, are stated at cost, which approximates fair value.

Restricted Cash

The Company’s restricted cash balance of $3,307,000 at July 31, 2005 consisted of certificates of deposit that serve as collateral for letters of credit that were issued to the Company’s principal landlords as a security deposit for office space in San Francisco, California. The letters of credit renew annually through December 31, 2010.

Marketable Securities

Management determines the appropriate classification of investments in marketable securities at the time of purchase in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities and reevaluates such determination at each balance sheet date. Securities, which are classified as available for sale at July 31, 2005 and January 31, 2005, are carried at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of stockholders’ equity. Fair value is determined based on quoted market rates. Realized gains and losses and declines in value judged to be other-than-temporary on securities available for sale are included as a component of interest income. The cost of securities sold is based on the specific-identification method. Interest on securities classified as available for sale is also included as a component of interest income.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income, which includes certain changes in equity that are excluded from net income. Specifically, cumulative foreign currency translation and unrealized gains and losses on marketable securities adjustments, net of tax, are included in accumulated other comprehensive income. Comprehensive income has been reflected in the consolidated statements of stockholders’ equity.

Comprehensive income consisted of the following (in thousands):

	Three months ended July 31,						Six months ended July 31,
	2005			2004			2005			2004
Net income	$	5,040		$	1,170		$	9,420		$	1,607
Translation adjustment		(485	)		(54	)		(491	)		(56	)
Unrealized loss on marketable securities		(348	)		(54	)		(670	)		(54	)
Total comprehensive income	$	4,207		$	1,062		$	8,259		$	1,497

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

Accounting for Stock-Based Compensation

The Company accounts for compensation expense for its stock-based employee compensation plans using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and complies with the disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”) and SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure. Under APB 25, compensation expense of fixed stock options is based on the difference, if any, on the date of the grant between the deemed fair value of the Company’s stock and the exercise price of the option. Compensation expense is recognized on a straight-line basis over the option-vesting period of four years. The Company accounts for stock issued to nonemployees in accordance with the provisions of SFAS 123 and EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

Pro forma information regarding the results of operations is determined as if the Company had accounted for its employee stock options using the fair-value method. The fair value of each option grant is estimated on the date of grant using the Black-Scholes method with the following assumptions:

	Three months ended July 31,				Six months ended July 31,
	2005		2004		2005		2004
Volatility	50	%	80	%	50%-75	%	80%-100	%
Weighted-average estimated life	4 years		4 years		4 years		4 years
Weighted-average risk-free interest rate	3.79	%	3.54	%	3.79%-3.95	%	2.86%-3.54	%
Dividend yield	—		—		—		—

During the second quarter of fiscal 2006, the Company reevaluated the assumptions used to estimate the future volatility of its stock price. The Company estimated its future stock price volatility based upon a blending of both observed option-implied volatilities and historical volatility calculations for both the Company and a group of peer comparable companies. Management believes this is the best estimate of the expected volatility over the 4 year weighted-average expected life of its option grants. During the Company’s initial year as a public company, the volatility assumption was primarily based on the historical volatility of comparable companies. As a result of its reevaluation and the general market decline in share price volatilities, the Company reduced its volatility assumption from 75% to 50% and applied this estimate in valuing the options awarded during the second quarter of fiscal 2006.

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

Had compensation cost for the Company’s stock-based compensation plans been determined using the fair-value method at the grant date for awards under those plans calculated using the Black-Scholes pricing model and recognized on a straight-line basis over the option vesting periods, the Company’s net income would have been decreased to the pro forma amounts indicated below (in thousands, except per share data):

	Three months ended July 31,						Six months ended July 31,
	2005			2004			2005			2004
Net income, as reported	$	5,040		$	1,170		$	9,420		$	1,607
Add: Total stock-based compensation expense included in the determination of net income		754			857			1,514			1,679
Deduct: Total stock-based compensation expense determined under the fair-value-based method for all awards. Such expense amounts are not net of tax benefits.		(5,248	)		(3,459	)		(10,006	)		(6,306	)
Net income (loss), pro forma	$	546		$	(1,432	)	$	928		$	(3,020	)
Net income (loss), per share:
Basic:
As reported	$	0.05		$	0.02		$	0.09		$	0.03
Pro forma		0.01			(0.02	)		0.01			(0.06	)
Diluted:
As reported	$	0.04		$	0.01		$	0.08		$	0.02
Pro forma		0.00			(0.02	)		0.01			(0.06	)

Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding for the fiscal period. Diluted net income per share is computed giving effect to all potential dilutive common stock, including options, warrants and convertible preferred stock prior to the completion of the Company’s initial public offering in June 2004.

A reconciliation of the denominator used in the calculation of basic and diluted net income per share is as follows (in thousands):

	Three months ended July 31,				Six months ended July 31,
	2005		2004		2005		2004
Numerator:
Net income	$	5,040	$	1,170	$	9,420	$	1,607
Denominator:
Weighted-average shares outstanding for basic earnings per share, net of weighted-average shares of common stock subject to repurchase		106,614		64,524		105,918		48,106
Effect of dilutive securities:
Employee stock options and warrants		11,360		11,981		11,263		11,339
Convertible preferred stock		—		31,244		—		44,634
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share		117,974		107,749		117,181		104,079

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

Outstanding unvested common stock purchased by employees is subject to repurchase by the Company and therefore is not included in the calculation of the weighted-average shares outstanding for basic earnings per share.

The following were excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact as their exercise prices were greater than the average fair values of our common stock (in thousands):

	Three months ended July 31,		Six months ended July 31,
	2005	2004	2005	2004
Options	580	20	845	257

Income Taxes

The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax basis of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Revenue Recognition

The Company derives its revenues from two sources: (1) subscription revenues, which are comprised of subscription fees from customers accessing its on-demand application service, and from customers purchasing additional support beyond the standard support that is included in the basic subscription fee; and (2) related professional services and other revenue. Other revenues consist primarily of training fees. Because the Company provides its application as a service, the Company follows the provisions of SEC Staff Accounting Bulletin No. 104, Revenue Recognition and Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. The Company recognizes revenue when all of the following conditions are met:

• There is persuasive evidence of an arrangement;

• The service has been provided to the customer;

• The collection of the fees is reasonably assured; and

• The amount of fees to be paid by the customer is fixed or determinable.

The Company’s arrangements do not contain general rights of return.

Subscription and support revenues are recognized ratably over the contract terms beginning on the commencement date of each contract. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.

Professional services and other revenues, when sold with subscription and support offerings, are accounted for separately when these services have value to the customer on a standalone basis and there is objective and reliable evidence of fair value of each deliverable. When accounted for separately, revenues are recognized as the services are rendered for time and material contracts, and when the milestones are achieved and accepted by the customer for fixed price contracts. The majority of the Company’s consulting contracts are on a time and material basis. Training revenues are recognized after the services are performed.

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

In determining whether the consulting services can be accounted for separately from subscription and support revenues, the Company considers the following factors for each consulting agreement: availability of the consulting services from other vendors, whether objective and reliable evidence for fair value exists for the undelivered elements, the nature of the consulting services, the timing of when the consulting contract was signed in comparison to the subscription service start date, and the contractual dependence of the subscription service on the customer’s satisfaction with the consulting work. If a consulting arrangement does not qualify for separate accounting, the Company recognizes the consulting revenue ratably over the remaining term of the subscription contract. Additionally, in these situations, the Company defers only the direct costs of the consulting arrangement and amortizes those costs over the same time period as the consulting revenue is recognized. As of July 31, 2005 and January 31, 2005, the deferred cost on the accompanying consolidated balance sheet totaled $1,156,000 and $874,000, respectively.

On occasion, the Company has purchased from its suppliers goods or services for the Company’s use in its operations at or around the same time these same businesses entered into subscription and/or consulting agreements. The Company generally defines “at or around the same time” as within six months. Revenues recognized from customers who were also suppliers were not significant during the three and six months ended July 31, 2005 and 2004. Both the procurement and revenue agreements are separately negotiated, settled ultimately in cash, and recorded at what the Company considers to be fair value. When any of these factors is not present, the Company does not recognize the revenue from the underlying sale agreements; rather, the revenue is netted with expenses.

Deferred Revenue

Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from the Company’s subscription service described above and is recognized as the revenue recognition criteria are met. The Company generally invoices its customers in annual or quarterly installments. Accordingly, the deferred revenue balance does not represent the total contract value of annual or multi-year, noncancelable subscription agreements.

Deferred Commissions

Deferred commissions are the incremental costs that are directly associated with noncancelable subscription contracts with customers and consist of sales commissions paid to the Company’s direct sales force. The commissions are deferred and amortized over the noncancelable terms of the related customer contracts, which are typically 12 to 24 months. The commission payments are paid in full the month after the customer’s service commences. The deferred commission amounts are recoverable through the future revenue streams under the noncancelable customer contracts. The Company believes this is the preferable method of accounting as the commission charges are so closely related to the revenue from the noncancelable customer contracts that they should be recorded as an asset and charged to expense over the same period that the subscription revenue is recognized. Amortization of deferred commissions is included in marketing and sales expense in the accompanying consolidated statements of operations.

Warranties and Indemnification

The Company’s on-demand application service is typically warranted to perform in a manner consistent with general industry standards that are reasonably applicable and 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 indemnifications and has not accrued any liabilities related to such obligations in the accompanying consolidated financial statements.

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

The Company has entered into service level agreements with a small number of its customers warranting certain levels of uptime reliability and performance and permitting those customers to receive credits or terminate their agreements in the event that the Company fails to meet those levels. During the six months ended July 31, 2005, the Company recorded a provision of approximately $500,000 for potential credits and paid out no amounts.

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.

Recent Accounting Pronouncement

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, or SFAS 123R, which requires all share-based payments to employees, including grants of employee stock options and purchases under employee stock purchase plans, to be recognized as expenses in the statement of operations based on their fair values and vesting periods. The Company will adopt the provisions of SFAS 123R on February 1, 2006, which is the start of its next fiscal year. The Company is currently assessing the impact of this prospective change in accounting and believes that it will have a material and adverse impact on the Company’s reported results of operations.

Additionally, SFAS 123R requires the tax benefits from employee stock plans to be classified as a financing activity in the consolidated statement of cash flows. The Company currently classifies these tax benefits as a source of cash provided by operating activities. These benefits totaled $1.9 million during the six months ended July 31, 2005 and zero for the comparable period a year ago.

2. Balance Sheet Accounts

Marketable Securities

At July 31, 2005, marketable securities consisted of the following (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Corporate notes and obligations	$	102,190	$	11	$	(715	)	$	101,486
Municipal bonds		1,883		—		(49	)		1,834
US government and agency obligations		104,918		—		(668	)		104,250
	$	208,991	$	11	$	(1,432	)	$	207,570

At January 31, 2005, marketable securities consisted of the following (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Corporate notes and obligations	$	78,773	$	13	$	(418	)	$	78,368
Municipal bonds		26,085		—		(35	)		26,050
US government and agency obligations		66,098		—		(309	)		65,789
	$	170,956	$	13	$	(762	)	$	170,207

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

	July 31, 2005		January 31, 2005
Recorded as follows (in thousands):
Short-term (due in one year or less)	$	109,270	$	83,087
Long-term (due between one and three years)		98,300		87,120
	$	207,570	$	170,207

The unrealized losses are attributable to changes in interest rates. None of the investments have been in an unrealized loss position for 12 months or longer. Management has the ability to hold these investments to maturity and does not believe any of the unrealized losses represent an other-than-temporary impairment based on its evaluation of available evidence as of July 31, 2005. The Company expects to receive the full principal and interest on these securities.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

	July 31, 2005		January 31, 2005
	(unaudited)
Deferred professional services costs	$	705	$	874
Prepaid expenses and other current assets		6,009		2,593
	$	6,714	$	3,467

Fixed Assets

Fixed assets consisted of the following (in thousands):

	July 31, 2005			January 31, 2005
	(unaudited)
Computers, equipment and software	$	20,906		$	12,703
Furniture and fixtures		2,590			1,755
Leasehold improvements		5,602			2,708
		29,098			17,166
Less accumulated depreciation and amortization		(11,818	)		(9,529	)
	$	17,280		$	7,637

In February 2005, we obtained additional software licenses for use in our business operations at a cost of $8.0 million. These software licenses are being depreciated over their useful life of 5 years.

Depreciation and amortization expense totaled $1,358,000 and $584,000 for the three months ended July 31, 2005 and 2004, respectively, and $2,381,000 and $1,245,000 for the six months ended July 31, 2005 and 2004, respectively.

Fixed assets at July 31, 2005 and January 31, 2005 included a total of $3,609,000 and $3,487,000, respectively, acquired under capital lease agreements. Accumulated amortization relating to equipment and software under capital leases totaled $2,462,000 and $2,142,000, respectively, at July 31, 2005 and January 31, 2005. Amortization of assets under capital leases is included in depreciation and amortization expense.

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

Other Assets

Other assets consisted of the following (in thousands):

	July 31, 2005		January 31, 2005
	(unaudited)
Capitalized internal-use software development costs, net of accumulated amortization of $1,165 and $957, respectively	$	1,012	$	641
Deferred professional services costs, noncurrent portion		451		—
Long-term deposits		1,474		1,138
	$	2,937	$	1,779

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	July 31, 2005		January 31, 2005
	(unaudited)
Accrued compensation	$	13,966	$	16,836
Accrued other liabilities		8,928		6,560
Current portion of lease abandonment liability		201		278
Liability for early exercise of unvested employee stock options		381		591
Accrued taxes payable		4,751		5,146
Accrued professional costs		2,486		2,241
Accrued rent		1,372		815
	$	32,085	$	32,467

3. Stockholders’ Equity

Stock Options Issued to Employees

The Company has in place the 1999 Stock Option Plan (the “1999 Plan”) which provides for the issuance of incentive and nonstatutory options to employees and nonemployees of the Company. As of July 31, 2005, there were 1,538,337 shares of common stock available for grant under the 1999 Plan. The 1999 Plan provides for grants of immediately exercisable options; however, the Company has the right to repurchase any unvested common stock upon the termination of employment at the original exercise price.

In addition to the 1999 Plan, the Company maintains the 2004 Equity Incentive Plan, 2004 Employee Stock Purchase Plan and the 2004 Outside Directors Stock Plan. These plans, other than the 2004 Outside Directors Plan, provide for annual automatic increases on February 1 to the shares reserved for issuance based on the lesser of (i) a specific percentage of the total number of shares outstanding at year end; (ii) a fixed number of shares; or (iii) a lesser number of shares set by the Company’s Board of Directors, all as specified in the respective plans. On February 1, 2005, 5,000,000 additional shares were reserved under the 2004 Equity Incentive Plan pursuant to the automatic increase. The 2004 Employee Stock Purchase Plan will not be implemented unless and until the Company’s Board of Directors authorizes the commencement of one or more offerings under the plan. No offering periods have been authorized to date.

Options issued under the Company’s stock option plans are generally for periods not to exceed 10 years and are issued at fair value of the shares of common stock on the date of grant as determined by the trading price of such stock on the New York Stock Exchange. Grants made pursuant to the 2004 Equity Incentive Plan generally do not provide for the immediate exercise of options.

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

Stock option activity for the six months ended July 31, 2005 is as follows:

	Shares Available for Grant		Options Outstanding
			Outstanding Stock Options		Weighted- Average Exercise Price
Balance as of January 31, 2005	2,759,305		17,365,589		$	5.74
Increase in options authorized:
2004 Equity Incentive Plan	5,000,000		—			—
Options granted under all plans	(2,692,250	)	2,692,250			18.43
Stock grants to a board member for board services	(10,000	)	—			—
Exercised	—		(2,419,511	)		3.02
Cancelled	1,189,189		(1,189,189	)		7.61
Repurchased	25,123		—			—
Balance as of July 31, 2005	6,271,367		16,449,139		$	8.09

At July 31, 2005, options to purchase 4,920,211 shares were vested at a weighted average exercise price of $2.75 per share.

As of July 31, 2005, 286,041 shares issued pursuant to exercises of options issued under the 1999 Plan remained subject to repurchase.

For the six months ended July 31, 2005, the Company reversed deferred stock-based compensation related to the cancellation of options for terminated employees in the amount of $370,000. The Company amortized $1,505,000 of the deferred stock-based compensation during the six months ended July 31, 2005. The compensation expense is being recognized on a straight-line basis over the option-vesting period of four years.

The following table summarizes information about stock options outstanding as of July 31, 2005:

Range of Exercise Prices	Options Outstanding
	Number Outstanding	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price
$0.03 to $0.95	692,688	5.13	$	0.30
$1.10	2,938,358	7.06		1.10
$1.25 to $2.00	180,572	5.31		1.84
$2.50	3,383,054	7.90		2.50
$4.00 to $6.00	949,305	8.24		4.83
$8.00	2,473,242	8.65		8.00
$12.77 to $22.64	5,831,920	9.53		16.53
	16,449,139		$	8.09

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

Common Stock

The following shares of common stock are available for future issuance at July 31, 2005:

Options outstanding	16,449,139
Warrants outstanding	823,089
Stock available for future grant:
1999 Stock Option Plan	1,538,337
2004 Equity Incentive Plan	3,755,530
2004 Employee Stock Purchase Plan	1,000,000
2004 Outside Directors Stock Plan	977,500
	24,543,595

During the six months ended July 31, 2005, a board member received stock grants for a total of 10,000 shares of common stock for board services pursuant to the terms described in the 2004 Outside Directors Plan.

4. Commitments and Contingencies

Letters of Credit

As of July 31, 2005, the Company had a total of $3.9 million in letters of credit outstanding in favor of its landlords for office space in San Francisco, California and Switzerland. Of these letters of credit, $3.3 million are collateralized by certificates of deposit maintained at a granting financial institution.

These letters of credit renew annually and mature at various dates through May 2012.

Leases

The Company leases office space and equipment under noncancelable operating and capital leases with various expiration dates through June 2013.

In March 2005, the Company entered into an agreement with its primary landlord that released it from a portion of the future obligations associated with the remaining 4,000 square feet of San Francisco office space that was abandoned in December 2001 in exchange for an agreement to lease additional space elsewhere in the building at fair value. Accordingly, the Company recorded a $285,000 credit to reflect the reversal of a portion of the accrual that was directly related to the previously abandoned space.

The following table sets forth the lease abandonment activity since January 31, 2005:

Liability balance at January 31, 2005	$	1,531,000
Charges utilized, net of subtenant income of $9,600		(190,000	)
Reversals		(285,000	)
Liability balance at July 31, 2005	$	1,056,000

In March 2005, in connection with the office lease modification described above, and separately in May 2005, the Company leased additional office space in San Francisco. The terms of these lease agreements are through June 2013. As of July 31, 2005, the future incremental minimum lease payments are as follows: $776,000 for the remainder of fiscal 2006, $2,809,000 in fiscal 2007, $3,830,000 in fiscal 2008, $3,888,000 in fiscal 2009, $3,948,000 in fiscal 2010 and a total of $14,322,000 thereafter.

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

The Company recently obtained additional data center capacity on both the west and east coasts and is in the process of upgrading its new development and test data center. The Company expects these resources to be on-line at various dates during fiscal 2006. For these resources, the Company’s principal commitments consist of obligations under operating leases for the facilities and computer equipment and contracts for certain services. As of July 31, 2005, the future minimum payments under these commitments were as follows: $9,793,000 for the remainder of fiscal 2006, $19,109,000 in fiscal 2007, $13,318,000 in fiscal 2008 and $4,643,000 in fiscal 2009.

5. Legal Proceedings

On July 26, 2004, a purported class action complaint was filed in the United States District Court for the Northern District of California, entitled Morrison v. salesforce.com, et al., against the Company, its Chief Executive Officer and its Chief Financial Officer. The complaint alleged violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), purportedly on behalf of all persons who purchased salesforce.com common stock between June 21, 2004 and July 21, 2004, inclusive. The claims were based upon allegations that defendants failed to disclose an allegedly declining trend in its revenues and earnings. Subsequently, four other substantially similar class action complaints were filed in the same district based upon the same facts and allegations, asserting claims under Section 10(b) and Section 20(a) of the 1934 Act and Section 11 and Section 15 of the Securities Act of 1933, as amended. The actions have been consolidated under the caption In re salesforce.com, inc. Securities Litigation, Case No. C-04-3009 JSW (N.D. Cal.). On December 22, 2004, the Court appointed Chuo Zhu as lead plaintiff. On February 22, 2005, lead plaintiff filed a Consolidated and Amended Class Action Complaint (the “CAC”). The CAC alleged violations of Section 10(b) and Section 20(a) of the 1934 Act, purportedly on behalf of all persons who purchased salesforce.com common stock between June 23, 2004 and July 21, 2004, inclusive. As in the original complaints, the claims in the CAC were based upon allegations that defendants failed to disclose an allegedly declining trend in its revenues and earnings. On April 14, 2005, defendants filed a motion to dismiss the CAC. On April 15, 2005, the Court granted lead plaintiff leave to file an amended/superseding complaint. On April 22, 2005, lead plaintiff filed a Corrected and Superceding [sic] First Amended Class Action Complaint (“FAC”). As in the CAC, the FAC alleges violations of Section 10(b) and Section 20(a) of the 1934 Act, purportedly on behalf of all persons who purchased salesforce.com common stock between June 23, 2004 and July 21, 2004, inclusive. The claims in the FAC are based upon allegations that defendants failed to disclose an internal forecast that earnings for fiscal year 2005 would decline from the prior fiscal year. On April 29, 2005, defendants filed a motion to dismiss the FAC. The hearing on the motion to dismiss the FAC is scheduled for August 26, 2005. The lawsuit is still in the preliminary stages, and it is not possible for the Company to quantify the extent of potential liability, if any. The Company does not believe that the lawsuit has any merit and intends to defend the action vigorously.

On August 6, 2004, a shareholder derivative action was filed in the Superior Court of the State of California, San Francisco County, entitled Borrelli v. Benioff, et al., against the Company’s Chief Executive Officer, its Chief Financial Officer and members of its Board of Directors alleging breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment under state common law. Subsequently, a substantially similar complaint was filed in the same court based on the same facts and allegations, entitled Johnson v. Benioff, et al. The two actions have been consolidated under the caption Borrelli v. Benioff, Case No. CGC-04-433615 (Cal. Super. Ct., S.F. Cty.). On October 5, 2004, plaintiffs filed a consolidated complaint, which is based upon the same facts and circumstances as alleged in the shareholder class action discussed above, and asserts that the defendants breached their fiduciary duties by making or failing to prevent salesforce.com, inc. and its management from making statements or omissions that potentially subject the Company to liability and injury to its reputation. The action seeks damages on behalf of salesforce.com in an unspecified amount, among other forms of legal and equitable relief. Salesforce.com is named solely as a nominal defendant against which no recovery is sought. The plaintiff shareholders made no demand upon the

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salesforce.com, inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

Board of Directors prior to filing these actions. The deadline for defendants to respond to the consolidated complaint is September 29, 2005. The derivative action is still in the preliminary stages, and it is not possible for the Company to quantify the extent of potential liability to the individual defendants, if any. Management does not believe that the lawsuits have any merit and intends to defend the actions vigorously.

Additionally, the Company is and may become involved in various legal proceedings arising from the normal course of its business activities. In management’s opinion, resolution of these matters is not expected to have a material adverse impact on the Company’s consolidated results of operations, cash flows or its financial position. However, depending on the nature and timing of any such dispute, an unfavorable resolution of a matter could materially affect the Company’s future results of operations, cash flows or financial position in a particular period.

6. Related-Party Transactions

In January 1999, the salesforce.com/foundation, commonly referred to as the Foundation, a non-profit public charity, was chartered to build philanthropic programs that are particularly focused on youth and technology. The Company’s chairman is the chairman of the Foundation. He, one of the Company’s executive officers and one of the Company’s board members hold three of the Foundation’s eight board seats. The Company is not the primary beneficiary of the Foundation’s activities, and accordingly, the Company does not consolidate the Foundation’s statement of activities with its financial results.

Since the Foundation’s inception, the Company has provided at no charge certain resources to Foundation employees such as office space. The value of these items totals approximately $30,000 per quarter.

In addition to the resource sharing with the Foundation, the Company issued the Foundation warrants in August 2002 to purchase 500,000 shares of common stock. Through July 31, 2005, the Foundation has exercised 250,000 of these warrants. Additionally, the Company has donated subscriptions to the Company’s service to other qualified non-profit organizations. The fair value of these donated subscriptions is currently approximately $600,000 per month. The Company plans to continue providing free subscriptions to qualified non-profit organizations.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements consist of, among other things, trend analyses, statements regarding future events, future financial performance, our plan to build our business, our plans for additional data center capacity and upgrading our new development and test data center and the related expenses, our anticipated growth, trends in our business, the effect of foreign currency exchange rate and interest rate fluctuations on our financial results, the potential impact of current or any future litigation, the potential availability of tax assets in the future and related matters, the impact of the new accounting pronouncement to expense stock options and the sufficiency of our capital resources, all of which are based on current expectations, estimates, and forecasts, and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “projects,” “intends,” “plans,” “believes,” “estimates,” variations of such words, and similar expressions are also intended to identify such forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Readers are directed to risks and uncertainties identified below, under “Risk Factors Which May Impact Future Operating Results” and elsewhere in this report, for factors that may cause actual results to be different than those expressed in these 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

We are the leading provider, based on market share, of application services that allow organizations to easily share customer information on demand, according to a March 2004 report by Forrester Research, Inc. We provide a comprehensive CRM service to businesses of all sizes and industries worldwide.

We were founded in February 1999 and began offering our on-demand CRM application service in February 2000.

In order to increase our revenues and take advantage of our market opportunity, we will need to continue to add substantial numbers of paying subscriptions. We define paying subscriptions as unique user accounts, purchased by customers for use by their employees and other customer-authorized users that have not been suspended for non-payment and for which we are recognizing subscription revenue. The number of our paying subscribers increased from approximately 30,000 as of February 1, 2001 to approximately 308,000 as of July 31, 2005. We plan to re-invest our revenues for the foreseeable future by expanding our data center capacity and upgrading our new development and test data center; hiring additional personnel, particularly in marketing and sales; expanding our domestic and international selling and marketing activities; increasing our research and development activities to upgrade and extend our service offerings and to develop new services and technologies; expanding the number of locations around the world where we conduct business; adding to our infrastructure to support our growth; and expanding our operational systems to manage a growing business.

As our revenues increase, we expect marketing and sales costs, which were 51 percent of our total revenues for the six months ended July 31, 2005 and 57 percent of our total revenues for the same period a year ago, to continue to represent a substantial portion of total revenues in the future as we seek to add and manage more paying subscribers, build brand awareness and increase the number of marketing events that we sponsor.

Fiscal Year

Our fiscal year ends on January 31. References to fiscal 2006, for example, refer to the fiscal year ended January 31, 2006.

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Sources of Revenues

We derive our revenues from two sources: (1) subscription revenues, which are comprised of subscription fees from customers accessing our on-demand application service, and from customers purchasing additional support beyond the standard support that is included in the basic subscription fee; and (2) related professional services and other revenues. Other revenues consist primarily of training fees. Subscription and support revenues accounted for 91 percent of our total revenues during the six months ended July 31, 2005 and 89 percent during the same period a year ago. Subscription revenues are driven primarily by the number of paying subscribers of our service and the subscription price of our service. None of our customers accounted for more than 5 percent of our revenues during the three and six month periods ended July 31, 2005 and 2004.

Subscription and support revenues are recognized ratably over the contract terms beginning on the commencement dates of each contract. The typical subscription and support term is 12 to 24 months, although terms range from one to 60 months. Our subscription and support contracts are noncancelable, though customers typically have the right to terminate their contracts for cause if we materially fail to perform. We generally invoice our customers in advance, in annual or quarterly 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 deferred revenue, or in revenue depending on whether the revenue recognition criteria have been met. In general, we collect our billings in advance of the subscription service period.

Professional services and other revenues consist of fees associated with consulting and implementation services and training. Our consulting and implementation engagements are typically billed on a time and materials basis. We also offer a number of classes on implementing, using and administering our service that are billed on a per person, per class basis. Our typical payment terms provide that our customers pay us within 30 days of invoice.

Cost of Revenues and Operating Expenses

Cost of Revenues. Cost of subscription and support revenues primarily consists of expenses related to hosting our service and providing support, the costs of the additional data center capacity that we obtained, depreciation or operating lease expense associated with computer equipment, costs associated with website development activities, allocated overhead and amortization expense associated with capitalized software. To date, the amortization expense associated with capitalized software has not been material to our cost of revenues. We allocate overhead such as rent and occupancy charges, employee benefit costs and taxes to all departments based on headcount. As such, general overhead expenses are reflected in each cost of revenue and operating expense category. Cost of professional services and other revenues consists primarily of employee-related costs associated with these services, the cost of subcontractors and allocated overhead. The cost associated with providing professional services is significantly higher as a percentage of revenue than for our on-demand subscription service due to the labor costs associated with providing consulting services.

To the extent that our customer base grows, we intend to continue to invest additional resources in our on-demand application service and in our consulting services. The timing of these additional expenses will affect our cost of revenues, both in terms of absolute dollars and as a percentage of revenues, in a particular quarterly period. For example, we plan to increase the number of employees who are fully dedicated to consulting services. We have also obtained additional data center capacity on both the west and east coasts in the United States. We expect these resources to be on-line at various dates during fiscal 2006 and we expect the annual cost of these resources to be significant.

Research and Development. Research and development expenses consist primarily of salaries and related expenses, the costs of upgrading our new development and test data center and allocated overhead. We have historically focused our research and development efforts on increasing the functionality and enhancing the ease of use of our on-demand application service. Our proprietary, scalable and secure multi-tenant architecture enables us to provide all of our customers with a service based on a single version of our application. As a result,

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we do not have to maintain multiple versions, which enables us to have relatively low research and development expenses as compared to traditional enterprise software companies. We expect that in the future, research and development expenses will increase in absolute dollars as we upgrade and extend our service offerings and develop new technologies.

We are also in the process of upgrading our new development and test data center. We expect the annual cost of the data center to be significant.

Marketing and Sales. Marketing and sales expenses are our largest cost and consist primarily of salaries and related expenses for our sales and marketing staff, including commissions, payments to partners, marketing programs and allocated overhead. Marketing programs consist of advertising, events, corporate communications and brand building and product marketing activities.

As our revenues increase, we plan to continue to invest heavily in marketing and sales by increasing the number of direct sales personnel in order to add new customers and increase penetration within our existing customer base, expanding our domestic and international selling and marketing activities, building brand awareness and sponsoring additional marketing events. We expect that in the future, marketing and sales expenses will increase in absolute dollars and continue to be our largest cost.

General and Administrative. General and administrative expenses consist of salaries and related expenses for finance and accounting, human resources and management information systems personnel, legal costs, professional fees, other corporate expenses and allocated overhead. We expect that in the future, general and administrative expenses will increase in absolute dollars as we add personnel and incur additional professional fees and insurance costs related to the growth of our business, international expansion and operations as a public company, including the cost of our first year of compliance with Section 404 of the Sarbanes-Oxley Act.

Stock-Based Expenses. Our cost of revenues and operating expenses include stock-based expenses related to options and warrants issued to non-employees, option grants to employees in situations where the exercise price was less than the deemed fair value of our common stock at the date of grant and stock awards to board members for board services. These charges have been significant and are reflected in our historical financial results. We expect stock-based expenses to be between $3.0 to $4.0 million in fiscal 2006. These amounts do not include the incremental costs and operating expenses associated with the new accounting pronouncement to expense stock options, which we will adopt at the start of fiscal 2007.

Joint Venture

In December 2000, we established a Japanese joint venture, Kabushiki Kaisha salesforce.com, with SunBridge, Inc., a Japanese corporation, to assist us with our sales efforts in Japan. As of July 31, 2005, we owned a 63 percent interest in the joint venture. Because of this majority interest, we consolidate the venture’s financial results, which are reflected in each revenue, cost of revenues and expense category in our consolidated statement of operations. We then record minority interest, which reflects the minority investors’ interest in the venture’s results. Through July 31, 2005, the operating performance and liquidity requirements of the Japanese joint venture had not been significant. While we plan to expand our selling and marketing activities in Japan in order to add new customers, we believe the future operating performance and liquidity requirements of the Japanese joint venture will not be significant.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

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We believe that of our significant accounting policies, which are described in note 1 of the notes to our condensed consolidated financial statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Revenue Recognition. We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition” and Emerging Issues Task Force, or EITF, Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.”

We recognize revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer; (3) the collection of our fees is reasonably assured; and (4) the amount of fees to be paid by the customer is fixed or determinable. Our arrangements do not contain general rights of return.

We recognize subscription revenues ratably over the contract terms beginning on the commencement dates of each contract. Support revenues from customers who purchase our premium support offerings are recognized similarly over the term of the support contract. As part of their subscription agreements, customers benefit from new features and functionality with each release at no additional cost. In situations where we have contractually committed to an individual customer specific technology, we defer all of the revenue for that customer until the technology is delivered and accepted. Once delivery occurs, we then recognize the revenue over the remaining contract term.

Consulting services and training revenues are accounted for separately from subscription and support revenues when these services have value to the customer on a standalone basis and there is objective and reliable evidence of fair value of each deliverable. When accounted for separately, revenues are recognized as the services are rendered for time and material contracts, and when the milestones are achieved and accepted by the customer for fixed price contracts. The majority of our consulting service contracts are on a time and material basis. Training revenues are recognized after the services are performed.

In determining whether the consulting services can be accounted for separately from subscription and support revenues, we consider the following factors for each consulting agreement: availability of the consulting services from other vendors, whether objective and reliable evidence for fair value exists for the undelivered elements, the nature of the consulting services, the timing of when the consulting contract was signed in comparison to the subscription service start date, and the contractual dependence of the subscription service on the customer’s satisfaction with the consulting work. If a consulting arrangement does not qualify for separate accounting, we recognize the consulting revenue ratably over the remaining term of the subscription contract. Additionally, in these situations we defer the direct costs of the consulting arrangement and amortize those costs over the same time period as the consulting revenue is recognized. The deferred cost on our consolidated balance sheet totaled $1,156,000 at July 31, 2005 and $874,000 at January 31, 2005.

Accounting for Deferred Commissions. We defer commission payments to our direct sales force. The commissions are deferred and amortized to sales expense over the noncancelable terms of the related subscription contracts with our customers, which are typically 12 to 24 months. The commission payments, which are paid in full the month after the customer’s service commences, are a direct and incremental cost of the revenue arrangements. The deferred commission amounts are recoverable through the future revenue streams under the noncancelable customer contracts. We believe this is the preferable method of accounting as the commission charges are so closely related to the revenue from the noncancelable customer contracts that they should be recorded as an asset and charged to expense over the same period that the subscription revenue is recognized.

During the six months ended July 31, 2005, we deferred $7.6 million of commission expenditures and we amortized $6.7 million to sales expense. During the six months ended July 31, 2004, we deferred $5.8 million of commission expenditures and we amortized $7.5 million to sales expense. Deferred commissions on our consolidated balance sheet totaled $10.5 million at July 31, 2005 and $9.6 million at January 31, 2005.

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Accounting for Stock-Based Awards. We recorded deferred stock-based compensation charges in the amount by which the exercise price of an option is less than the deemed fair value of our common stock at the date of grant. We have elected not to record stock-based compensation expense when employee stock options are awarded at exercise prices equal to the deemed fair value of our common stock at the date of grant. Prior to the establishment of a public market for our stock in June 2004, our board of directors determined the fair value of our common stock based upon several factors, including, but not limited to, our operating and financial performance, private sales of our common and preferred stock between third parties, issuances of convertible preferred stock and appraisals performed by an appraisal firm. The fair value of our common stock is now determined by the trading price of our stock on the New York Stock Exchange.

We amortize the deferred compensation charges ratably over the four-year vesting period of the underlying option awards. As of July 31, 2005, we had an aggregate of $4.0 million of deferred stock-based compensation remaining to be amortized. We currently expect this deferred stock-based compensation balance to be amortized as follows: $1.3 million during the remainder of fiscal 2006; $1.9 million during fiscal 2007; $0.7 million during fiscal 2008 and $100,000 during fiscal 2009.

On February 1, 2006, which is the start of our fiscal 2007, we will begin to prospectively recognize in our consolidated statement of operations the cost of employee stock options in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, or SFAS 123R (see Recent Accounting Pronouncement below for further discussion). We are currently assessing the impact this prospective change in accounting will have, but believe that it will have a material and adverse impact on our reported results of operations.

In the past, we have awarded a limited number of stock options and warrants to non-employees. For these options and warrants, we recognize stock-based compensation expense over the vesting periods of the underlying awards, based on an estimate of their fair value on the vesting dates using the Black-Scholes option-pricing model. As of July 31, 2005, we had recognized compensation expense on all options and warrants issued to non-employees except for options for 50,000 shares of our common stock, all of which will fully vest by July 2007 and have an exercise price of $2.50 per share.

Accounting for Income Taxes. We account for income taxes using the liability method, which requires the recognition of deferred tax assets or liabilities for the tax-effected temporary differences between the financial reporting and tax bases of our assets and liabilities and for net operating loss and tax credit carryforwards. Historically, we have recorded a full valuation allowance to reserve for the benefit of our deferred tax assets due to the uncertainty of being able to realize these benefits.

If our positive trend of earnings continues, it is likely that the valuation allowance will be reversed at some point in the future. However, we cannot predict in which quarter this will occur.

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Results of Operations

The following tables set forth selected data for each of the periods indicated and are in thousands, except customer and subscriber data. All data is unaudited.

	Three months ended July 31,						Six months ended July 31,
	2005			2004			2005			2004
	(unaudited)
Revenues:
Subscription and support	$	65,638		$	36,017		$	123,828		$	67,133
Professional services and other		6,305			4,564			12,292			8,287
Total revenues		71,943			40,581			136,120			75,420
Cost of revenues:
Subscription and support		8,013			2,699			13,349			4,981
Professional services and other		8,224			5,483			14,853			9,564
Total cost of revenues		16,237			8,182			28,202			14,545
Gross profit		55,706			32,399			107,918			60,875
Operating expenses:
Research and development		5,470			2,074			9,772			4,201
Marketing and sales		34,688			22,525			69,190			42,940
General and administrative		11,355			6,635			20,778			12,208
Lease recovery		—			—			(285	)		—
Total operating expenses		51,513			31,234			99,455			59,349
Income from operations		4,193			1,165			8,463			1,526
Interest income		1,724			353			3,178			497
Interest expense		(31	)		(5	)		(44	)		(6	)
Other income		666			5			710			25
Income before provision for income taxes and minority interest		6,552			1,518			12,307			2,042
Provision for income taxes		1,310			202			2,461			272
Income before minority interest		5,242			1,316			9,846			1,770
Minority interest in consolidated joint venture		(202	)		(146	)		(426	)		(163	)
Net income	$	5,040		$	1,170		$	9,420		$	1,607
In addition to the statement of operations data above:
Cash flow provided by operating activities	$	14,072		$	14,935		$	31,982		$	21,594

	As of
	July 31, 2005		January 31, 2005		July 31, 2004
Balance sheet data:
Cash, cash equivalents and marketable securities	$	232,710	$	205,938	$	172,627
Deferred revenue		117,311		95,900		61,557
Customer and subscriber data:
Approximate number of customers		16,900		13,900		11,100
Approximate number of paying subscriptions (1)		308,000		227,000		168,000

(1) Paying subscriptions are defined as unique user accounts, purchased by customers for use by their employees and other customer-authorized users that have not been suspended for non-payment and for which we are recognizing subscription revenue.

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	Three months ended July 31,				Six months ended July 31,
	2005		2004		2005		2004
Revenues by geography:
Americas	$	57,689	$	32,506	$	108,601	$	60,842
Europe		10,038		5,828		19,421		10,460
Asia Pacific		4,216		2,247		8,098		4,118
	$	71,943	$	40,581	$	136,120	$	75,420

Cost of revenues and operating expenses include the following amounts related to stock-based awards.

	Three months ended July 31,				Six months ended July 31,
	2005		2004		2005		2004
Stock-based expenses:
Cost of revenues	$	160	$	187	$	310	$	357
Research and development		91		80		179		169
Marketing and sales		365		408		727		822
General and administrative		322		425		578		629
	$	938	$	1,100	$	1,794	$	1,977

The following tables set forth selected consolidated statements of operations data for each of the periods indicated as a percentage of total revenues.

	Three months ended July 31,				Six months ended July 31,
	2005		2004		2005		2004
Revenues:
Subscription and support	91	%	89	%	91	%	89	%
Professional services and other	9		11		9		11
Total revenues	100		100		100		100
Cost of revenues:
Subscription and support	11		6		10		6
Professional services and other	12		14		11		13
Total cost of revenues	23		20		21		19
Gross profit	77		80		79		81
Operating expenses:
Research and development	7		5		7		6
Marketing and sales	48		56		51		57
General and administrative	16		16		15		16
Lease abandonment recovery	—		—		—		—
Total operating expenses	71		77		73		79
Income from operations	6		3		6		2
Interest income	2		1		2		1
Interest expense	—		—		—		—
Other income	1		—		1		—
Income before provision for income taxes and minority interest	9		4		9		3
Provision for income taxes	(2	)	(1	)	(2	)	(1	)
Income before minority interest	7		3		7		2
Minority interest in consolidated joint venture	—		—		—		—
Net income	7	%	3	%	7	%	2	%

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	Three months ended July 31,				Six months ended July 31,
	2005		2004		2005		2004
Revenues by geography:
Americas	80	%	80	%	80	%	81	%
Europe	14		14		14		14
Asia Pacific	6		6		6		5
	100	%	100	%	100	%	100	%
	Three months ended July 31,				Six months ended July 31,
	2005		2004		2005		2004
Stock-based expenses:
Cost of revenues	—	%	1	%	—	%	1	%
Research and development	—		—		—		—
Marketing and sales	1		1		1		1
General and administrative	—		1		—		1
	1	%	3	%	1	%	3	%

Overview of Results of Operations for the Three Months Ended July 31, 2005

Revenues during the three months ended July 31, 2005 were $71.9 million, an increase of 77 percent over the same period a year ago. The total number of paying subscribers increased to approximately 308,000 as of July 31, 2005 from approximately 168,000 as of July 31, 2004.

Our gross profit during the three months ended July 31, 2005 was $55.7 million, or 77 percent of revenues, and operating income was $4.2 million. Operating income for the period included a non-cash stock-based expense of $938,000, which consisted primarily of the amortization of our deferred stock-based compensation. During the same period a year ago, we generated a gross profit of $32.4 million, or 80 percent of revenues, and had operating income of $1.2 million. Operating income during the three months ended July 31, 2004 also included $1.1 million of non-cash stock-based expense.

During the three months ended July 31, 2005, we continued to incur substantial costs and operating expenses related to the expansion of our business. We incurred costs related to adding data center capacity and upgrading our new development and test data center. Additionally, we added sales personnel to focus on adding new customers and increasing the penetration within our existing customer base, professional services personnel to support our consulting services, and developers to broaden and enhance our on-demand service.

During the three months ended July 31, 2005, we generated $14.1 million of cash from operating activities, as compared to $14.9 million during the same period a year ago. At July 31, 2005, we had cash, cash equivalents and marketable securities of $232.7 million, as compared to $172.6 million at July 31, 2004, accounts receivable of $50.2 million at July 31, 2005, as compared to $29.9 million at July 31, 2004, and deferred revenue of $117.3 million at July 31, 2005, as compared to $61.6 million at July 31, 2004.

Three Months Ended July 31, 2005 and 2004

Revenues. Total revenues were $71.9 million for the three months ended July 31, 2005, compared to $40.6 million during the same period a year ago, an increase of $31.3 million, or 77 percent. Subscription and support revenues were $65.6 million, or 91 percent of total revenues, for the three months ended July 31, 2005, compared to $36.0 million, or 89 percent of total revenues, during the same period a year ago. The increase in subscription and support revenues was due primarily to the increase in the number of paying subscribers to approximately

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308,000 as of July 31, 2005 from approximately 168,000 as of July 31, 2004. Professional services and other revenues were $6.3 million, or 9 percent of total revenues, for the three months ended July 31, 2005, compared to $4.6 million, or 11 percent of total revenues, for the same period a year ago. The increase in professional services and other revenues was due primarily to the higher demand for services from an increased number of paying subscribers and customers.

Revenues in Europe and Asia Pacific accounted for $14.3 million, or 20 percent of total revenues, during the three months ended July 31, 2005, compared to $8.1 million, or 20 percent of total revenues, during the same period a year ago, an increase of $6.2 million, or 77 percent. The increase in revenues outside of the Americas was the result of our efforts to expand the number of locations around the world where we conduct business and our international selling and marketing activities.

Cost of Revenues. Cost of revenues was $16.2 million, or 23 percent of total revenues, during the three months ended July 31, 2005, compared to $8.2 million, or 20 percent of total revenues, during the same period a year ago, an increase of $8.0 million. The increase in absolute dollars was comprised of an increase of $3.4 million in employee-related costs, primarily all of which was due to the 57 percent increase in the headcount of our professional services organization since July 31, 2004, an increase of $2.3 million in service delivery costs, primarily due to our efforts in adding data center capacity, an increase of $700,000 in outside subcontractor and other service costs and an increase of $1.4 million in allocated overhead charges. The cost of the additional professional services headcount resulted in the cost of professional services and other revenues to be in excess of the related revenue during the three months ended July 31, 2005 by $1.9 million. We increased the professional services headcount in order to meet the anticipated demand for our consulting and training services as our subscriber base has expanded.

Research and Development. Research and development expenses were $5.5 million, or 7 percent of total revenues, during the three months ended July 31, 2005, compared to $2.1 million, or 5 percent of total revenues, during the same period a year ago, an increase of $3.4 million. The increase in absolute dollars was primarily due to an increase of $1.9 million in employee-related costs, an increase of $700,000 in equipment and service costs primarily due to upgrading our new development and test data center and a $400,000 increase in allocated overhead charges. We increased our research and development headcount by 106 percent since July 31, 2004 in order to upgrade and extend our service offerings and develop new technologies. During the three months ended July 31, 2005, we capitalized $150,000 in development costs associated with our recent release in June 2005 and the next planned release.

Marketing and Sales. Marketing and sales expenses were $34.7 million, or 48 percent of total revenues, during the three months ended July 31, 2005, compared to $22.5 million, or 56 percent of total revenues, during the same period a year ago, an increase of $12.2 million. The increase in absolute dollars was primarily due to an increase of $8.9 million in employee-related costs, $300,000 in marketing spending related to new service offerings and a $2.6 million increase in allocated overhead. Our marketing and sales headcount increased by 76 percent since July 31, 2004 as we hired additional sales personnel to focus on adding new customers and increasing penetration within our existing customer base.

General and Administrative. General and administrative expenses were $11.4 million, or 16 percent of total revenues, during the three months ended July 31, 2005, compared to $6.6 million, or 16 percent of total revenues, during the same period a year ago, an increase of $4.8 million. The increase was due to an increase of $6.0 million in employee-related costs, $1.3 million in professional and outside service costs and $1.0 million in infrastructure-related costs, which were offset by $4.4 million in increased allocated charges to non-general and administrative departments. Our general and administrative headcount increased by 94 percent since July 31, 2004 as we added personnel to support our growth.

Operating Income. Operating income during the three months ended July 31, 2005 was $4.2 million. During the same period a year ago, it was $1.2 million. The increase was primarily due to the increase in revenues, most of which was re-invested in an effort to expand our business.

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Income from operations outside of the Americas, excluding intercompany transactions, was $3.3 million during the three months ended July 31, 2005 and $479,000 during the same period a year ago. The continued investment outside of the Americas were due to our efforts in expanding the number of locations where we conduct business and expanding our international selling and marketing activities.

Interest Income. Interest income consists of investment income on cash and marketable securities balances. During the three months ended July 31, 2004, interest income also included the interest income on outstanding loans made to individuals who early exercised their stock options. None of these individuals was an executive officer or director of the Company and all of them repaid their loan balances by February 28, 2005. Interest income was $1.7 million during the three months ended July 31, 2005 and was $353,000 during the same period a year ago. The increase was primarily due to increased marketable securities balances resulting from the proceeds from the sale of our common stock in our initial public offering in June 2004 and cash generated by operating activities since July 31, 2004.

Other Income. Other income was $666,000 during the three months ended July 31, 2005, compared to other income of $5,000 during the same period a year ago. The increase in other income was primarily due to increased gains on foreign currency transactions.

Provision for Income Taxes. We recorded a provision for income tax expense of $1.3 million for the three months ended July 31, 2005 as compared to a provision for income tax expense of $202,000 during the same period a year ago. The fiscal 2006 provision for income taxes consists of amounts accrued for our domestic federal alternative minimum tax and state income tax liability as well as our foreign income tax expense.

We believe that our fiscal 2006 effective tax rate will be approximately 20 percent, unless the valuation allowance reserve is reversed in fiscal 2006. This effective tax rate differs from the statutory rate primarily due to domestic loss carryovers net of losses in foreign jurisdictions for which no benefit can be recognized for the full year. It is based on the projected mix of full-year income in each tax jurisdiction in which we operate and the related income tax expense in each jurisdiction. These actual results could vary from those projected. The tax expense or benefit for significant unusual items or tax exposure items are treated as discrete items in the interim period in which the events occur.

Historically, we have recorded a full valuation allowance to reserve for the benefit of our deferred tax assets due to the uncertainty of being able to realize these benefits. If our positive trend of earnings continues, it is likely that the valuation allowance will be reversed at some point in the future. However, we cannot predict in which quarter this will occur.

Six Months Ended July 31, 2005 and 2004

Revenues. Total revenues were $136.1 million for the six months ended July 31, 2005, compared to $75.4 million during the same period a year ago, an increase of $60.7 million, or 80 percent. Subscription and support revenues were $123.8 million, or 91 percent of total revenues, for the six months ended July 31, 2005, compared to $67.1 million, or 89 percent of total revenues, for the same period a year ago. The increase in subscription and support revenues was due primarily to the increase in the number of paying subscribers. Professional services and other revenues were $12.3 million, or 9 percent of total revenues, for the six months ended July 31, 2005, compared to $8.3 million, or 11 percent of total revenues, for the same period a year ago. The increase in professional service and other revenues was due primarily to the higher demand for services from an increasing number of paying subscribers and customers.

Revenues in Europe and Asia Pacific accounted for $27.5 million, or 20 percent of total revenues, during the six months ended July 31, 2005, compared to $14.6 million, or 19 percent of total revenues, during the same period a year ago, an increase of $12.9 million, or 89 percent. The increase in revenues outside of the Americas was the result of our efforts to expand the number of locations around the world where we conduct business and the expansion of our international selling and marketing activities.

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Cost of Revenues. Cost of revenues was $28.2 million, or 21 percent of total revenues, during the six months ended July 31, 2005, compared to $14.5 million, or 19 percent of total revenues, during the same period a year ago, an increase of $13.7 million. The increase in absolute dollars was primarily due to an increase of $6.3 million in employee-related costs, most of which was due to the 44 percent increase in the headcount of our professional services organization since January 31, 2005, an increase of $3.2 million in service delivery costs, primarily due to our efforts in adding data center capacity, an increase of $1.1 million in outside subcontractor and other service costs and an increase of $2.4 million in allocated overhead. We increased the professional services headcount in order to meet the higher demand for our consulting and training services as our customer base has expanded.

Research and Development. Research and development expenses were $9.8 million, or 7 percent of total revenues, during the six months ended July 31, 2005, compared to $4.2 million, or 6 percent of total revenues, during the same period a year ago, an increase of $5.6 million. The increase in absolute dollars was primarily due to an increase of $3.5 million in employee-related costs, an increase of $1.1 million in equipment and service costs primarily due to upgrading our new development and test data center and an increase of $750,000 in allocated overhead. We increased our research and development headcount by 46 percent since January 31, 2005 to upgrade and extend our service offerings and develop new technologies.

Marketing and Sales. Marketing and sales expenses were $69.2 million, or 51 percent of total revenues, during the six months ended July 31, 2005, compared to $42.9 million, or 57 percent of total revenues, during the same period a year ago, an increase of $26.3 million. The increase in absolute dollars was primarily due to an increase of $16.8 million in employee-related costs, $4.1 million in increased marketing event costs and advertising and $4.7 million in allocated overhead. Our marketing and sales headcount increased by 35 percent since January 31, 2005 as we hired additional sales personnel to focus on adding new customers and increasing penetration within our existing customer base.

General and Administrative. General and administrative expenses were $20.8 million, or 15 percent of total revenues, during the six months ended July 31, 2005, compared to $12.2 million, or 16 percent of total revenues, during the same period a year ago, an increase of $8.6 million. The increase in absolute dollars was due to an increase of $10.9 million in employee-related costs, an increase of $2.1 million in professional and outside service costs and an increase of $2.7 million in infrastructure costs, which were offset by $7.9 million in increased allocated charges to non-general and administrative departments. Our general and administrative headcount increased by 37 percent since January 31, 2005 as we added personnel to support our growth.

Lease Recovery. The lease recovery of $285,000, which occurred during the first quarter of fiscal 2006, was due to the reduction in accruals associated with the San Francisco, California office space that we abandoned in December 2001. In March 2005, we entered into an agreement with our primary landlord that released us from a portion of the future obligations associated with the remaining space abandoned in exchange for an agreement to lease additional space elsewhere in the building at fair value. Accordingly, we recorded a $285,000 credit to reflect the reversal of a portion of the accrual that was directly related to this space.

Operating Income. Operating income during the six months ended July 31, 2005 was $8.5 million as compared to $1.5 million during the same period a year ago. The increase in operating income was primarily due to an increase in revenues, most of which was re-invested in an effort to expand our business.

Income from operations outside of the Americas, excluding intercompany transactions, was $5.2 million during the six months ended July 31, 2005 and was $360,000 during the same period a year ago. The continued investments outside of the Americas were due to our efforts to expand the number of locations where we conduct business and to expand our international selling and marketing activities.

Interest Income. Interest income was $3.2 million during the six months ended July 31, 2005, compared to $497,000 during the same period a year ago, an increase of $2.7 million. The increase was primarily due to investment earnings on higher cash and marketable securities balances.

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Interest Expense. Interest expense consists of interest on our capital lease obligations.

Other Income. Other expense was $710,000 during the six months ended July 31, 2005, compared to other income of $25,000 during the same period a year ago. The increase in other expense was due to increased gains on foreign currency transactions.

Provision for Income Taxes. We recorded a provision for income tax expense of $2.5 million for the six months ended July 31, 2005. This provision for income taxes consists of amounts accrued for our estimated fiscal 2006 domestic federal alternative minimum tax and state income tax liability as well as an estimate of our foreign income tax expense.

Liquidity and Capital Resources

At July 31, 2005, our principal sources of liquidity were cash, cash equivalents and marketable securities totaling $232.7 million and accounts receivable of $50.2 million.

Net cash provided by operating activities was $32.0 million during the six months ended July 31, 2005 and $21.6 million during the same period a year ago. The improvement in cash flow was due primarily to the increased number of paying subscribers to our service. Cash provided by operating activities has historically been affected by sales of subscriptions and support and professional services, changes in working capital accounts, particularly increases in accounts receivable and deferred revenue and the timing of commission and bonus payments, and add-backs of non-cash expense items such as depreciation and amortization and the expense associated with stock-based awards.

Net cash used in investing activities was $50.7 million during the six months ended July 31, 2005 and $86.2 million during the same period a year ago, which included the investment of most of the proceeds from our initial public offering in June 2004. The net cash used in investing activities during the six months ended July 31, 2005 primarily related to the investment of excess cash, the change in restricted cash balances and capital expenditures associated with the purchase of software licenses, computer equipment and furniture and fixtures as we have expanded our infrastructure and work force.

In February 2005, we obtained additional software licenses for use in our business operations at a cost of $8.8 million, which included the cost for support for the first year of the license agreement. Additionally, we recently obtained additional data center capacity and are in the process of upgrading our new development and test data center. We expect these resources to be on-line at various dates during fiscal 2006. While the costs for these will be significant over the next several years, most of the capital expenditures for the additional data center capacity and upgrade of our new development and test data center are being leased so there will not be a significant impact on our liquidity during the remainder of fiscal 2006. For these resources, our principal commitments consist of obligations under operating leases for the facilities and computer equipment and contracts for certain services. At July 31, 2005, the future minimum payments under these commitments were as follows (in thousands):

	Payments Due by Period
Contractual Obligations	Total		Next 6 months		Fiscal 2007 to 2009
Operating lease obligations:
Facilities	$	8,126	$	2,648	$	5,478
Computer equipment		38,217		6,833		31,384
Contracts for services		520		312		208

Our agreements for the facilities and certain services provide us with the option to renew. Our future contractual obligations would change if we exercised these options.

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Net cash provided by financing activities was $7.8 million during the six months ended July 31, 2005 and $115.3 million during the same period a year ago. In June 2004, we completed the sale of 11.5 million shares of common stock during our initial public offering. The net proceeds from the initial public offering were $113.8 million. During the six months ended July 31, 2005, the $7.4 million of proceeds from the exercise of employee stock options and warrants and the $727,000 of proceeds from the collection of notes receivable from shareholders were offset by principal payments on capital lease obligations.

In March 2005, in connection with the office lease modification described above, and separately in May 2005, we leased additional office space in San Francisco, California. The terms of these agreements are through June 2013. As of July 31, 2005, the future incremental minimum lease payments are as follows: $776,000 for the remainder of fiscal 2006, $2,809,000 in fiscal 2007, $3,830,000 in fiscal 2008, $3,888,000 in fiscal 2009, $3,948,000 in fiscal 2010 and a total of $14,322,000 thereafter.

As of July 31, 2005, we have a total of $3.9 million in letters of credit outstanding in favor of our landlords for office space in San Francisco, California and Switzerland. Of these letters of credit, $3.3 million are collateralized by certificates of deposit maintained at a granting financial institution. To date, no amounts have been drawn against the letters of credit, which renew annually and mature at various dates through May 2012.

We do not have any special purpose entities, and other than operating leases for office space and computer equipment, we do not engage in off-balance sheet financing arrangements. Additionally, we currently do not have a bank line of credit.

We believe our existing cash, cash equivalents and short-term marketable securities and cash provided by operating activities will be sufficient to meet our working capital and capital expenditure needs over the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our marketing and sales activities, the timing and extent of spending to support product development efforts and expansion into new territories, the timing of introductions of new services and enhancements to existing services, the timing of capital expenditures and expenses associated with Web hosting and the continuing market acceptance of our services. To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. From time to time, we may enter into arrangements to acquire or invest in complementary businesses, services or technologies, which may require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us or at all.

Recent Accounting Pronouncement

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, or SFAS 123R, which requires all share-based payments to employees, including grants of employee stock options and purchases under employee stock purchase plans, to be recognized as expenses in the statement of operations based on their fair values and vesting periods. We will adopt the provisions of SFAS 123R on February 1, 2006, which is the start of our fiscal 2007. We are currently assessing the impact this prospective change in accounting will have but believe that it will have a material and adverse impact on our reported results of operations.

Additionally, SFAS 123R requires the tax benefits from employee stock plans to be classified as a financing activity in the consolidated statement of cash flows. We currently classify these tax benefits as a source of cash provided by operating activities. These benefits totaled $1.9 million during the six months ended July 31, 2005 and zero for the comparable period a year ago.

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RISK FACTORS

Risks Related to Our Business and Industry

We are an early-stage company in an emerging market with an unproven business model, a new and unproven enterprise technology model and a short operating history, which makes it difficult to evaluate our current business and future prospects.

We have only a limited operating history and our current business and future prospects are difficult to evaluate. We were founded in February 1999 and began offering our on-demand CRM application service in February 2000. The risks and difficulties we encounter as an early-stage company in the new and rapidly evolving market of on-demand CRM application services include the following:

• our new and unproven business and technology models;

• a limited number of service offerings and risks associated with developing new service offerings; and

• the difficulties we face in managing rapid growth in personnel and operations.

We may not be able to successfully address any of these risks or others, including the other risks related to our business and industry described below. Failure to adequately do so could seriously harm our business and cause our operating results to suffer.

Defects in our service could diminish demand for our service and subject us to substantial liability.

Because our service is complex and we have incorporated a variety of software both developed in-house and acquired from third party vendors, our service may have errors or defects that users identify after they begin using it that could result in unanticipated downtime for our subscribers and harm our reputation and our business. Internet-based services frequently contain undetected errors when first introduced or when new versions or enhancements are released. We have from time to time found defects in our service and new errors in our existing service may be detected in the future. Since our customers use our service for important aspects of their business, any errors, defects or other performance problems with our service could hurt our reputation and may damage our customers’ businesses. If that occurs, customers could elect not to renew, or delay or withhold payment to us, we could lose future sales or customers may make warranty claims against us, which could result in an increase in our provision for doubtful accounts, an increase in collection cycles for accounts receivable or the expense and risk of litigation.

Interruptions or delays in service from our third-party Web hosting facilities could impair the delivery of our service and harm our business.

We provide our service through computer hardware that is currently located in a third-party Web hosting facility in California. We do not control the operation of this facility, and it is subject to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. It is also subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. Despite precautions taken at the facility, the occurrence of a natural disaster or an act of terrorism, a decision to close the facility without adequate notice or other unanticipated problems at the facility could result in lengthy interruptions in our service. In addition, the failure by the third-party facility to provide our required data communications capacity could result in interruptions in our service. We have an agreement with SunGard Data Systems, a provider of availability services, to provide access to a geographically remote disaster recovery facility that would provide us access to hardware, software and Internet connectivity in the event the third-party facility becomes unavailable. Even with this disaster recovery arrangement, however, our service would be interrupted during the transition Also, as we continue to add data center capacity, we may move or transfer data. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of our service. Further, any damage to, or failure of, our systems generally could result in interruptions in our service. Interruptions in our service may reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their subscriptions and adversely affect our renewal rates. Our business will be harmed if our customers and potential customers believe our service is unreliable.

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If we experience significant fluctuations in our operating results and rate of growth and fail to balance our expenses with our revenue and earnings expectations, our results would be harmed and our stock price may fall rapidly and without advance notice.

Due to our limited operating history, our evolving business model and the unpredictability of our emerging industry, we may not be able to accurately forecast our rate of growth. For example, in the last twelve fiscal quarters, we have recorded quarterly operating income of as much as $4.3 million and quarterly operating losses of as much as $4.9 million. We base our current and future expense levels and our investment plans on estimates of future revenue and future rate of growth. Our expenses and investments are, to a large extent, fixed and we expect that these expenses will increase in the future. We may not be able to adjust our spending quickly enough if our revenue falls short of our expectations.

As a result, we expect that our operating results may fluctuate significantly on a quarterly basis. Revenue growth may not be sustainable and may decrease in the future. We believe that period-to-period comparisons of our operating results may not be meaningful, and you should not rely upon them as an indication of future performance.

Our quarterly results can fluctuate and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.

Our quarterly operating results are likely to fluctuate, and if we fail to meet or exceed the expectations of securities analysts or investors, the trading price of our common stock could decline. Some of the important factors that could cause our revenues and operating results to fluctuate from quarter to quarter include:

• our ability to retain and increase sales to existing customers, attract new customers and satisfy our customers’ requirements;

• the renewal rates for our service;

• changes in our pricing policies;

• the introduction of new features to our service;

• the rate of expansion and effectiveness of our sales force;

• the length of the sales cycle for our service;

• new product and service introductions by our competitors;

• our success in selling our service to large enterprises;

• variations in the revenue mix of editions of our service;

• technical difficulties or interruptions in our service;

• expenses related to obtaining additional data center capacity and upgrading our development and test data center;

• changes in foreign currency exchange rates;

• general economic conditions in our geographic markets;

• the timing of additional investments in our on-demand application service and in our consulting service;

• regulatory compliance costs;

• payment defaults by customers; and

• extraordinary expenses such as litigation or other dispute-related settlement payments.

Some of these factors are not within our control and the occurrence of one or more of them might cause our operating results to vary widely. As such, we believe that quarter-to-quarter comparisons of our revenues and operating results may not be meaningful and should not be relied upon as an indication of future performance.

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We have incurred significant operating losses in the past and may incur significant operating losses in the future.

We incurred significant losses in each fiscal quarter from our inception in February 1999 through fiscal 2003 and we generated small profits in fiscal 2005 and fiscal 2004. As we are a young company in an emerging market, we may not be able to maintain profitability and we may again incur significant operating losses in the future. In addition, we expect our operating expenses to increase in the future as we expand our operations. If our revenue does not grow to offset these expected increased expenses, we will not continue to be profitable. You should not consider recent quarterly revenue growth as indicative of our future performance. In fact, in future quarters we may not have any revenue growth and our revenue could decline. Furthermore, if our operating expenses exceed our expectations, our financial performance will be adversely affected.

If our security measures are breached and unauthorized access is obtained to a customer’s data, our service may be perceived as not being secure, customers may curtail or stop using our service and we may incur significant liabilities.

Our service involves the storage and transmission of customers’ proprietary information, and security breaches could expose us to a risk of loss of this information, litigation and possible liability. If our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, during transfer of data to additional data centers or at any time, and, as a result, someone obtains unauthorized access to one of our customers’ data, our reputation will be damaged, our business may suffer and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose sales and customers.

Because we recognize revenue from subscriptions for our service over the term of the subscription, downturns or upturns in sales may not be immediately reflected in our operating results.

We generally recognize revenue from customers ratably over the terms of their subscription agreements, which are typically 12 to 24 months, although terms can range from one to 60 months. As a result, much of the revenue we report in each quarter is deferred revenue from subscription agreements entered into during previous quarters. Consequently, a decline in new or renewed subscriptions in any one quarter will not necessarily be fully reflected in the revenue in that quarter and will negatively affect our revenue in future quarters. In addition, we may be unable to adjust our cost structure to reflect these reduced revenues. Accordingly, the effect of significant downturns in sales and market acceptance of our service may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription term.

If our on-demand application service is not widely accepted, our operating results will be harmed.

We derive substantially all of our revenue from subscriptions to our on-demand application service, and we expect this will continue for the foreseeable future. As a result, widespread acceptance of our service is critical to our future success. Factors that may affect market acceptance of our service include:

• reluctance by enterprises to migrate to an on-demand application service;

• the price and performance of our service;

• the level of customization we can offer;

• the availability, performance and price of competing products and services;

• reluctance by enterprises to trust third parties to store and manage their internal data; and

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• adverse publicity about us, our service or the viability or security of on-demand application services generally from third party reviews, industry analyst reports and adverse statements made by competitors.

Many of these factors are beyond our control. The inability of our on-demand application service to achieve widespread market acceptance would harm our business.

The market for our technology delivery model and on-demand application services is immature and volatile, and if it does not develop or develops more slowly than we expect, our business will be harmed.

The market for on-demand application services is new and unproven, and it is uncertain whether these services will achieve and sustain high levels of demand and market acceptance. Our success will depend to a substantial extent on the willingness of enterprises, large and small, to increase their use of on-demand application services in general, and for CRM in particular. Many enterprises have invested substantial personnel and financial resources to integrate traditional enterprise software into their businesses, and therefore may be reluctant or unwilling to migrate to on-demand application services. Furthermore, some enterprises may be reluctant or unwilling to use on-demand application services because they have concerns regarding the risks associated with security capabilities, among other things, of the technology delivery model associated with these services. If enterprises do not perceive the benefits of on-demand application services, then the market for these services may not develop at all, or it may develop more slowly than we expect, either of which would significantly adversely affect our operating results. In addition, as a new company in this unproven market, we have limited insight into trends that may develop and affect our business. We may make errors in predicting and reacting to relevant business trends, which could harm our business.

We do not have an adequate history with our subscription model to predict the rate of customer subscription renewals and the impact these renewal rates will have on our future revenue or operating results.

Our customers have no obligation to renew their subscriptions for our service after the expiration of their initial subscription period and in fact, some customers have elected not to do so. In addition, our customers may renew for a lower priced edition of our service or for fewer subscriptions. We have limited historical data with respect to rates of customer subscription renewals, so we cannot accurately predict customer renewal rates. Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their dissatisfaction with our service and their ability to continue their operations and spending levels. If our customers do not renew their subscriptions for our service, our revenue will decline and our business will suffer.

Our future success also depends in part on our ability to sell additional features or enhanced editions of our service to our current customers. This may require increasingly sophisticated and costly sales efforts that are targeted at senior management. If these efforts are not successful, our business may suffer.

Our growth could strain our personnel resources and infrastructure, and if we are unable to implement appropriate controls and procedures to manage our growth, we may not be able to successfully implement our business plan.

We are currently experiencing a period of rapid growth in our headcount and operations, which has placed, and will continue to place, to the extent that we are able to sustain such growth, a significant strain on our management, administrative, operational and financial infrastructure. We anticipate that further growth will be required to address increases in our customer base, as well as our expansion into new geographic areas.

Our success will depend in part upon the ability of our senior management to manage this growth effectively. To do so, we must continue to hire, train and manage new employees as needed. If our new hires perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new employees, or if we are not successful in retaining our existing employees, our business may be harmed. To manage the expected

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growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. The additional headcount and capital investments we are adding will increase our cost base, which will make it more difficult for us to offset any future revenue shortfalls by offsetting expense reductions in the short term. If we fail to successfully manage our growth, we will be unable to execute our business plan.

We derive a significant portion of our revenue from small businesses, which have a greater rate of attrition and non-renewal than medium-sized and large enterprise customers.

Our small business customers, which we consider to be companies with fewer than 200 employees, typically have shorter initial subscription periods and, based on our limited experience to date, have had a higher rate of attrition and non-renewal as compared to our medium-sized and large enterprise customers. If we cannot replace our small business customers that do not renew their subscriptions for our service with new customers quickly enough, our revenue could decline.

Our limited operating history may impede acceptance of our service by medium-sized and large customers.

Our ability to increase revenue and maintain profitability depends, in large part, on widespread acceptance of our service by medium-sized and large businesses. Our efforts to sell to these customers may not continue to be successful. In particular, because we are a relatively new company with a limited operating history, these target customers may have concerns regarding our viability and may prefer to purchase critical CRM applications from one of our larger, more established competitors. Even if we are able to sell our service to these types of customers, they may insist on additional assurances from us that we will be able to provide adequate levels of service, which could harm our business.

As more of our sales efforts are targeted at larger enterprise customers, our sales cycle may become more time-consuming and expensive, we may encounter pricing pressure and implementation challenges, and we may have to delay revenue recognition on these customers, all of which could harm our business.

As we target more of our sales efforts at larger enterprise customers, we will face greater costs, longer sales cycles and less predictability in completing some of our sales. In this market segment, the customer’s decision to use our service may be an enterprise-wide decision and, if so, these types of sales would require us to provide greater levels of education to prospective customers regarding the use and benefits of our service. In addition, larger customers may demand more customization, integration services and features. As a result of these factors, these sales opportunities may require us to devote greater sales support and professional services resources to individual customers, driving up costs and time required to complete sales and diverting sales and professional services resources to a smaller number of larger transactions, while at the same time requiring us to delay revenue recognition on some of these transactions until the technical or implementation requirements have been met. In addition, larger enterprise customers may seek volume discounts and price concessions that could make these transactions less profitable.

The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed.

The market for CRM applications is intensely competitive and rapidly changing, barriers to entry are relatively low, many of our competitors are larger and have more resources than we do, and with the introduction of new technologies and market entrants, we expect competition to intensify in the future. If we fail to compete effectively, our operating results will be harmed. Some of our principal competitors offer their products at a lower price, which has resulted in pricing pressures. If we are unable to maintain our current pricing, our operating results could be negatively impacted. In addition, pricing pressures and increased competition generally could result in reduced sales, reduced margins or the failure of our service to achieve or maintain more widespread market acceptance, any of which could harm our business.

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Our current principal competitors include:

• enterprise software application vendors including Amdocs Limited, E.piphany, Inc., which is in the process of being acquired by SSA Global Technologies, Inc., IBM Corporation, Microsoft Corporation, Oracle Corporation, SAP AG and Siebel Systems, Inc.;

• packaged CRM software vendors, some of whom offer hosted services, such as BMC Software Corporation, FrontRange Solutions, Inc., Onyx Software Corp., Pivotal Corporation, which has been acquired by CDC Software Corporation, a subsidiary of chinadotcom corporation, and Sage Group plc;

• on-demand CRM application service providers such as Siebel Systems, NetSuite, Inc., RightNow Technologies, Inc., and Salesnet, Inc.; and

• enterprise application service providers including British Telecom and IBM.

In addition, we face competition from businesses that develop their own CRM applications internally, as well as from enterprise software vendors and online service providers who may develop and/or bundle CRM products with their products in the future. We also face competition from some of our larger and more established competitors who historically have been packaged CRM software vendors, but who are developing directly competitive on-demand CRM application services offerings, such as Siebel Systems through Siebel CRM OnDemand. Our professional services organization competes with a broad range of large systems integrators, including Accenture Ltd., BearingPoint, Inc. and IBM, as well as smaller independent consulting firms specializing in CRM implementations. We have relationships with many of these consulting companies and frequently work cooperatively on projects with them, even as we compete for business in other customer engagements.

Many of our potential competitors enjoy substantial competitive advantages, such as greater name recognition, longer operating histories and larger marketing budgets, as well as substantially greater financial, technical and other resources. In addition, many of our potential competitors have established marketing relationships and access to larger customer bases, and have major distribution agreements with consultants, system integrators and resellers.

As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. Furthermore, because of these advantages, even if our service is more effective than the products that our competitors offer, potential customers might accept competitive products and services in lieu of purchasing our service. For all of these reasons, we may not be able to compete successfully against our current and future competitors.

If we are not able to develop enhancements and new features to our existing service or acceptable new services that keep pace with technological developments, our business will be harmed.

If we are unable to develop enhancements to and new features for our existing service or acceptable new services that keep pace with rapid technological developments, our business will be harmed. The success of enhancements, new features and services such as Supportforce, Multiforce and Customforce depends on several factors, including the timely completion, introduction and market acceptance of the feature or edition. Failure in this regard may significantly impair our revenue growth. In addition, because our service is designed to operate on a variety of network hardware and software platforms using a standard browser, we will need to continuously modify and enhance our service to keep pace with changes in Internet-related hardware, software, communication, browser and database technologies. We may not be successful in either developing these modifications and enhancements or in timely bringing them to market. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our research and development expenses. Any failure of our service to operate effectively with future network platforms and technologies could reduce the demand for our service, result in customer dissatisfaction and harm our business.

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Any efforts we may make in the future to expand our service beyond the CRM market may not succeed.

To date, we have focused our business on providing on-demand application services for the CRM market, but we may in the future seek to expand into other markets. However, any efforts to expand beyond the CRM market may never result in significant revenue growth for us. In addition, efforts to expand our on-demand application service beyond the CRM market may divert management resources from existing operations and require us to commit significant financial resources to an unproven business, which may harm our business.

If we fail to develop our brand cost-effectively, our business may suffer.

We believe that developing and maintaining awareness of the salesforce.com brand in a cost-effective manner is critical to achieving widespread acceptance of our existing and future services and is an important element in attracting new customers. Furthermore, we believe that the importance of brand recognition will increase as competition in our market develops. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable and useful services at competitive prices. In the past, our efforts to build our brand have involved significant expense. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, and our business could suffer.

Any failure to adequately expand our direct sales force will impede our growth.

We continue to be substantially dependent on our direct sales force to obtain new customers, particularly large enterprise customers, and to manage our customer base. We believe that there is significant competition for direct sales personnel with the advanced sales skills and technical knowledge we need. Our ability to achieve significant growth in revenue in the future will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of direct sales personnel. New hires require significant training and may, in some cases, take more than a year before they achieve full productivity. Our recent hires and planned hires may not become as productive as we would like, and we may be unable to hire sufficient numbers of qualified individuals in the future in the markets where we do business. If we are unable to hire and develop sufficient numbers of productive direct sales personnel, sales of our service will suffer and our growth will be impeded.

Sales to customers outside the United States expose us to risks inherent in international sales.

Because we sell our service throughout the world, we are subject to risks and challenges that we would otherwise not face if we conducted our business only in the United States. For example, sales in Europe and Asia Pacific together represented approximately 20 percent of our total revenues during the six months ended July 31, 2005 and 19 percent of our total revenues during the six months ended July 31, 2004, and we intend to continue to expand our international sales efforts. The risks and challenges associated with sales to customers outside the United States include:

• localization of our service, including translation into foreign languages and associated expenses;

• laws and business practices favoring local competitors;

• compliance with multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations;

• foreign currency fluctuations, whose effects we may not be able to mitigate through our hedging program;

• different pricing environments;

• difficulties in staffing and managing foreign operations;

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• different or lesser protection of our intellectual property;

• longer accounts receivable payment cycles and other collection difficulties; and

• regional economic and political conditions.

Some of our international subscription fees are currently denominated in U.S. dollars and paid in local currency. As a result, fluctuations in the value of the U.S. dollar and foreign currencies may make the service more expensive for international customers, which could harm our business.

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.

If we fail to protect our intellectual property rights adequately, our competitors might gain access to our technology, and our business might be harmed. In addition, defending our intellectual property rights might entail significant expense. Any of our trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. We currently have no issued patents and may be unable to obtain patent protection in the future. In addition, if any patents are issued in the future, they may not provide us with any competitive advantages, or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effective patent, trademark, copyright and trade secret protection may not be available to us in every country in which our service is available. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

We might be required to spend significant resources to monitor and protect our intellectual property rights. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel.

We may be sued by third parties for alleged infringement of their proprietary rights.

The software and Internet industries are characterized by the existence of a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. We have received in the past, and may receive in the future, communications from third parties claiming that we have infringed on the intellectual property rights of others. Our technologies may not be able to withstand any third-party claims or rights against their use. Any intellectual property claims, with or without merit, could be time-consuming and expensive to resolve, could divert management attention from executing our business plan and could require us to pay monetary damages or enter into royalty or licensing agreements. In addition, many of our subscription agreements require us to indemnify our customers for third-party intellectual property infringement claims, which would increase the cost to us of an adverse ruling on such a claim. An adverse determination could also prevent us from offering our service to others.

We rely on third-party hardware and software that may be difficult to replace or which could cause errors or failures of our service.

We rely on hardware purchased or leased and software licensed from third parties in order to offer our service, including database software from Oracle Corporation. This hardware and software may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use any of this hardware or software could result in delays in the provisioning of our service until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business. Any errors or defects in third-party hardware or software could result in errors or a failure of our service which could harm our business.

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We may be required to purchase the interest in our Japanese joint venture held by our joint venture partner, under certain circumstances, on terms that may not be favorable to us.

In some circumstances, we may be required to purchase the interest of our Japanese joint venture partner. If we default under the terms of our joint venture agreement with our joint venture partner, or if we and our partner disagree over a course of action proposed for the joint venture entity and the disagreement continues, then our partner may require that we purchase its interest in the joint venture. In the event we are required to purchase our partner’s interest in the joint venture, we could be forced to make an unanticipated outlay of a significant amount of capital, which could harm our financial condition. Although the timing and circumstances of any such purchase, were it to be required, are not predictable, if the joint venture were valued based on its most recent financing, which occurred in September 2003, the buyout price could be as much as approximately $13.0 million.

If we acquire any companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results.

We may acquire or make investments in complementary companies, services and technologies in the future. We have not made any acquisitions or investments to date, and therefore our ability as an organization to make acquisitions or investments is unproven. Acquisitions and investments involve numerous risks, including:

• difficulties in integrating operations, technologies, services and personnel;

• diversion of financial and managerial resources from existing operations;

• risk of entering new markets;

• potential write-offs of acquired assets or investments;

• potential loss of key employees;

• inability to generate sufficient revenue to offset acquisition or investment costs; and

• delays in customer purchases due to uncertainty.

In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted which could affect the market price of our stock. As a result, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be seriously harmed and the value of our common stock may decline.

Evolving regulation of the Internet may affect us adversely.

As Internet commerce continues to evolve, increasing regulation by federal, state or foreign agencies becomes more likely. For example, we believe increased regulation is likely in the area of data privacy, and laws and regulations applying to the solicitation, collection, processing or use of personal or consumer information could affect our customers’ ability to use and share data, potentially reducing demand for CRM solutions and restricting our ability to store, process and share data with our customers. In addition, taxation of services provided over the Internet or other charges imposed by government agencies or by private organizations for accessing the Internet may also be imposed. Any regulation imposing greater fees for Internet use or restricting information exchange over the Internet could result in a decline in the use of the Internet and the viability of Internet-based services, which could harm our business.

Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our solution and adversely affect our business.

Our customers can use our service to store contact and other personal or identifying information regarding their customers and contacts. Federal, state and foreign government bodies and agencies, however, have adopted or are considering adopting laws and regulations regarding the collection, use and disclosure of personal information obtained from consumers and individuals. The costs of compliance with, and other burdens imposed

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by, such laws and regulations that are applicable to the businesses of our customers may limit the use and adoption of our service and reduce overall demand for it. Furthermore, privacy concerns may cause our customers’ customers to resist providing the personal data necessary to allow our customers to use our service effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our service in certain industries. For example, regulations such as the Gramm-Leach-Bliley Act, which protects and restricts the use of consumer credit and financial information, and the Health Insurance Portability and Accountability Act of 1996, which regulates the use and disclosure of personal health information, impose significant requirements and obligations on businesses that may affect the use and adoption of our service.

The European Union has also adopted a data privacy directive that requires member states to impose restrictions on the collection and use of personal data that, in some respects, are far more stringent, and impose more significant burdens on subject businesses, than current privacy standards in the United States. All of these domestic and international legislative and regulatory initiatives may adversely affect our customers’ ability to collect and/or use demographic and personal information from their customers, which could reduce demand for our service.

In addition to government activity, privacy advocacy groups and the technology and other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on us. If the gathering of personal information were to be curtailed in this manner, CRM solutions would be less effective, which may reduce demand for our service and harm our business.

The success of our business depends on the continued growth and acceptance of the Internet as a business tool.

Expansion in the sales of our service depends on the continued acceptance of the Internet as a communications and commerce platform for enterprises. The Internet could lose its viability as a business tool due to delays in the development or adoption of new standards and protocols to handle increased demands of Internet activity, security, reliability, cost, ease-of-use, accessibility and quality-of-service. The performance of the Internet and its acceptance as a business tool has been harmed by “viruses,” “worms” and similar malicious programs, and the Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If for any reason the Internet does not remain a widespread communications medium and commercial platform, the demand for our service would be significantly reduced, which would harm our business.

Our business is subject to changing regulations regarding corporate governance and public disclosure that have increased both our costs and the risk of noncompliance.

We are subject to rules and regulations by various governing bodies, including the Securities and Exchange Commission, New York Stock Exchange and Public Company Accounting Oversight Board, that are charged with the protection of investors and the oversight of companies whose securities are publicly traded. Our efforts to comply with these new regulations, most notably the Sarbanes-Oxley Act, or SOX, have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention to compliance activities.

By the end of fiscal 2006, we are required to comply with the SOX requirements involving the assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment. Although we believe our on-going review and testing of our internal controls will enable us to be compliant with the SOX requirements, we may identify deficiencies that we may not be able to remediate by the end of fiscal 2006. If we cannot assess our internal controls over financial reporting as effective, or our external auditors are unable to provide an unqualified attestation report on such assessment, our stock price could decline.

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Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, our business may be harmed.

We are dependent on our management team and development and operations personnel, and the loss of one or more key employees or groups could harm our business and prevent us from implementing our business plan in a timely manner.

Our success depends largely upon the continued services of our executive officers and other key personnel, particularly Marc Benioff, our Chief Executive Officer and Chairman of the Board, Steve Cakebread, our Chief Financial Officer, Jim Steele, our President of Worldwide Sales and Services, Parker Harris, our Executive Vice President of Technology and Ken Juster, our Executive Vice President of Legal Affairs and Corporate Development. We are also substantially dependent on the continued service of our existing development and operations personnel because of the complexity of our service and technologies. We do not have employment agreements with any of our executive officers, key management, development or operations personnel and, therefore, they could terminate their employment with us at any time. We do not maintain key person life insurance policies on any of our employees. The loss of one or more of our key employees or groups could seriously harm our business.

Because competition for our target employees is intense, we may not be able to attract and retain the highly skilled employees we need to support our planned growth.

To continue to execute on our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel is intense, especially for engineers with high levels of experience in designing and developing software and Internet-related services and senior sales executives. We may not be successful in attracting and retaining qualified personnel. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. In addition, in making employment decisions, particularly in the Internet and high-technology industries, job candidates often consider the value of the stock options they are to receive in connection with their employment. Volatility in the price of our stock may, therefore, adversely affect our ability to attract or retain key employees. Furthermore, the new requirement to expense stock options may discourage us from granting the size or type of stock options awards that job candidates require to join our company. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be severely harmed.

We might require additional capital to support business growth, and this capital might not be available.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges or opportunities, including the need to develop new services or enhance our existing service, enhance our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited.

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We believe our reported financial results will be adversely affected by changes in accounting principles generally accepted in the United States.

Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, or FASB, the American Institute of Certified Public Accountants, the Securities and Exchange Commission, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.

For example, in December 2004, the FASB announced its decision to require companies to expense employee stock options. We will adopt this new accounting pronouncement, Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, beginning on February 1, 2006, which is the start of fiscal 2007. We believe this change in accounting will materially and adversely affect our reported results of operations.

Unanticipated changes in our tax rates could affect our future results.

We are subject to income taxes in the United States and various foreign jurisdictions, and our domestic and international tax liabilities are subject to the allocation of expenses in differing jurisdictions.

Our effective tax rate could be adversely affected by changes in the mix of earnings and losses in countries with differing statutory tax rates and in the valuation of deferred tax assets and liabilities. Any increase in the effective tax rate could materially affect our net results.

Additionally, the carrying value of our deferred tax assets has been historically offset by a full valuation allowance. Our ability to realize the carrying value of our deferred tax assets is dependent on our ability to generate future taxable income in the taxing jurisdiction where the deferred tax asset was created. Should we conclude that it is more likely than not that the carrying value of the deferred tax assets will be utilized, we would reverse the valuation allowance and list the deferred tax assets on the balance sheet at its carrying value, which would result in a reduction in our income tax expense and could materially affect our net results. However, we cannot predict in which quarter this will occur.

Risks Related to Ownership of Our Common Stock

The trading 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 been highly volatile. Accordingly, the trading price of our common stock has been and is likely to continue to be subject to wide fluctuations. Further, our common stock has a limited trading history. Factors affecting the trading price of our common stock include:

• variations in our operating results;

• announcements of technological innovations, new services or service enhancements, strategic alliances or significant agreements by us or by our competitors;

• recruitment or departure of key personnel;

• changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock;

• market conditions in our industry, the industries of our customers and the economy as a whole; and

• the occurrence of a natural disaster, catastrophic event, or act of terrorism in the locations where we conduct business that results in the destruction or disruption of our service and adversely affects our ability to conduct normal business operations.

In addition, if the market for technology stocks or the stock market in general experiences uneven investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, operating

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results or financial condition. The trading price of our common stock might also decline in reaction to events that affect other companies within, or outside, our industry even if these events do not directly affect us. Any volatility in our stock price may result in litigation, such as the lawsuits following the approximate 25% decline in our stock price on July 21, 2004, which may harm our business and results of operations.

If securities analysts stop publishing research or reports about us or our business or if they downgrade our stock, the price of our stock could decline.

The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts. If one or more of the analysts who do cover us downgrade our stock, our stock price would likely decline rapidly. Furthermore, if one or more of these analysts cease coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline.

The concentration of our capital stock ownership with insiders will likely limit your ability to influence corporate matters.

Our executive officers, directors, current 5 percent or greater stockholders and affiliated entities together beneficially own a significant percentage of our outstanding common stock. As a result, these stockholders, acting together, will have control over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions, even if other stockholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.

Provisions in our amended and restated certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Our amended and restated certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions among other things:

• establish a classified board of directors so that not all members of our board are elected at one time;

• establish the size of the board of directors at seven (7) members;

• provide that directors may only be removed “for cause” and only with the approval of 66 ²/3 percent of our stockholders;

• require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and bylaws;

• authorize the issuance of “blank check” preferred stock that our board could issue to increase the number of outstanding shares and to discourage a takeover attempt;

• eliminate the ability of our stockholders to call special meetings of stockholders;

• prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

• provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and

• establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.

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

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign currency exchange risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British pound, Canadian dollar and Japanese yen. We have a risk management policy that allows us to utilize foreign currency forward and option contracts to manage currency exposures that exist as part of our ongoing business operations. The hedging contracts by policy have maturities of less than three months and settle before the end of each quarterly period. Additionally, by policy we do not enter into any hedging contracts for trading or speculative purposes.

We have entered into forward contracts to hedge short-term foreign exchange transaction exposures associated primarily with certain balance sheet exposures. The gain/loss from settling these contracts are offset by the loss/gain derived from the underlying balance sheet exposures.

Interest rate sensitivity

We had unrestricted cash, cash equivalents and marketable securities totaling $232.7 million at July 31, 2005. These amounts were invested primarily in money market funds and instruments, corporate notes and bonds, government securities and other debt securities with strong credit ratings. The unrestricted cash, cash equivalents and short-term marketable securities are held for working capital purposes. We do not enter into investments for trading or speculative purposes.

Our fixed-income portfolio is subject to interest rate risk. An immediate increase in interest rates of 100-basis points could result in higher interest income of $0.9 million offset by a principal reduction of $1.9 million for a net reduction of $1.0 million over a 12-month period. Similarly, a 100-basis point decrease could result in a decrease in interest income of $0.9 million and a principal increase of $1.9 million for a net increase of $1.0 million. Fluctuations 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, and are realized only if we sell the underlying securities.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed by us in periodic SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and can therefore only provide reasonable, not absolute assurance that the design will succeed in achieving its stated goals.

(b) Changes in internal control over financial reporting.

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has 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

On July 26, 2004, a purported class action complaint was filed in the United States District Court for the Northern District of California, entitled Morrison v. salesforce.com, et al., against the Company, its Chief Executive Officer and its Chief Financial Officer. The complaint alleged violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), purportedly on behalf of all persons who purchased salesforce.com common stock between June 21, 2004 and July 21, 2004, inclusive. The claims were based upon allegations that defendants failed to disclose an allegedly declining trend in its revenues and earnings. Subsequently, four other substantially similar class action complaints were filed in the same district based upon the same facts and allegations, asserting claims under Section 10(b) and Section 20(a) of the 1934 Act and Section 11 and Section 15 of the Securities Act of 1933, as amended. The actions have been consolidated under the caption In re salesforce.com, inc. Securities Litigation, Case No. C-04-3009 JSW (N.D. Cal.). On December 22, 2004, the Court appointed Chuo Zhu as lead plaintiff. On February 22, 2005, lead plaintiff filed a Consolidated and Amended Class Action Complaint (the “CAC”). The CAC alleged violations of Section 10(b) and Section 20(a) of the 1934 Act, purportedly on behalf of all persons who purchased salesforce.com common stock between June 23, 2004 and July 21, 2004, inclusive. As in the original complaints, the claims in the CAC were based upon allegations that defendants failed to disclose an allegedly declining trend in its revenues and earnings. On April 14, 2005, defendants filed a motion to dismiss the CAC. On April 15, 2005, the Court granted lead plaintiff leave to file an amended/superseding complaint. On April 22, 2005, lead plaintiff filed a Corrected and Superceding [sic] First Amended Class Action Complaint (“FAC”). As in the CAC, the FAC alleges violations of Section 10(b) and Section 20(a) of the 1934 Act, purportedly on behalf of all persons who purchased salesforce.com common stock between June 23, 2004 and July 21, 2004, inclusive. The claims in the FAC are based upon allegations that defendants failed to disclose an internal forecast that earnings for fiscal year 2005 would decline from the prior fiscal year. On April 29, 2005, defendants filed a motion to dismiss the FAC. The hearing on the motion to dismiss the FAC is scheduled for August 26, 2005. The lawsuit is still in the preliminary stages, and it is not possible for the Company to quantify the extent of potential liability, if any. The Company does not believe that the lawsuit has any merit and intends to defend the action vigorously.

On August 6, 2004, a shareholder derivative action was filed in the Superior Court of the State of California, San Francisco County, entitled Borrelli v. Benioff, et al., against the Company’s Chief Executive Officer, its Chief Financial Officer and members of its Board of Directors alleging breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment under state common law. Subsequently, a substantially similar complaint was filed in the same court based on the same facts and allegations, entitled Johnson v. Benioff, et al. The two actions have been consolidated under the caption Borrelli v. Benioff, Case No. CGC-04-433615 (Cal. Super. Ct., S.F. Cty.). On October 5, 2004, plaintiffs filed a consolidated complaint, which is based upon the same facts and circumstances as alleged in the shareholder class action discussed above, and asserts that the defendants breached their fiduciary duties by making or failing to prevent salesforce.com, inc. and its management from making statements or omissions that potentially subject the Company to liability and injury to its reputation. The action seeks damages on behalf of salesforce.com in an unspecified amount, among other forms of legal and equitable relief. Salesforce.com is named solely as a nominal defendant against which no recovery is sought. The plaintiff shareholders made no demand upon the Board of Directors prior to filing these actions. The deadline for defendants to respond to the consolidated complaint is September 29, 2005. The derivative action is still in the preliminary stages, and it is not possible for the Company to quantify the extent of potential liability to the individual defendants, if any. Management does not believe that the lawsuits have any merit and intends to defend the actions vigorously.

Additionally, we are involved in various legal proceedings arising from the normal course of business activities. In our opinion, resolution of these matters is not expected to have a material adverse impact on our consolidated results of operations, cash flows or our financial position. However, depending on the nature and timing of any such dispute, an unfavorable resolution of a matter could materially affect our future results of operations, cash flows or financial position in a particular period.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

a. Securities Sold

Since May 1, 2005 we issued 125,000 shares of common stock upon the exercise of warrants held by the salesforce.com/foundation, commonly referred to as the Foundation, at an exercise price of $1.10 per share. Additionally, we issued 17,000 shares of common stock upon the net exercise of warrants held by Merrill Lynch, Pierce, Finner and Smith, Inc. at an exercise price of $1.75 per share.

b. Underwriters and Other Purchasers

Not applicable.

c. Consideration

We received cash proceeds of $137,500 from the exercise of the warrants held by the Foundation and we received no cash proceeds from the net exercise of the warrants held by Merrill Lynch.

d. Exemption from Registration Claimed

The shares issued pursuant to the above described exercises were exempt from Registration pursuant to Section 4(2) of the Securities Act.

e. Terms of Conversion or Exercise

Not applicable.

f. Use of Proceeds

The Securities and Exchange Commission declared our registration statement, filed on Form S-1 (File No. 333-111289) under the Securities Act of 1933 in connection with the initial public offering of our common stock, $0.001 par value, effective on June 22, 2004. The underwriters were Morgan Stanley & Co. Incorporated, Deutsche Bank Securities Inc., UBS Securities LLC, Wachovia Capital Markets, LLC and William Blair & Company, L.L.C.

Our initial public offering commenced on June 23, 2004. All 11,500,000 shares of common stock registered under the Registration Statement, which included 1,500,000 shares of common stock covered by an over-allotment option granted to the underwriters, were sold to the public at a price of $11.00 per share. All of the shares of common stock were sold by us and there were no selling shareholders in the offering. The offering did not terminate until after the sale of all of the securities registered by the Registration Statement.

The aggregate gross proceeds from the shares of common stock sold were $126.5 million. The aggregate net proceeds to us were $113.8 million after deducting $8.8 million in underwriting discounts and commissions and $3.9 million in other costs incurred in connection with the offering.

We have not spent any of the net proceeds from our public offering.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our 2005 Annual Meeting of Stockholders was held on July 14, 2005. The following proposals were adopted as follows.

1. To elect two Class I directors to serve for a term of three years and until their successors are duly elected and qualified:

	For	Withheld
Marc Benioff	94,331,155	299,673
Alan Hassenfeld	94,553,503	77,325

2. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2006:

For	Against	Abstain
94,586,241	38,326	6,261

Other directors whose term continued after the 2005 Annual Meeting of Stockholders include Craig Ramsey, Sanford R. Robertson, Stratton Sclavos and Larry Tomlinson.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits

The Exhibits listed below are filed as part of this Form 10-Q.

Exhibit 3.1(1)	Restated Certificate of Incorporation of salesforce.com, inc.
Exhibit 3.2(1)	Amended and Restated Bylaws of salesforce.com, inc.
Exhibit 10.1	Office Lease dated as of June 23, 2000 between salesforce.com, inc. and TMG/One Market, L.P., and amendments thereto
Exhibit 10.2*(2)	Severance and Confidentiality Agreement and General and Special Release dated May 17, 2005 by and between salesforce.com, inc. and Patricia Sueltz
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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

(1) Incorporated by reference from the Company’s registration statement on Form S-1 (No. 333-111289) as filed with the Securities and Exchange Commission on April 20, 2004.

(2) Incorporated by reference from the Company’s Form 8-K as filed with the Securities and Exchange Commission on May 19, 2005.

 * Denotes a management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements 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: August 19, 2005

salesforce.com, inc.

/s/    STEVE CAKEBREAD        

Steve Cakebread

Chief Financial Officer

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EX-10.1

EXHIBIT 10.1

OFFICE LEASE

THE LANDMARK @ ONE MARKET

San Francisco, California

TMG/ONE MARKET, L.P.

And

CROSSMARKET, LLC

LANDLORD

SALESFORCE.COM, INC.

TENANT

JUNE 23, 2000

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OFFICE LEASE

THE LANDMARK @ ONE MARKET

San Francisco, California

BASIC LEASE INFORMATION

Lease Date:	June 23, 2000
Landlord:	TMG/ONE MARKET, L.P., a Delaware limited partnership and CROSSMARKET, LLC, a Nevada limited liability company
Tenant:	SALESFORCE.COM, INC., a Delaware corporation
Premises:	58,988 square feet of Rentable Area located on the Bayside portion of the 3rd Floor of the Building (28,513 square feet of Rentable Area, the “Third Floor Portion”), on the Cityside portion of the Fourth (4th) Floor of the Building (14,528 square feet of Rentable Area, the “Fourth Floor Portion”) and on the First (1st) Floor and Mezzanine of the Building (15,947 square feet of Rentable Area, the “First Floor Portion”), as shown on the Floor Plans attached as Exhibit A. The Premises shall also include the storage area outlined on the Floor Plan attached as Exhibit A, located in the basement of the Building containing approximately 3,500 square feet (the “Storage Space”). The entire Building contains 360,021 square feet of Rentable Area.
Term:	Commencing on the Initial Possession Date (as defined in Section 5.1 of Exhibit C attached to this Lease) and continuing until a date ten (10) years from the Commencement Date (the “Initial Term”), subject to Landlord’s option of partial termination, described in Section 2.2, hereof and one (1) option to extend the Term for a single period of five (5) years (the “Extended Term”).
Anticipated Possession Date:	June 23, 2000
Commencement Date:	The date one hundred twenty (120) days after the Possession Date. The term “Initial Commencement Date” shall mean October 21, 2000.
Expiration Date:	The date which is ten (10) years after the Commencement Date, or the last day of the Extended Term, if the Extended Term is properly exercised.

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	Period of Term	Amount
Base Rent:
	Initial Commencement Date to Commencement Date	$215,824.16/month (“Start Rent”)
	Commencement Date to Second anniversary of Commencement Date	$3,865,650.00/year (“Preliminary Base Rent”)
	Second anniversary of Commencement Date to Fourth anniversary of Commencement Date	$4,017,197.00/year (“Initial Base Rent”)
	Fourth anniversary of Commencement Date to Seventh anniversary of Commencement Date	$4,175,215.20/year (“Middle Base Rent”)
	Seventh anniversary of Commencement Date to End of Initial Term	$4,258,962.20/year (“Final Base Rent”)
	Extended Term:	The fair market rent for the Premises (including Storage Space) as of the first day of the Extended Term, as determined in accordance with Section 3.2 of the Lease
Base Year:	The 2000 calendar year.
Tenant’s Percentage Share:	16.38% (Excludes Storage Space)
Permitted Use:	General office use
Security Deposit:	$3,500,000.00
Building Directory Spaces:	See Section 33.13 below
Tenant’s Address:	101 Spear Street #203, San Francisco, CA 94105, until Tenant’s occupancy of the Premises, then the Premises
Landlord’s Address:	100 Bush Street, Suite 2600 San Francisco, CA 94104

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Brokers:

Landlord’s Broker:     CB Richard Ellis, Inc.

Tenant’s Broker:         BT Commercial Real Estate

Exhibits and Addenda:

Exhibit A:	Floor Plan(s) of Premises
Exhibit B:	Legal Description of Land
Exhibit C:	Work Letter
Exhibit D:	Rules and Regulations of the Building
Exhibit E:	Confirmation of Lease Term
Exhibit F:	Janitorial Specifications
Exhibit F-1:	Holidays
Exhibit F-2:	Security

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

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OFFICE LEASE

THIS LEASE is made and entered into by and between Landlord and Tenant as of the Lease Date. This Lease amends and restates in its entirety that certain Office Lease between Landlord and Tenant dated April 26, 2000. Landlord and Tenant hereby agree as follows:

1. Definitions.

1.1. Terms Defined. The following terms have the meanings set forth below. Certain other terms have the meanings set forth in the Basic Lease Information or elsewhere in this Lease.

Alterations: Alterations, additions or other improvements to the Premises made by or on behalf of Tenant (but not including Tenant’s moveable trade fixtures, moveable items of personal property or the alterations, additions or other improvements, if any, made by or on behalf of Tenant during the initial improvement of the Premises pursuant to and governed by the provisions of the Work Letter attached hereto as Exhibit C).

Annex: The office building consisting of 6-stories located adjacent to the westerly wing of the Building.

Annex Lease: That certain sublease dated as of even date with this Lease, between Landlord and Tenant for a portion of the space located in the Annex.

Base Operating Expenses and Base Real Estate Taxes: The Operating Expenses and the Real Estate Taxes paid or incurred by Landlord in the Base Year. For purposes of determining Real Estate Taxes for the Base Year, Landlord shall make an appropriate adjustment to the Real Estate Taxes for such year as reasonably determined by Landlord using sound accounting and management principles, to determine the amount of Real Estate Taxes (including the annual installment of any special assessment, including any special assessment first assessed after 2000, but relating to the renovation of the Building or the initial buildout of the Premises) that would have been incurred during such year if the tenant improvements in the Building had been fully constructed and the Land, the Building, and all tenant improvements in the Building had been fully assessed for Real Estate Tax purposes. For purposes of determining Operating Expenses for the Base Year, if Landlord does not obtain earthquake insurance for the Building during the Base Year, Landlord shall make an appropriate adjustment to the amount of Operating Expenses for the Base Year at such time as Landlord elects to obtain earthquake insurance so as to impute the amount of the premium that would have been incurred as an Operating Expense if not self insured (assuming such insurance was competitively bid and included customary coverage and exclusions and commercially reasonable deductibles).

Building: The office building consisting of an 11-story building located on the Land, commonly known as The Landmark @ One Market, One Market Street, San Francisco, California, and any additions to such Building.

Escalation Rent: Tenant’s Percentage Share of the total dollar increase, if any, in Operating Expenses and in Real Estate Taxes, each as paid or incurred by Landlord in each calendar year, or part thereof, after the Base Year, over the amount of Base Operating Expenses and Base Real Estate Taxes. If the Building is less than ninety-five percent (95%) occupied during any part of any year (including the Base Year), Landlord shall make an appropriate adjustment of the variable components of Operating

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Expenses and Real Estate Taxes for that year, as reasonably determined by Landlord using sound accounting and management principles, to determine the amount of Operating Expenses and Real Estate Taxes that would have been incurred during such year if the Building had been ninety-five percent (95%) occupied during the entire year. If the management fees for the Building for any year are calculated as a different percentage of gross revenue than in the Base Year, then the percentage used in the calculation of management fees in any such year shall be adjusted upward or downward to be identical to the percentage used during the Base Year. This amount shall be considered to have been the amount of Operating Expenses and Real Estate Taxes for that year. For purposes hereof, “variable components” include only those component expenses that are affected by variations in occupancy levels.

Impositions: Taxes, assessments, charges, excises and levies, business taxes, licenses, permits, inspection and other authorization fees, transit development fees, assessments or charges for housing funds, service payments in lieu of taxes and any other fees or charges of any kind at any time levied, assessed, charged or imposed by any federal, state or local entity, (i) upon, measured by or reasonably attributable to the cost or value of Tenant’s equipment, furniture, fixtures or other personal property located in the Premises, or the cost or value of any alterations, additions or other improvements to the Premises made by or on behalf of Tenant during the initial improvement of the Premises pursuant to and governed by the Work Letter which exceed Building standard improvements (which are defined to mean tenant improvements costing less than $37.50 per square foot of Rentable Area) and any subsequent Alterations; (ii) upon, or measured by, any Rent payable hereunder, including any gross receipts tax; (iii) upon, with respect to or by reason of the development, possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; or (iv) upon this Lease transaction, or any document to which Tenant is a party creating or transferring any interest or estate in the Premises. Impositions do not include Real Estate Taxes, franchise, transfer, inheritance or capital stock taxes, or income taxes measured by the net income of Landlord from all sources, unless any such taxes are levied or assessed against Landlord as a substitute for, in whole or in part, any Imposition.

Land: The parcel of land described on Exhibit B attached to this Lease.

Operating Expenses: All costs of management, operation, maintenance and repair of the Building and the Land, including, but not limited to, the following: (i) salaries, wages, benefits and other payroll expenses of employees engaged in the operation, maintenance or repair of the Building; (ii) property management fees and expenses (not to exceed 3.5% of the gross revenue from the Building and the Land); (iii) rent (or rental value) and expenses for Landlord’s and any property manager’s offices in the Building; (iv) electricity, natural gas, water, waste disposal, sewer, heating, lighting, air conditioning and ventilating and other utilities; (v) janitorial, maintenance, security, life safety and other services, such as alarm service, window cleaning and elevator maintenance and uniforms for personnel providing services; (vi) repair and replacement, resurfacing or repaving of paved areas, sidewalks, curbs and gutters (except that any such work which constitutes a capital improvement shall be included in Operating Expenses in the manner provided in clause (xiv) below); (vii) landscaping, ground keeping, management, operation, and maintenance and repair of all public, private and park areas adjacent to the Building; (viii) materials, supplies, tools and rental equipment; (ix) license, permit and inspection fees and costs; (x) insurance premiums and costs (including an imputed insurance premium if Landlord self-insures, or a proportionate share if Landlord insures under a “blanket” policy), and the deductible portion of any insured loss under Landlord’s insurance; (xi) sales, use and excise taxes; (xii) legal, accounting and other professional services for the Building, including costs, fees and expenses of contesting the validity or applicability of any law, ordinance, rule, regulation or order relating to the Building; (xiii) depreciation on personal property, including exterior window draperies provided by Landlord and floor coverings in the common areas and other public portions of the Building, and/or rental costs of leased furniture, fixtures, and equipment; and (xiv) the cost of any

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

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costs of all utilities (heating, ventilating, air cooling, if any, electricity, water, serer, elevators), for repairs and replacements and for steam cleaning; (BB) capital expenditures required solely by Landlord’s failure to comply with laws applicable to the Building, including the Premises, as of the Possession Date; (CC) income, franchise taxes and dividends; (DD) capital expenditures to common areas on multi-tenant floors to the extent such expenditures are made solely to accommodate the tenants on such floors; and (EE) the cost of removal or remediation of hazardous substances required in order to comply with any Environmental Law (as defined below) (i) applicable to the Building, including the Premises, as of the Possession Date or (ii) with respect to subsurface removal or remediation only, not applicable to the Building, including the Premises, as of the Possession Date, which subsurface removal or remediation is required in connection with the re-construction of the Building following an earthquake or casualty. Subject to the provisions of this definition, the determination of Operating Expenses shall be made by Landlord in accordance with generally accepted accounting principles and practices consistently applied.

Real Estate Taxes: All taxes, assessments and charges now or hereafter levied or assessed upon, or with respect to, the Building or any portion thereof, or any personal property of Landlord used in the operation thereof or located therein, or Landlord’s interest in the Building or such personal property, by any federal, state or local entity, including: (i) all real property taxes and general and special assessments; (ii) charges, fees or assessments for transit, housing, day care, open space, art, police, fire or other governmental services or benefits to the Building; (iii) service payments in lieu of taxes; (iv) any tax, fee or excise on the use or occupancy of any part of the Building, or on rent for space in the Building; (v) any other tax, fee or excise, however described, that may be levied or assessed as a substitute for, or as an addition to, in whole or in part, any other Real Estate Taxes; and (vi) reasonable fees and expenses, including those of consultants or attorneys, incurred in connection with proceedings to contest, determine or reduce Real Estate Taxes. Real Estate Taxes do not include: (A) franchise, transfer, inheritance or capital stock taxes, or income taxes measured by the net income of Landlord from all sources, unless any such taxes are levied or assessed against Landlord as a substitute for, in whole or in part, any Real Estate Tax; (B) Impositions and all similar amounts payable by tenants of the Building under their leases; and (C) penalties, fines, interest or charges due for late payment of Real Estate Taxes by Landlord. If any Real Estate Taxes are payable, or may at the option of the taxpayer be paid, in installments, such Real Estate Taxes shall, together with any interest that would otherwise be payable with such installment, be deemed to have been paid in installments, amortized over the maximum time period allowed by applicable law.

Rent: Base Rent, Escalation Rent and all other additional charges and amounts payable by Tenant in accordance with this Lease.

Rentable Area: The aggregate of (i) the Leased Area (as defined below) of the portion of the floor occupied by Tenant, plus (ii) the result obtained by multiplying (1) the area of the Common Area (as defined below) on such floor by (2) a fraction whose numerator is the Leased Area of Tenant’s portion of the floor and whose denominator is the Leased Area of all tenant space on such floor, plus (iii) in the event that Landlord must enlarge or alter in any way, shape or fashion the Common Area to accommodate Tenant’s Leased Area, the total additional Common Area space. For purposes of this paragraph, “Leased Area” shall mean all floor area in a tenant space, measured to the inside glass surface of exterior Building walls, to the center of corridors and other permanent partitions, and to the center of partitions that separate tenant space from adjoining tenant spaces, without deduction for columns and projections necessary to the Building; and “Common Area” shall mean the total area on a floor consisting of restrooms, janitor, telephone and electrical closets, mechanical areas and public corridors providing access to tenant space on such floor, but excluding the main Building lobby, public stairs, elevator shafts and pipe shafts. At any time within three (3) business days after the Lease Date, Tenant may engage an independent licensed architect or surveyor to measure the Rentable Area of the Premises. Tenant’s architect or surveyor

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shall determine the Rentable Area in accordance with the standards set forth in this paragraph. If the architect’s or surveyor’s measurement of the Rentable Area is less than the area of the Premises set forth in the Basic Lease Information by greater than two percent (2%), then Tenant shall have the right to terminate the Lease by delivering to Landlord, within three (3) business days after the Lease Date, written notice of its intentions to terminate the Lease based upon such variance. Tenant’s failure to deliver such notice to Landlord within such three (3) business day period shall constitute Tenant’s waiver of its right to terminate the Lease pursuant to this paragraph. In addition, before the Possession Date, Landlord’s architect shall reasonably remeasure the Rentable Area of the First Floor Portion (the “Remeasurement”). If such Remeasurement discloses that the Rentable Area of the First Floor Portion is less than or greater than 15,947 square feet, then Landlord and Tenant shall execute an amendment to this Lease pursuant to which Landlord equitably adjusts the Rentable Area of the Premises, the Base Rent and the Tenant’s Percentage Share.

Scient Lease. That certain lease dated October 15, 1999 between Landlord and Scient Corporation (“Scient”) for a portion of the Building, without reference to any amendment or modification that is subsequent to such date.

Tenant’s Percentage Share: The percentage figure specified in the Basic Lease Information. Landlord and Tenant acknowledge that Tenant’s Percentage Share has been obtained by dividing the Rentable Area of the Premises, as specified in the Basic Lease Information by the total Rentable Area of the Building, and multiplying such quotient by one hundred (100). In the event Tenant’s Percentage Share is changed during a calendar year by reason of a change in the Rentable Area of the Premises or a change in the total Rentable Area of the Building, Tenant’s Percentage Share shall thereafter mean the result obtained by dividing the then Rentable Area of the Premises by the then total Rentable Area of the Building and multiplying such quotient by one hundred (100). For the purposes of determining Tenant’s Percentage Share of Escalation Rent, Tenant’s Percentage Share shall be determined on the basis of the number of days during such calendar year at each such Percentage Share.

Term: The period from the Possession Date to the Expiration Date.

Wattage Allowance: The product obtained by multiplying the Rentable Area of the Premises by 6 watts. “Lighting Wattage Allowance” means thirty-three percent (33%) of the Wattage Allowance.

1.2. Effect of Certain Defined Terms. The parties acknowledge that the Rentable Area of the Premises and the Building have been finally determined by the parties as part of this Lease for all purposes, including the calculation of Tenant’s Percentage Share and will not, except as otherwise provided in this Lease, be changed.

2. Lease of Premises.

2.1. Premises. Landlord leases to Tenant and Tenant leases from Landlord the Premises, together with the non-exclusive right to use, in common with others, the lobbies, entrances, stairs, elevators, plazas, pedestrian walkways, restrooms, and other public portions of the Building, all subject to the terms, covenants and conditions set forth in this Lease. Subject to compliance with applicable law, Tenant shall have the right at its cost to decorate the stair wells within its Premises and to install a card access system to the doors from the stairwells to the Premises (including all cabling required for such system) so as to permit travel by Tenant between the floors of the Premises. The right to use the stairwells however shall remain non-exclusive. All the windows and exterior walls of the Premises, the terraces adjacent to the Premises, if any, and any space in the Premises used for shafts, columns, projections, stacks, pipes, conduits, ducts,

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electric utilities, sinks or other Building facilities, and the use thereof and access thereto through the Premises for the purposes of management, operation, maintenance and repairs, are reserved to Landlord.

2.2. Deletion of Portion of Premises. Only if Scient exercises its right to expand its premises pursuant to the terms of the Scient Lease during the twelve (12) month period described in Section 2.4 of the Scient Lease, and provided that Landlord terminates the Annex Lease as of the same date, then Landlord shall have the right, in Landlord’s sole discretion, upon providing Tenant nine (9) months written notice and a copy of written notice of Scient exercising such right (“Deletion Notice”), to terminate this Lease as to the Fourth Floor Portion of the Premises (which termination shall not be effective before a date three (3) years after the Commencement Date). If Landlord timely delivers a Deletion Notice to Tenant, then Landlord shall concurrently deliver to Tenant an amendment to this Lease memorializing the termination of this Lease as to the Fourth Floor Portion from the Premises (the “Deletion Amendment”). The Deletion Amendment shall provide the following: (i) the definition of the Premises shall be modified to exclude the Fourth Floor Portion, (ii) Tenant’s Percentage Share shall be decreased to reflect the deletion of the Fourth Floor Portion from the Premises, (iii) the Initial Base Rent shall be reduced by $1,033,868.00 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $813,568.00), (iv) the Middle Base Rent shall be reduced by $1,058,506.20 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $857,152.00), (v) the Final Base Rent shall be reduced by $1,081,846.20 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $871,680.00), and (vi) the then current amount of the Security Deposit shall be proportionately reduced to reflect the reduction in the aggregate Base Rent under this Lease and the Annex Lease in proportion to the then current aggregate Base Rent under this Lease and the Annex Lease. If Tenant fails to execute the Deletion Amendment within thirty (30) days after receipt of the Deletion Amendment from Landlord, or if Tenant fails to vacate the Fourth Floor Portion of the Premises on or before the effective date of the Deletion Amendment, then Tenant shall be in default under this Lease and Landlord shall have the right to exercise all of its rights and remedies under this Lease. If Scient properly rescinds its notice delivered with the Retention Notice, then Landlord shall advise Tenant of such rescission in writing and Tenant shall have the right, for a period of ten (10) days after receipt of Landlord’s notice, to elect in writing to cause the Deletion Amendment to be rescinded and to remain in possession of the Fourth Floor Portion on the terms and conditions of this Lease.

2.3. Satellite Dish/Antennae. Subject to Tenant’s compliance (at Tenant’s sole cost and expense) with all applicable laws, rules and ordinances, and subject to Tenant obtaining Landlord’s prior written consent, which shall not be unreasonably withheld, Tenant shall have the right to elect, by delivery of written notice to Landlord, to install, at Tenant’s sole cost and expense, an antenna or satellite dish on the roof of the Building in a location determined by Landlord in its sole discretion (the “Dish”). Tenant shall be solely responsible for the installation, insurance, maintenance and repair of the Dish and the repair of any damage to the roof of the Building caused by Tenant’s use, installation or maintenance of the Dish. The Dish shall be of reasonable size and design so as not to materially and adversely affect the Building structure, loading, systems or aesthetics. The use and installation of any antenna or satellite dish on the roof of the Building by any other tenant or occupant of the Building shall not interfere with Tenant’s use of the Dish and Tenant’s use and installation of the Dish shall not interfere with the use of antennas or satellite dishes by other tenants of the Building. The Dish may be installed only after the acquisition by Tenant of all appropriate permits, consents and licenses. The provisions of this Lease regarding Alterations shall apply as if the installation of the Dish were a Tenant Alteration.

2.4. Conditions Precedent. If Tenant does not obtain a reasonably satisfactory subordination, non-disturbance and attornment agreement from Union Bank on or before July 14, 2000, then Tenant may

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terminate this Lease at any time before July 17, 2000 by giving Landlord written notice, in which event Landlord shall promptly return all consideration previously paid by Tenant to Landlord. In addition, this Lease with respect to the Fourth Floor Portion only is expressly conditioned upon the approval of the Annex Lease by the master landlord (“Master Landlord”) under the Annex Lease. If Landlord fails to obtain Master Landlord’s consent on or before July 14, 2000, then Landlord or Tenant may terminate this Lease with respect to the Fourth Floor Portion only and the Annex Lease (but not one of such leases and not the other) at any time thereafter, but before the date such consent is obtained, by giving the other party written notice, in which event Landlord shall deliver to Tenant an amendment to this Lease memorializing the termination of this Lease as to the Fourth Floor Portion from the Premises (the “Annex Deletion Amendment”). The Annex Deletion Amendment shall provide the following: (i) the definition of the Premises shall be modified to exclude the Fourth Floor Portion, (ii) Tenant’s Percentage Share shall be decreased to reflect the deletion of the Fourth Floor Portion from the Premises, (iii) the Preliminary Base Rent shall be reduced by $987,188.00, (iv) the Initial Base Rent shall be reduced by $1,033,868.00, (v) the Middle Base Rent shall be reduced by $1,058,506.20, (vi) the Final Base Rent shall be reduced by $1,081,846.20, (vii) the Start Rent shall be reduced to equal $133,558,50/month, and (viii) the then current amount of the Security Deposit shall be proportionately reduced to reflect the reduction in the aggregate Base Rent under this Lease and the Annex Lease in proportion to the then current aggregate Base Rent under this Lease and the Annex Lease, and Landlord shall promptly return all consideration previously paid by Tenant to Landlord with respect to the Fourth Floor Portion. If Tenant fails to execute the Annex Deletion Amendment within thirty (30) days after receipt of the Annex Deletion Amendment from Landlord, then Tenant shall be in default under this Lease and Landlord shall have the right to exercise all of its rights and remedies under this Lease. Landlord shall use reasonable efforts to obtain the satisfaction of the foregoing conditions.

2.5 Use Change. Landlord and Tenant acknowledge that the First Floor Portion may not currently be used for office purposes. In addition, Landlord and Tenant acknowledge that it may be economically unfeasible to configure a mezzanine in the First Floor Portion (the “Mezzanine”) in accordance with the requirements of all Laws and this Lease (including Schedule 1 hereto). Landlord shall use reasonable efforts to obtain all approvals necessary to permit the use of the First Floor Portion for office purposes, at Landlord’s sole cost and expense (the “Office Permits”), and Landlord shall use reasonable efforts to obtain an economically feasible plan for the configuration of the Mezzanine in the First Floor Portion in accordance with the requirements of all Laws and this Lease (including Schedule 1 hereto) (the “Mezzanine Plans”). Landlord shall promptly notify Tenant upon its receipt of all Office Permits (“Office Permits Notice”). Landlord shall promptly notify Tenant upon its determination that it has developed economically feasible Mezzanine Plans to construct and deliver the Mezzanine as a portion of Landlord’s Work (the “Mezzanine Acceptance Notice”).

2.5.1 Office Permits. If Landlord does not obtain the Office Permits on or before September 1, 2000, then Landlord or Tenant may terminate this Lease with respect to the First Floor Portion at any time thereafter, but before delivery of the Office Permits Notice, by giving the other party written notice (the “First Floor Notice”). Upon proper delivery of any First Floor Notice pursuant to this Section 2.5.1, Landlord shall promptly deliver to Tenant an amendment to this Lease memorializing the deletion of the First Floor Portion from the Premises (the “First Floor Deletion Amendment”). The First Floor Deletion Amendment shall provide the following: (i) the definition of the Premises shall be modified to exclude the First Floor Portion, (ii) Tenant’s Percentage Share shall be decreased to reflect the deletion of the First Floor Portion from the Premises, (iii) the Preliminary Base Rent shall be reduced by $1,275,760.00, (iv) the Initial Base Rent shall be reduced by $1,323,601.00, (v) the Middle Base Rent shall be reduced by $1,371,442.00, (vi) the Final Base Rent shall be reduced by $1,403,336.00, (vii) the then current amount of the Security Deposit shall be proportionately reduced to reflect the percentage reduction in the Base Rent, (viii) the “Initial Possession Date” shall be deemed to be the “Possession Date”, and (ix) all references in the Lease to the First

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Floor Portion shall be deemed deleted. If Tenant fails to execute the First Floor Deletion Amendment within thirty (30) days after receipt of the First Floor Deletion Amendment from Landlord, then Tenant shall be in default under this Lease and Landlord shall have the right to exercise all of its rights and remedies under this Lease.

2.5.2 Mezzanine. If Landlord does not obtain economically feasible Mezzanine Plans on or before September 1, 2000, then Landlord or Tenant may terminate this Lease with respect to the Mezzanine at any time thereafter, but before delivery of the Mezzanine Acceptance Notice, by giving the other party written notice (the “Mezzanine Notice”). Upon proper delivery of any Mezzanine Notice pursuant to this Section 2.5.2, Landlord shall promptly deliver to Tenant an amendment to this Lease memorializing the deletion of the Mezzanine from the Premises (the “Mezzanine Deletion Amendment”). The Mezzanine Deletion Amendment shall provide the following: (i) the definition of the Premises shall be modified to exclude the Mezzanine and to reduce the Rentable Area of the First Floor Portion to 11,947 square feet, (ii) Tenant’s Percentage Share shall be decreased to reflect the reduction in the Rentable Area of the First Floor Portion, (iii) the Preliminary Base Rent shall be reduced by $320,000.00, (iv) the Initial Base Rent shall be reduced by $332,000.00, (v) the Middle Base Rent shall be reduced by $344,000.00, (vi) the Final Base Rent shall be reduced by $352,000.00, (vii) the then current amount of the Security Deposit shall be proportionately reduced to reflect the percentage reduction in the Base Rent, (viii) Landlord shall have no obligation to construct an elevator or stairways in the First Floor Portion, and (ix) all references in the Lease to the Mezzanine shall be deemed deleted. If Tenant fails to execute the Mezzanine Deletion Amendment within thirty (30) days after receipt of the Mezzanine Deletion Amendment from Landlord, then Tenant shall be in default under this Lease and Landlord shall have the right to exercise all of its rights and remedies under this Lease.

2.6. Termination of Annex Lease. If for any reason the Annex Lease terminates and the Fourth Floor Portion remains included in the Premises, then Landlord shall promptly deliver to Tenant an amendment to this Lease memorializing the termination of the Annex Lease (the “Annex Termination Amendment”). The Annex Termination Amendment shall provide only the following: (i) the Preliminary Base Rent shall be reduced by $202,676.00 (ii) the Initial Base Rent shall be reduced by $220,300.00, (iii) the Middle Base Rent shall be reduced by $201,354.00, and (iv) the Final Base Rent shall be reduced by $210,166.20. If Tenant fails to execute the Annex Termination Amendment within thirty (30) days after receipt of the Annex Termination Amendment from Landlord, then Tenant shall be in default under this Lease and Landlord shall have the right to exercise all of its rights and remedies under this Lease.

3. Term; Condition and Acceptance of Premises.

3.1 Initial Term and Acceptance of Premises. Except as hereinafter provided, and unless sooner terminated pursuant to the provisions of this Lease, the Term of this Lease shall commence on the earlier of the Initial Possession Date and the Possession Date and end on the Expiration Date. Except as otherwise provided in the Tenant Improvement Agreement attached to this Lease as Exhibit C (the “Work Letter”), Landlord shall deliver the Premises to Tenant on the Possession Date (and the Initial Possession Date with respect to the Third Floor Portion and the Fourth Floor Portion) in the condition required under the Work Letter and this Lease. If Landlord, for any reason whatsoever, cannot deliver the Premises to Tenant in the condition specified herein by the Anticipated Possession Date, this Lease shall not be void or voidable. No delay in delivery of the Premises for any reason whatsoever shall operate to extend the Expiration Date or the Term. In the event that the Premises are delivered to Tenant on any date other than the Anticipated Possession Date set forth in the Basic Lease Information of this Lease, Landlord and Tenant shall execute a Confirmation of Lease Term in the form as set forth in Exhibit E attached to this Lease. Tenant’s occupancy of all or any portion of the (i) Third Floor Portion shall constitute Tenant’s acceptance of the Third Floor

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Portion, (ii) Fourth Floor Portion shall constitute Tenant’s acceptance of the Fourth Floor Portion and (iii) the First Floor Portion shall constitute Tenant’s acceptance of the First Floor Portion, in the condition called for by this Lease, except for punchlist items described in Section 5.1 of the Work Letter and except for latent defects in the windows discovered within one (1) year after the Possession Date and latent defects in other Landlord’s Work discovered within sixty (60) days after the Possession Date. Notwithstanding the foregoing, if the Possession Date occurs after September 1, 2000 as a result of events other than delays caused by the acts or omissions of Tenant, or Tenant’s contractors, employees or agents (“Tenant Delays”), then “Commencement Date” shall be a date calculated as follows: (1) four (4) months after the Possession Date, plus (ii) the number of days by which the Possession Date exceeds September 1, 2000, minus (iii) the number of days of delay that Landlord is actually delayed in delivering the Premises to Tenant caused by Tenant Delays.

3.2 Option to Extend.

3.2.1. Exercise of Option to Extend Term. If no “Suspension Condition” (as hereinafter defined) exists at the time of Tenant’s exercise of the option to extend the Term or at the commencement of the Extended Term, and if Tenant has timely and properly exercised the option to extend set forth in the Annex Lease for the comparable extended term, Tenant shall have one (1) option (the “Extension Option”) to extend the Initial Term for an additional period of five (5) years (an “Extended Term”). To exercise Tenant’s option with respect to the Extended Term, Tenant shall give notice to Landlord not less than twelve (12) months prior to the expiration of the Initial Term (“Election Notice”). A “Suspension Condition” shall mean the existence of any event or condition of default after the expiration of any applicable grace, notice or cure periods. Notwithstanding any provision in this Lease to the contrary, Tenant shall have no right to exercise the Extension Option unless Tenant simultaneously properly exercises the extension option under the Annex Lease.

3.2.2. Fair Market Rent. If Tenant properly and timely exercises the Extension Option pursuant to Section 3.2.1 above, such Extended Term shall be upon all of the same terms, covenants and conditions of this Lease; provided, however, that the Base Rent applicable to the Premises for the Extended Terms shall be the greater of: (1) the Base Rent and Escalation Rent as of the last month of the Initial Term, or (ii) one hundred percent (100%) of the “Fair Market Rent” for space comparable to the Premises as of the commencement of the Extended Term; provided further, however, that the Base Year during the Extended Term shall be the first full calendar year following the first day of the Extended Term. “Fair Market Rent” shall mean the annual rental being charged for first class space comparable to the Premises in buildings comparable to the Building in the financial district of San Francisco, taking into account location, condition and improvements to the space; provided, however, that Fair Market Rent shall not be discounted to reflect tenant improvement allowances granted to other tenants, but Landlord shall be obligated to contribute to Tenant upon commencement of the applicable Extended Term a refurbishment allowance equivalent to the refurbishment allowances granted to renewal tenants in buildings comparable to the Building in the financial district of San Francisco, which refurbishment allowance shall be used by Tenant, within one (1) year after receipt, for the improvement of the Premises. Tenant shall pay all leasing commissions and consulting fees payable in connection with such extensions, unless such leasing commissions or consulting fees arise solely out of a contractual relationship between Landlord and a broker or consultant. All other terms and conditions of the Lease, which may be amended from time to time by the parties in accordance with the provisions of the Lease, shall remain in full force and effect and shall apply during the Extended Term, except that there shall be no further option to extend the Term beyond a date five (5) years after the expiration of the Initial Term.

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3.2.3. Determination of Rent. Within forty-five (45) days after the date of the Election Notice, Landlord and Tenant shall negotiate in good faith in an attempt to determine Fair Market Rent for the Extended Term. If they are unable to agree within said forty-five (45) day period, then the Fair Market Rent shall be determined as provided in Section 3.2.4 below.

3.2.4. Appraisal. If it becomes necessary to determine the Fair Market Rent for the Premises by appraisal, the real estate appraiser(s) indicated in this Section 3.2.4, each of whom shall be members of the American Institute of Real Estate Appraisers and each of whom have at least five (5) years experience appraising office space located in the vicinity of the Premises, shall be appointed and shall act in accordance with the following procedures:

(i) If the parties are unable to agree on the Fair Market Rent within the allowed time, either party may demand an appraisal by giving written notice to the other party, which demand to be effective must state the name, address and qualifications of an appraiser selected by the party demanding the appraisal (“Notifying Party”). Within ten (10) days following the Notifying Party’s appraisal demand, the other party (“Non-Notifying Party”) shall either approve the appraiser selected by the Notifying Party or select a second properly qualified appraiser by giving written notice of the name, address and qualification of said appraiser to the Notifying Party. If the Non-Notifying Party fails to select an appraiser within the ten (10) day period, the appraiser selected by the Notifying Party shall be deemed selected by both parties and no other appraiser shall be selected. If two (2) appraisers are selected, they shall select a third appropriately qualified appraiser. If the two (2) appraisers fail to select a third qualified appraiser, the third appraiser shall be appointed by the then presiding judge of the county where the Premises are located upon application by either party.

(ii) If only one appraiser is selected, that appraiser shall notify the parties in simple letter form of its determination of the Fair Market Rent for the Premises within fifteen (15) days following his or her selection, which appraisal shall be conclusively determinative and binding on the parties as the appraised Fair Market Rent.

(iii) If multiple appraisers are selected, the appraisers shall meet not later than ten (10) days following the selection of the last appraiser. At such meeting, the appraisers shall attempt to determine the Fair Market Rent for the Premises as of the commencement date of the Extended Term by the agreement of at least two (2) of the appraisers.

(iv) If two (2) or more of the appraisers agree on the Fair Market Rent for the Premises at the initial meeting, such agreement shall be determinative and binding upon the parties hereto and the agreeing appraisers shall forthwith notify both Landlord and Tenant of the amount set by such agreement. If multiple appraisers are selected and two (2) appraisers are unable to agree on the Fair Market Rent for the Premises, each appraiser shall submit to Landlord and Tenant his or her respective independent appraisal of the Fair Market Rent for the Premises, in simple letter form, within twenty (20) days following appointment of the final appraiser. The parties shall then determine the Fair Market Rent for the Premises by averaging the appraisals; provided that any high or low appraisal, differing from the middle appraisal by more than ten percent (10%) of the middle appraisal, shall be disregarded in calculating the average.

(v) If only one (1) appraiser is selected, then each party shall pay one-half (1/2) of the fees and expenses of that appraiser. If three (3) appraisers are selected, each party shall bear the fees and expenses of the appraiser it selects and one-half (1/2) of the fees and expenses of the third appraiser.

(vi) Notwithstanding anything to the contrary contained in this Section 3.2, in no event shall the Base Rent for the Extended Term be less than the Base Rent plus Escalation Rent immediately preceding the Extended Term.

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3.2.5. Amendment to Lease. Immediately after the Fair Market Rent has been determined, the parties shall enter into an amendment to this Lease setting forth the Base Rent for the Extended Term and the new Expiration Date of the Term of the Lease.

4. Rent.

4.1. Obligation to Pay Base Rent. Tenant shall pay Base Rent to Landlord with respect to the Third Floor Portion, the Fourth Floor Portion and the Storage Space, in advance, in equal monthly installments, commencing on or before the Initial Commencement Date, and thereafter on or before the first day of each calendar month during the Term until the Commencement Date. Commencing on the Commencement Date, Tenant shall pay Base Rent to Landlord, in advance, in equal monthly installments for the entire Premises, and thereafter on or before the first day of each calendar month during the Term. If the Initial Commencement Date, Commencement Date and/or Expiration Date is other than the first day of a calendar month, the installment of Base Rent for the applicable fractional month of the Term shall be prorated on a daily basis. On the Initial Commencement Date, Tenant shall pay to Landlord the first month’s Base Rent with respect to the Third Floor Portion, the Fourth Floor Portion and the Storage Space.

4.2. Manner of Rent Payment. All Rent shall be paid by Tenant without notice, demand, abatement, deduction or offset, in lawful money of the United States of America, payable to Landlord, at Landlord’s Address as set forth in the Basic Lease Information, or to such other person or at such other place as Landlord may from time to time designate by notice to Tenant.

4.3. Additional Rent. All Rent not characterized as Base Rent or Escalation Rent shall constitute additional rent, and if payable to Landlord shall, unless otherwise specified in this Lease, be due and payable fifteen (15) days after Tenant’s receipt of Landlord’s invoice therefor.

4.4. Late Payment of Rent; Interest. Tenant acknowledges that late payment by Tenant of any Rent will cause Landlord to incur administrative costs not contemplated by this Lease, the exact amount of which are extremely difficult and impracticable to ascertain based on the facts and circumstances pertaining as of the Lease Date. Accordingly, if any Rent is not paid by Tenant when due, Tenant shall pay to Landlord, with such Rent, a late charge equal to three percent (3%) of such Rent; provided, however, that the following additional provisions shall apply to such late charge: (i) the first two late payments in any calendar year shall not result in any late charge payment unless such payment of Rent is not received within one (1) business day after telephonic notice by Landlord to each of Tenant’s Controller and Chief Financial Officer (or any person succeeding such person for whom notice has been provided to Landlord), and (ii) if there are more than three (3) late payments of Rent by Tenant in any calendar year, then the late charge for each subsequent late payment in such calendar year shall be five percent (5%). Any Rent, other than late charges, due Landlord under this Lease, if not paid when due, shall also bear interest from the date due until paid, at the rate of ten percent (10%) per annum or, if a higher rate is legally permissible, at the highest rate legally permitted. The parties acknowledge that such late charge and interest represent a fair and reasonable estimate of the administrative costs and loss of use of funds Landlord will incur by reason of a late Rent payment by Tenant, but Landlord’s acceptance of such late charge and/or interest shall not constitute a waiver of Tenant’s default with respect to such Rent or prevent Landlord from exercising any other rights and remedies provided under this Lease, at law or in equity.

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5. Calculation and Payments of Escalation Rent. During each full or partial calendar year of the Term subsequent to the Base Year, Tenant shall pay to Landlord Escalation Rent in accordance with the following procedures:

5.1. Payment of Estimated Escalation Rent. During December of the Base Year and December of each subsequent calendar year, or as soon thereafter as practicable (and Landlord shall use reasonable efforts to provide such information on or before March 1 of each subsequent calendar year), Landlord shall give Tenant notice of its estimate of Escalation Rent due for the next ensuing calendar year. On or before the first day of each month during such next ensuing calendar year, Tenant shall pay to Landlord in advance, in addition to Base Rent, one-twelfth (1/12th) of such estimated Escalation Rent. In the event such notice is given after December 31st of any year during the Term, (i) Tenant shall continue to pay Escalation Rent on the basis of the prior calendar year’s estimate until the month after such notice is given, (ii) subsequent payments by Tenant shall be based of the estimate of Escalation Rent set forth in Landlord’s notice, and (iii) with the first monthly payment of Escalation Rent based on the estimate set forth in Landlord’s notice, Tenant shall also pay the difference, if any, between the amount previously paid for such calendar year and the amount which Tenant would have paid through the month in which such notice is given, based on Landlord’s noticed estimate or, in the alternative, if such amount previously paid by Tenant for such calendar year through the month in which such notice is given exceeds the amount which Tenant would have paid through such month based on Landlord’s noticed estimate, Landlord shall credit such excess amount against the next monthly payments of Escalation Rent due from Tenant. If at any time Landlord reasonably determines that the Escalation Rent for the current calendar year will vary from Landlord’s estimate by more than five percent (5%), Landlord may, by notice to Tenant, revise its estimate for such calendar year, and subsequent payments by Tenant for such calendar year shall be based upon such revised estimate.

5.2. Escalation Rent Statement and Adjustment. Within one hundred twenty (120) days after the close of each calendar year, or as soon thereafter as practicable, Landlord shall deliver to Tenant a statement of (i) the calculation of the Base Operating Expenses and the Base Real Estate Taxes with respect only to the initial calendar year following the Base Year and (ii) the actual Escalation Rent for such calendar year, accompanied by a statement prepared by Landlord showing in reasonable detail the Operating Expenses and the Real Estate Taxes comprising the actual Escalation Rent. If Landlord’s statement shows that Tenant owes an amount less than the payments previously made by Tenant for such calendar year, Landlord shall credit the difference first against any sums then owed by Tenant to Landlord and then against the next payment or payments of Rent due Landlord, except that if a credit amount is due Tenant after termination of this Lease, Landlord shall pay to Tenant any excess remaining after Landlord credits such amount against any sums owed by Tenant to Landlord. If Landlord’s statement shows that Tenant owes an amount more than the payments previously made by Tenant for such calendar year, Tenant shall pay the difference to Landlord within fifteen (15) days after delivery of the statement. Tenant shall have the right to inspect Landlord’s books and records relating to the calculation of Base Operating Expenses and Base Real Estate Taxes and/or Operating Expenses and Real Estate Taxes, subject to the following limitations: (i) such inspection shall be conducted no more than one time per calendar year, (ii) such inspection shall be conducted within two (2) years after Tenant’s receipt of Landlord’s statement of Base Operating Expenses and Base Real Estate Taxes and Operating Expenses and Real Estate Taxes; (iii) subject to the following, such inspection may not be conducted by a person or entity whose compensation is in any way calculated based on the results of such audit; provided, however, that if such inspection is conducted by such person or entity, then Tenant shall pay to Landlord on demand all of Landlord’s reasonable costs and expenses incurred in connection with such inspection; and (iv) such information shall be kept in the strictest confidence by Tenant and any other person or entity performing such inspection. If Tenant in good faith disputes the accuracy of any statement on the

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basis of any such inspection, such dispute must be alleged in reasonable detail in a written notice to Landlord within ninety (90) days following Tenant’s completion of such inspection. If actual Operating Expenses or Real Estate Taxes are ultimately determined to have been overstated by Landlord for any calendar year, then Landlord shall within thirty (30) days thereafter refund to Tenant the applicable overpayment of Escalation Rent.

5.3. Proration for Partial Year. If this Lease terminates other than on the last day of a calendar year (other than due to Tenant’s default), the amount of Escalation Rent for such fractional calendar year shall be prorated on a daily basis. Upon such termination, Landlord may, at its option, calculate the adjustment in Escalation Rent prior to the time specified in Section 5.2 above. Tenant’s obligation to pay Escalation Rent, as set forth in Paragraph 5.2, above, shall survive the expiration or termination of this Lease.

6. Impositions Payable by Tenant. Tenant shall pay all Impositions prior to delinquency. If billed directly to Tenant, then, subject to Tenant’s right to contest such Impositions (upon the posting of a bond or other security reasonably satisfactory to Landlord), Tenant shall pay such Impositions and concurrently deliver to Landlord evidence of such payments. If any Impositions are billed to Landlord or included in bills to Landlord for Real Estate Taxes or other charges, then Tenant shall pay to Landlord all such amounts within fifteen (15) days after delivery of Landlord’s invoice therefor. If applicable law prohibits Tenant from reimbursing Landlord for an Imposition, but Landlord may lawfully increase the Base Rent to account for Landlord’s payment of such Imposition, the Base Rent payable to Landlord shall be increased to net to Landlord the same return without reimbursement of such Imposition as would have been received by Landlord with reimbursement of such Imposition. Tenant’s obligation to pay Impositions which have accrued and remain unpaid upon the expiration or earlier termination of this Lease shall survive the expiration or earlier termination of this Lease.

7. Use of Premises.

7.1. Permitted Use. The Premises shall be used solely for the Permitted Use and for no other use or purpose.

7.2. No Violation of Legal and Insurance Requirements. Tenant shall not do or permit to be done, or bring or keep or permit to be brought or kept, in or about the Premises, or any other portion of the Building, anything which (i) is prohibited by or will in any way conflict with any law, ordinance, rule or regulation; (ii) would invalidate or be in conflict with the provisions of any insurance policy carried by Landlord or Tenant on any portion of the Building or Premises, or any property therein; or (iii) would cause a cancellation of any such insurance, increase the existing rate of or affect any such Landlord’s insurance, or subject Landlord to any liability or responsibility for injury to any person or property. If Tenant does or permits anything to be done which increases the cost of any of Landlord’s insurance, or which results in the need, in Landlord’s reasonable judgment, for additional insurance by Landlord or Tenant with respect to any portion of the Building or Premises, then Tenant shall reimburse Landlord, upon demand, for any such additional costs or the costs of such additional insurance, and/or procure such additional insurance at Tenant’s sole cost and expense. Exercise by Landlord of such right to require reimbursement of additional costs (including the costs of procuring of additional insurance) shall not limit or preclude Landlord from prohibiting Tenant’s impermissible use of the Premises or from invoking any other right or remedy available to Landlord under this Lease.

7.3. Compliance with Legal, Insurance and Life Safety Requirements. Except as provided in clauses (i) through (iii) below, Tenant, at its cost and expense, shall promptly comply with all laws, ordinances, rules, regulations, orders and other governmental requirements, the requirements of any board

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of fire underwriters or other similar body, any directive or occupancy certificate issued pursuant to any law by any public officer or officers which is delivered to Tenant by Landlord, the provisions of all recorded documents affecting any portion of the Building which is delivered to Tenant by Landlord and all life safety programs, procedures and rules implemented or promulgated by Landlord (“Laws”). Tenant shall not, however, be required to comply with Laws requiring Tenant to make structural changes to the Premises unless necessitated, in whole or in part, by (i) Tenant’s special use or occupancy of, or business conducted in, the Premises, (ii) any acts or omissions of Tenant, its employees, agents, contractors, invitees or licensees, or (iii) Alterations (including any alterations, additions or other improvements to the Premises made by or on behalf of Tenant during the initial improvement of the Premises pursuant to the Work Letter, but excluding any structural changes which are part of Landlord’s Work under the Work Letter.)

7.4. No Nuisance. Tenant shall not (i) do or permit anything to be done in or about the Premises, or any other portion of the Building, which would injure, or obstruct or interfere with the rights of, Landlord or other occupants of the Building, or others lawfully in or about the Building; (ii) use or allow the Premises to be used in any manner inappropriate for a Class A office building, or for any improper or objectionable purposes; or (iii) cause, maintain or permit any nuisance or waste in, on or about the Premises, or any other portion of the Building.

7.5 Hazardous Substances. The term “hazardous substances” as used in the Lease, is defined as follows:

Any element, compound, mixture, solution, particle or substance, which presents danger or potential danger of damage or injury to health, welfare or to the environment including, but not limited to: (i) those substances which are inherently or potentially radioactive, explosive, ignitable, corrosive, reactive, carcinogenic or toxic and (ii) those substances which have been recognized as dangerous or potentially dangerous to health, welfare or to the environment by any federal, municipal, state, county or other governmental or quasi-governmental authority and/or any department or agency thereof.

Tenant represents and warrants to Landlord and agrees that at all times during the term of this Lease and any extensions or renewals thereof, Tenant shall:

(i) promptly comply at Tenant’s sole cost and expense, with all laws, orders, rules, regulations, certificates of occupancy, or other requirements, as the same now exist or may hereafter be enacted, amended or promulgated, of any federal, municipal, state, county or other governmental or quasi-governmental authorities and/or any department or agency thereof relating to the manufacturing, processing, distributing, using, producing, treating, storing (above or below ground level), disposing or allowing to be present (the “Environmental Activity”) of hazardous substances in or about the Premises (each, an “Environmental Law”, and all of them, “Environmental Laws”), to the extent Tenant is responsible for the presence of such hazardous substances.

(ii) indemnify and hold Landlord, its agents and employees, harmless from any and all demands, claims, causes of action, penalties, liabilities, judgments, damages (including consequential damages) and expenses including, without limitation, court costs and reasonable attorneys’ fees incurred by Landlord as a result of (a) Tenant’s failure or delay in properly complying with any Environmental Law as required by item (i) above, or (b) any adverse effect which results from the Environmental Activity, whether Tenant or Tenant’s subtenants or any of their respective agents, employees, contractors or invitees, with or without Tenant’s consent has caused, either intentionally or unintentionally, such Environmental Activity. If any action or proceeding is brought against

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Landlord, its agents or employees by reason of any such claim, Tenant, upon notice from Landlord, will defend such claim at Tenant’s expense with counsel reasonably satisfactory to Landlord. This indemnity obligation by Tenant of Landlord will survive the expiration or earlier termination of this Lease.

(iii) promptly disclose to Landlord by delivering, in the manner prescribed for delivery of notice in this Lease, a copy of any forms, submissions, notices, reports, or other written documentation (each, a “Communication”) relating to any Environmental Activity, whether any such Communication is delivered to Tenant or any of its subtenants or is requested of Tenant or any of its subtenants by any federal, municipal, state, county or other government or quasi-governmental authority and/or any department or agency thereof.

(iv) in the event there is a release of any hazardous substance as a result of or in connection with any Environmental Activity by Tenant or any of Tenant’s subtenants or any of their respective agents, employees, contractors or invitees, which must be remediated under any Environmental Law, Landlord shall perform the necessary remediation; and Tenant shall reimburse Landlord for all costs thereby incurred within fifteen (15) days after delivery of a written demand therefor from Landlord (which shall be accompanied by reasonable substantiation of such costs). In the alternative, Landlord shall have the right to require Tenant, at its sole cost and expense, to perform the necessary remediation in accordance with a detailed plan of remediation which shall have been approved in advance in writing by Landlord. Landlord shall give notice to Tenant within thirty (30) days after Landlord receives notice or obtains knowledge of the required remediation. The rights and obligations of Landlord and Tenant set forth in this subparagraph (iv) shall survive the expiration or earlier termination of this Lease.

(v) notwithstanding any other provisions of this Lease, allow Landlord, and any authorized representative of Landlord, access and the right to enter and inspect the Premises for Environmental Activity, at any time deemed reasonable by Landlord, without prior notice to Tenant.

Compliance by Tenant with any provision of this Section 7.5 shall not be deemed a waiver of any other provision of this Lease. Without limiting the foregoing, Landlord’s consent to any Environmental Activity shall not relieve Tenant of its indemnity obligations under the terms hereof.

Landlord represents and warrants to Tenant that as of the date of this Lease Landlord has no actual knowledge of the presence of any hazardous substance in the Building in violation of any applicable Environmental Law, rules or ordinances, except as described in the Phase I and Phase II hazardous materials reports prepared by Geomatrix and delivered by Landlord to Tenant before the execution of this Lease. Landlord shall promptly disclose to Tenant by delivering, in the manner prescribed for delivery of notice in this Lease, a copy of any material Communication relating to any Environmental Activity from any federal, municipal, state, county or other government or quasi-governmental authority and/or any department or agency thereof to the extent such notice is required by Environmental Laws. Landlord shall comply with all Environmental Laws applicable to the Building to the extent such compliance is required of Landlord as owner of the Building.

7.6. Special Provisions Relating to The Americans With Disabilities Act of 1990.

7.6.1. Allocation of Responsibility to Landlord. Subject to the provisions of the second sentence of Section 10.2 of this Lease, as between Landlord and Tenant, Landlord shall be responsible that the public entrances, stairways, corridors, restrooms, elevators and elevator lobbies and other public areas

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in the Building comply with the requirements of Title III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12181, et seq., The Provisions Governing Public Accommodations and Services Operated by Private Entities), and all regulations promulgated thereunder, and all amendments, revisions or modifications thereto now or hereafter adopted or in effect in connection therewith (hereinafter collectively referred to as the “ADA”), and to take such actions and make such alterations and improvements as are necessary for such compliance. As of the Commencement Date, Landlord shall cause such portions of the Building to so comply with ADA, as interpreted by the local building officials. All costs incurred by Landlord in discharging its responsibilities under this Section 7.6.1 shall be included in Operating Expenses as provided in Section 1.1, except to the extent such costs relate to violations of ADA laws which occurred before the Commencement Date.

7.6.2. Allocation of Responsibility to Tenant. As between Landlord and Tenant, Tenant, at its sole cost and expense, shall be responsible that the Premises (other than the restrooms constructed by Landlord in the Premises), all Alterations to the Premises, Tenant’s use and occupancy of the Premises, and Tenant’s performance of its obligations under this Lease, comply with the requirements of the ADA, and to take such actions and make such Alterations as are necessary for such compliance; provided, however, that Tenant shall not make any such Alterations except upon Landlord’s prior written consent pursuant to the terms and conditions of this Lease; provided further, however, that Landlord shall be responsible for compliance with the requirements of the ADA with respect to the initial construction of an elevator and stairways in the First Floor Portion of the Premises as part of Landlord’s Work. Tenant shall protect, defend, indemnify and hold Landlord harmless from and against any claim, demand, cause of action, obligation, liability, loss, cost or expense (including reasonable attorneys’ fees) which may be asserted against or incurred by Landlord as a result of Tenant’s failure in any respect to comply with its obligations set forth in this Section 7.6.2. Tenant’s indemnity obligations set forth in the immediately preceding sentence shall survive the expiration or earlier termination of this Lease.

7.6.3. General. Notwithstanding anything in this Lease to the contrary, no act or omission of Landlord, including any approval, consent or acceptance by Landlord or Landlord’s agents, employees or other representatives, shall be deemed an agreement, acknowledgment, warranty, or other representation by Landlord that Tenant has complied with the ADA or that any action, alteration or improvement by Tenant complies or will comply with the ADA or constitutes a waiver by Landlord of Tenant’s obligations to comply with the ADA under this Lease or otherwise. Any failure of Landlord to comply with the obligations of the ADA shall not relieve Tenant from any obligations under this Lease or constitute or be construed as a constructive or other eviction of Tenant or disturbance of Tenant’s use and possession of the Premises.

8. Building Services.

8.1. Maintenance of Building. Landlord shall maintain the Building (other than the Premises and the premises of other tenants of the Building) in good order and condition, except for ordinary wear and tear, damage by casualty or condemnation, or damage occasioned by the act or omission of Tenant or Tenant’s employees, agents, contractors, licensees or invitees, which damage shall be repaired by Landlord at Tenant’s expense. Landlord’s maintenance of, and provision of services to, the Building shall be performed in a manner consistent with that of comparable Class A office buildings in the San Francisco, California area. Landlord shall have the right in connection with its maintenance of the Building hereunder (i) to change the arrangement and/or location of any amenity, installation or improvement in the public entrances, stairways, corridors, elevators and elevator lobbies, and other public areas in the Building, and (ii) to utilize portions of the public areas in the Building from time to time for entertainment, displays, product shows, leasing of kiosks or such other uses that in Landlord’s reasonable judgment tend to attract the public, so long as such

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uses do not materially interfere with or impair Tenant’s access to or use or occupancy of the Premises. Landlord shall not be in default under this Lease or liable for any damages directly or indirectly resulting from or incidental to, nor shall the rental reserved in this Lease be abated by reason of, Landlord’s failure to make any repair or to perform any maintenance required to be made or performed by Landlord under this Section 8.1, unless such failure shall persist for an unreasonable time after written notice of the need for such repair or maintenance is given to Landlord by Tenant; provided, however, that Landlord shall be liable to Tenant for actual, out of pocket, costs or expenses incurred by Tenant as a direct result of Landlord’s failure to cause the ground floor lobby, shared lobbies on Floors occupied by Tenant or elevators of the Building to comply with laws which are immediately applicable to, and enforceable against, the Building (subject to Landlord’s reasonable right of contest of such laws).

8.2. Building Standard Services. Landlord shall cause to be furnished to Tenant: (1) tepid and cold water to those points of supply and in volumes provided for general use of tenants in the Building; (ii) electricity up to the Wattage Allowance for lighting and the operation of electrically powered office equipment; (iii) heat, ventilation and air conditioning to the extent reasonably required for the comfortable occupancy by Tenant of the Premises during the period from 8:00 a.m. to 6:00 p.m on weekdays (except Building holidays determined by Landlord), or such shorter period as may be prescribed by any applicable policies, regulations or guidelines adopted by any federal, state or local governmental or quasi-governmental entities or utility suppliers; (iv) passenger elevator service; (v) freight elevator service subject to then applicable Building standard procedures and scheduling; (vi) lighting replacement for Building standard lights; (vii) restroom supplies; (viii) window washing as determined by Landlord (which shall not be less than 2 times per year for the exterior portions of Building windows, and 2 times per year for the interior portions of Building windows); (ix) janitor service on a five (5) day per week basis (excluding Building holidays), except for portions of the Premises used for preparing or consuming food or beverages (such janitorial services to include the services described on Exhibit F attached to this Lease); (x) security if and to the extent deemed appropriate by Landlord for the Building (but not less than as set forth on Exhibit F-2 attached to this Lease) (but not individually for Tenant or the Premises - provided that Tenant shall have the right to install its own security service in the Premises), except that Landlord shall not be liable in any manner for acts of others, criminal or otherwise, or for any direct, consequential or other loss, damage, death or injury related to any interruption, discontinuance, malfunction, circumvention or failure of such security service and (xi) access to the Building 24 hours/day seven days/week. Landlord may establish in the Premises or other portions of the Building such measures as are required by laws, ordinances, rules or regulations or as it deems necessary or appropriate to conserve energy, including automatic switching of lights and/or more efficient forms of lighting. Security personnel shall be on-duty, on-site 24 hours/day seven days/week during the Term. The initial Building holidays are described on Exhibit F-1 attached to this Lease.

8.3. Interruption or Unavailability of Services. Rent shall not abate, no constructive or other eviction shall be construed to have occurred, Tenant shall not be relieved from any of its obligations under this Lease, and Landlord shall not be in default hereunder or liable for any damages directly or indirectly resulting from, the failure of Landlord to furnish, or delay in furnishing, any maintenance or services under this Article 8 as a result of repairs, alterations, improvements or any circumstances beyond Landlord’s reasonable control. Landlord shall use reasonable diligence to remedy any failure or interruption in the furnishing of such maintenance or services. Notwithstanding anything set forth in this Lease to the contrary, if such interruption or unavailability of services continues for more than thirty (30) consecutive days and such interruption or unavailability prevents Tenant from using the Premises, then commencing upon the expiration of such thirty (30) day period, Rent shall abate until beneficial use of the Premises is restored.

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8.4. Tenant’s Use of Excess Electricity and Water. Tenant shall not, without Landlord’s prior consent, given or withheld in Landlord’s sole discretion, (i) install in the Premises (A) lighting, the aggregate average daily power usage of which exceeds the Lighting Wattage Allowance, or lighting and equipment, the aggregate average daily power usage of which exceeds the Wattage Allowance, or which requires a voltage other than 110/208 volts single-phase, (B) heat generating equipment or lighting other than lights deemed standard for the Building, or (C) supplementary air conditioning facilities, or (ii) permit average permanent occupancy levels in excess of one person per two hundred (200) feet of Rentable Area. If, pursuant to this Section 8.4, heat-generating equipment or lighting other than Building standard lights are installed or used in the Premises, or occupancy levels are greater than set forth above, or if the Premises or fixtures therein are reconfigured by Alterations, and such equipment, lighting, occupancy levels or Premises reconfiguration affects the temperature otherwise maintained by the Building air conditioning system, or if equipment is installed in the Premises which requires a separate temperature-controlled room, Landlord may, at Landlord’s election after notice to Tenant or upon Tenant’s request, install supplementary air conditioning facilities in the Premises, or otherwise modify the ventilating and air conditioning serving the Premises, in order to maintain the temperature otherwise maintained by the Building air conditioning system or to serve such separate temperature-controlled room. Tenant shall pay the cost of any transformers, additional risers, panel boards and other facilities if, when and to the extent required to furnish power for, and all maintenance and service costs of, any supplementary air conditioning facilities or modified ventilating and air conditioning, or for lighting and/or equipment the power usage of which exceeds the standards set forth in this Section 8.4. Notwithstanding the foregoing, Landlord acknowledges that Tenant intends to construct a temperature-controlled computer equipment room in the Premises which will require supplementary air conditioning facilities and Landlord will permit Tenant to install such facilities subject to Landlord’s approval of the plans therefor. The capital, maintenance and service costs of such facilities and modifications shall be paid by Tenant as Rent. Landlord, at its election and at Tenant’s expense, may also install and maintain an electric current meter or water meter (together with all necessary wiring and related equipment) at the Premises to measure the power and/or water usage of such lighting, equipment or ventilation and air conditioning equipment, or may otherwise cause such usage to be measured by reasonable methods.

8.5. Provision of Additional Services. If Tenant desires services in additional amounts or at different times than set forth in Section 8.2 above, or any other services that are not provided for in this Lease, Tenant shall make a request for such services to Landlord with such advance notice as Landlord may reasonably require. If Landlord provides such services to Tenant, Tenant shall pay Landlord’s charges for such services within fifteen (15) days after Tenant’s receipt of Landlord’s invoice; provided, however, that Landlord hereby agrees that upon Tenant’s written request Landlord shall provide HVAC service to the Premises 24 hours per day during the Term so long as Tenant pays Landlord’s actual costs for such services, plus an administrative fee not to exceed 15% of the cost of such services, which costs may be based on a reasonable allocation of Landlord’s actual costs.

9. Maintenance of Premises. Tenant shall, at all times during the Term, at Tenant’s cost and expense, keep the Premises in good condition and repair, except for ordinary wear and tear and damage by casualty or condemnation. Except as may be specifically set forth in this Lease (including the Work Letter), Landlord has no obligation to alter, remodel, improve, repair, decorate or paint the Premises, or any part thereof, or any obligation respecting the condition, maintenance and repair of the Premises or any other portion of the Building. Tenant hereby waives all rights, including those provided in California Civil Code Section 1941 or any successor statute, to make repairs which are Landlord’s obligation under this Lease at the expense of Landlord or to receive any setoff or abatement of Rent or in lieu thereof to vacate the Premises or terminate this Lease.

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10. Alterations to Premises.

10.1. Landlord Consent; Procedure. Tenant shall not make or permit to be made any Alterations without Landlord’s prior consent, which consent may be granted or withheld in Landlord’s reasonable discretion; no consent shall be required for non-structural Alterations to any single floor within the Premises which do not require a building permit and which, in the aggregate, cost less than $50,000.00 to construct. Any Alterations to which Landlord has consented shall be made in accordance with procedures as then established by Landlord and the provisions of this Article 10. Tenant shall provide Landlord with written notice of the commencement of all Alterations, within five (5) days before the commencement of such Alterations.

10.2. General Requirements. All Alterations shall be made at Tenant’s cost and expense. Tenant shall be solely responsible for compliance with applicable laws, ordinances, rules and regulations in connection with all Alterations. Without limiting the foregoing or any other provisions of this Lease, if any applicable law, ordinance, rule or regulation provides that any Alteration by Tenant will result in the requirement of the performance of any other work, repair, capital improvement or other expenditure with respect to any portion of the Building (including in the premises of other tenants), then Tenant shall be solely responsible, at Tenant’s sole cost and expense, to perform such work, repair or capital improvement, or to pay such expenditure. Tenant shall be responsible for the cost of any additional alterations required by applicable laws, ordinances, rules and regulations to be made by Landlord to any portion of the Building as a result of Alterations. Tenant shall promptly commence or cause the commencement of construction of all Alterations and complete or cause completion of the same with due diligence as soon as possible after commencement in order to cause the least disruption to Building operations and occupants and to continue Tenant’s business in the Premises. In connection with installing or removing Alterations, Tenant shall pay to Landlord on demand Landlord’s reasonable actual costs incurred in connection with the administration by Landlord (or its agent) of the construction, installation or removal of Alterations, and restoration of the Premises to their previous condition.

10.3. Removal of Alterations. If Landlord has not consented to an Alteration (for which such consent is required), Tenant shall, prior to the expiration of the Term or termination of this Lease, remove such Alteration and Tenant’s trade fixtures and personal property at Tenant’s cost and expense and restore the Premises to the condition existing prior to the installation of such Alteration. Tenant shall have no obligation to remove the Tenant’s Work. If Tenant fails so to do, then Landlord may remove such Alteration, trade fixtures and personal property and perform such restoration and Tenant shall reimburse Landlord for Landlord’s cost and expense incurred to perform such removal and restoration (which obligation of Tenant shall survive the expiration or earlier termination of this Lease). Tenant shall repair at its cost and expense all damage to the Premises or the Building caused by the removal of any Alteration. Subject to the foregoing provisions regarding removal, all Alterations (including any above Building standard improvements to the Premises) shall be Landlord’s property and from and after the expiration or earlier termination of this Lease shall remain on the Premises without compensation to Tenant; Tenant’s trade fixtures and personal property shall remain Tenant’s property, subject to applicable California laws regarding abandoned property.

11. Liens. Tenant shall keep the Premises and the Building free from any liens arising out of any work performed or obligations incurred by or for, or materials furnished to, Tenant pursuant to this Lease or otherwise. Landlord shall have the right to post and keep posted on the Premises any notices required by law or which Landlord may deem to be proper for the protection of Landlord, the Premises and the Building from such liens and to take any other action at the expense of Tenant that Landlord deems necessary or appropriate to prevent, remove or discharge such liens. Tenant shall protect, defend, indemnify and hold Landlord harmless from and against any claim, demand, cause of action, obligation, liability, loss, cost or expense

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(including reasonable attorneys’ fees) which may be asserted against or incurred by Landlord as a result of Tenant’s failure to comply with the foregoing obligation (which indemnity obligation shall survive the expiration or earlier termination of this Lease).

12. Damage or Destruction.

12.1. Obligation to Repair. Except as otherwise provided in this Article 12, if the Premises, or any other portion of the Building necessary for Tenant’s use and occupancy of the Premises, are damaged or destroyed by fire or other casualty, Landlord shall, within thirty (30) days after such event, notify Tenant of the estimated time, in Landlord’s reasonable judgment, required to repair such damage or destruction. If Landlord’s estimate of time is less than one hundred eighty (180) days after the date that Landlord obtains the required building permits for the repair of such damage or destruction, then (i) Landlord shall proceed with all due diligence to repair the Premises, and/or the portion of the Building necessary for Tenant’s use and occupancy of the Premises, to substantially the condition existing immediately before such damage or destruction, as permitted by and subject to then applicable laws, ordinances, rules and regulations; (ii) this Lease shall remain in full force and effect; and (iii) Base Rent and Escalation Rent shall abate for such part of the Premises rendered unusable by Tenant, in Tenant’s reasonable, good faith judgment, in the conduct of its business during the time such part is so unusable, in the proportion that the Rentable Area contained in the unusable part of the Premises bears to the total Rentable Area of the Premises.

12.2. Landlord’s Election. If Landlord determines that the necessary repairs cannot be completed within one hundred eighty (180) days after the date that Landlord obtains the required building permits for the repair of such damage or destruction, or if such damage or destruction arises from causes not covered by Landlord’s insurance policy then in force, and would cost in the aggregate more than $2,000,000 to repair, Landlord may elect, in its notice to Tenant pursuant to Section 12.1, to (i) terminate this Lease or (ii) repair the Premises or the portion of the Building necessary for Tenant’s use and occupancy of the Premises pursuant to the applicable provisions of Section 12.1 above. If Landlord terminates this Lease, then this Lease shall terminate as of the date of occurrence of the damage or destruction.

12.3. Cost of Repairs. Landlord shall pay the cost for repair of the Building and all improvements in the Premises, other than any Alterations. Tenant shall pay the costs to repair all Alterations (but Landlord shall make available to Tenant for such purpose any insurance proceeds received by Landlord for such purpose under Landlord’s insurance policy then in force). Tenant shall also replace or repair, at Tenant’s cost and expense, Tenant’s movable furniture, equipment, trade fixtures and other personal property in the Premises which Tenant shall be responsible for insuring during the Term of this Lease.

12.4. Damage at End of Term. Notwithstanding anything to the contrary contained in this Article 12, unless Tenant shall have extended the Term in accordance with Section 3.2 hereof, if the Premises, or any other portion thereof or of the Building, are materially damaged or destroyed by fire or other casualty within the last twelve (12) months of the Term, then Landlord shall have the right, in its sole discretion, to terminate this Lease by notice to Tenant given within ninety (90) days after the date of such event. Such termination shall be effective on the date specified in Landlord’s notice, but in no event later than the end of such 90-day period. For purposes hereof, the Premises or other portion of the Building shall be deemed to be materially damaged if such damage costs more than $2,000,000 to repair. Notwithstanding the foregoing, if Landlord seeks to terminate the Lease in circumstances where the Premises were not affected by any such damage or destruction, Landlord may do so only if Landlord is terminating all other office leases in the Building on account thereof.

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12.5. Tenant’s Right to Terminate. Notwithstanding anything to the contrary contained in this Article 12, if the Premises are materially damaged or destroyed by fire or other casualty and the date by which Landlord determines that the necessary repairs could be completed would occur in the last twelve (12) months of the Term, then Tenant shall have the right, in its sole discretion, to terminate this Lease by notice to Landlord given within ninety (90) days after the date of such casualty. Landlord shall, within thirty (30) days after such casualty, notify Tenant of the estimated time, in Landlord’s reasonable judgment, required to repair such damage or destruction. Such termination shall be effective on the date specified in Tenant’s notice, but in no event later than the end of such 90-day period.

12.6. Waiver of Statutes. The respective rights and obligations of Landlord and Tenant in the event of any damage to or destruction of the Premises, or any other portion of the Building, are governed exclusively by this Lease. Accordingly, Tenant hereby waives the provisions of any law to the contrary, including California Civil Code Sections 1932(2) and 1933(4) providing for the termination of a lease upon destruction of the leased property.

13. Eminent Domain.

13.1. Effect of Taking. Except as otherwise provided in this Article 13, if all or any part of the Premises is taken as a result of the exercise of the power of eminent domain or condemned for any public or quasi-public purpose, or if any transfer is made in avoidance of such exercise of the power of eminent domain (collectively, “taken” or a “taking”), this Lease shall terminate as to the part of the Premises so taken as of the effective date of such taking. On a taking of a portion of the Premises, Landlord and Tenant shall each have the right to terminate this Lease by notice to the other given within thirty (30) days after the effective date of such taking, if the portion of the Premises taken is of such extent and nature so as to materially impair Tenant’s business use of the balance of the Premises, as reasonably determined by the party giving such notice. Such termination shall be operative as of the effective date of the taking. Landlord may also terminate this Lease on a taking of any other portion of the Building if Landlord reasonably determines that such taking is of such extent and nature as to render the operation of the remaining Building economically infeasible or to require a substantial alteration or reconstruction of such remaining portion. Landlord shall elect such termination by notice to Tenant given within thirty (30) days after the effective date of such taking, and such termination shall be operative as of the effective date of such taking. Upon a taking of the Premises which does not result in a termination of this Lease, the Base Rent shall thereafter be reduced as of the effective date of such taking in the proportion that the Rentable Area of the Premises so taken bears to the total Rentable Area of the Premises.

13.2. Condemnation Proceeds. Except as hereinafter provided, in the event of any taking, Landlord shall have the right to all compensation, damages, income, rent or awards made with respect thereto (collectively an “award”), including any award for the value of the leasehold estate created by this Lease. No award to Landlord shall be apportioned and, subject to Tenant’s rights hereinafter specified, Tenant hereby assigns to Landlord any right of Tenant in any award made for any taking. So long as such claim will not reduce any award otherwise payable to Landlord under this Section 13.2, Tenant may seek to recover, at its cost and expense, as a separate claim, any damages or awards payable on a taking of the Premises to compensate for the unamortized cost paid by Tenant for the alterations, additions or improvements, if any, made by or on behalf of Tenant during the initial improvement of the Premises pursuant to the Work Letter and for any Alterations, or for Tenant’s personal property taken, or for interference with or interruption of Tenant’s business (including goodwill), or for Tenant’s removal and relocation expenses.

13.3. Restoration of Premises. On a taking of the Premises which does not result in a termination of this Lease, Landlord and Tenant shall restore the Premises as nearly as possible to the

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condition they were in prior to the taking in accordance with the applicable provisions and allocation of responsibility for repair and restoration of the Premises on damage or destruction pursuant to Article 12 above, and both parties shall use any awards received by such party attributable to the Premises for such purpose.

13.4. Tenant Waiver. The rights and obligations of Landlord and Tenant on any taking of the Premises or any other material portion of the Building are governed exclusively by this Lease. Accordingly, Tenant hereby waives the provisions of any law to the contrary, including California Code of Civil Procedure Sections 1265.120 and 1265.130, or any similar successor statute.

14. Insurance.

14.1. Liability Insurance. Landlord, with respect to the Building, and Tenant, at its cost and expense with respect to the Premises, shall each maintain or cause to be maintained, from the Lease Date and throughout the Term, a policy or policies of Commercial General Liability insurance with limits of liability not less than Five Million Dollars ($5,000,000.00) per occurrence and in the aggregate. Each policy shall contain coverage for blanket contractual liability, personal injury liability, and premises operations, and, as to Tenant’s insurance, fire legal liability. Tenant’s policy shall be subject to deductible amounts as Tenant may reasonably elect based on prudent risk management practices for business comparable to Tenant’s business and for Tenant’s financial condition.

14.2. Form of Policies. All insurance required by this Article 14 shall be issued on an occurrence basis by solvent companies qualified to do business in the State of California. Any insurance required under this Article 14 may be maintained under a “blanket policy”, insuring other parties and other locations, so long as the amount and coverage required to be provided hereunder is not thereby diminished. Tenant shall provide Landlord a copy of each policy of insurance or a certificate thereof certifying that the policies contain the provisions required hereunder. Tenant shall deliver such policies or certificates to Landlord within ten (10) business days prior to the Possession Date or such earlier date as Tenant or Tenant’s contractors, agents, licensees, invitees or employees first enter the Premises and, upon renewal, not less than five (5) business days prior to the expiration of such coverage. All evidence of insurance provided to Landlord shall provide (i) that Landlord, Landlord’s managing agent and any other person requested by Landlord who has an insurable interest, is designated as an additional insured without limitation as to coverage afforded under such policy; (ii) for severability of interests or that the acts or omissions of one of the insureds or additional insureds shall not reduce or affect coverage available to any other insured or additional insured; (iii) that the insurer agrees not to cancel or alter the policy without at least thirty (30) days prior written notice to all additional insureds; (iv) that the aggregate liability applies solely to the Premises and the remainder of the Building; and (v) that Tenant’s insurance is primary and noncontributing with any insurance carried by Landlord.

14.3. Workers’ Compensation Insurance. Tenant, at its sole cost and expense, shall maintain Workers’ Compensation insurance as required by law and employer’s liability insurance in an amount of not less than Five Hundred Thousand Dollars ($500,000).

14.4. Additional Tenant Insurance. Tenant, at its sole cost and expense, shall maintain such other insurance as Landlord may reasonably require from time to time, but in no event may Landlord require any other insurance which is (i) not then being required of comparable tenants leasing comparable amounts of space in comparable buildings in the vicinity of the Building or (ii) not then available at commercially reasonable rates.

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14.5. Landlord’s Casualty Insurance. Landlord shall, during the Term of this Lease, procure and maintain in full force and effect, at a minimum, a policy or policies of fire insurance covering the Building and the permanent tenant improvements in the Premises, with standard extended coverage, vandalism, malicious mischief and sprinkler leakage endorsements. The amount and scope of coverage of Landlord’s insurance hereunder shall be determined by Landlord from time to time in its reasonable discretion based on prudent risk management practices for buildings comparable to the Building (but shall not be less than 90% of full replacement value of the Building and Tenant’s permanent tenant improvements in the Premises, and shall be subject to such deductible amounts as Landlord may reasonably elect based on prudent risk management practices for buildings comparable to the Building. Landlord shall have the right to reduce or terminate any insurance or coverage called for by this Section 14.5 to the extent that any such coverage is not reasonably available in the commercial insurance industry from recognized carriers or not available at a cost which is in Landlord’s judgment commercially reasonable under the circumstances. Landlord shall at Tenant’s request provide a description of Landlord’s coverage then maintained by Landlord pursuant to this Section 14.5.

15. Waiver of Subrogation Rights. Notwithstanding anything to the contrary contained in this Lease, Landlord and Tenant, for themselves and their respective insurers, agree to and do hereby release each other of and from any and all claims, demands, actions and causes of action that each may have or claim to have against the other for loss or damage to property, both real and personal, notwithstanding that any such loss or damage may be due to or result from the negligence of either of the parties hereto or their respective employees or agents. Each party shall, to the extent such insurance endorsement is lawfully available at commercially reasonable rates, obtain or cause to be obtained, for the benefit of the other party, a waiver of any right of subrogation which the insurer of such party may acquire against the other party by virtue of the payment of any such loss covered by such insurance.

16. Tenant’s Waiver of Liability and Indemnification.

16.1. Waiver and Release. Except to the extent due to the gross negligence or willful misconduct of Landlord, Landlord shall not be liable to Tenant or Tenant’s employees, agents, contractors, licenses or invitees for, and Tenant waives and releases Landlord and Landlord’s managing agent from, all claims for loss or damage to any property or injury, illness or death of any person in, upon or about the Premises (including claims caused in whole or in part by the act, omission, or neglect of other tenants, contractors, licensees, invitees or other occupants of the Building or their agents or employees). The waiver and release contained in this Section 16.1 extends to the officers, directors, shareholders, partners, employees, agents and representatives of Landlord.

16.2. Indemnification of Landlord. Except to the extent due to Landlord’s gross negligence or willful misconduct, Tenant shall indemnify, defend, protect and hold Landlord harmless of and from any and all loss, liens, liability, claims, causes of action, damage, injury, cost or expense arising out of or in connection with (i) the making of any alterations, additions or other improvements made by or on behalf of Tenant during the initial improvement of the Premises pursuant to the Work Letter or any Alterations, or (ii) injury to or death of persons or damage to property occurring or resulting directly or indirectly from: (A) the use or occupancy of, or the conduct of business in, the Premises by Tenant or its subtenants or any of their respective officers, directors, employees, agents, contractors, invitees or licensees; (B) any other occurrence or condition in or on the Premises; and (C) acts, neglect or omissions of Tenant, or its subtenants or any of their respective officers, directors, employees, agents, contractors, invitees or licensees, in or about any portion of the Building. Tenant’s indemnity obligation includes reasonable attorneys’ fees and costs, investigation costs and other reasonable costs and expenses incurred by Landlord. If Landlord reasonably disapproves the legal counsel proposed by Tenant for the defense of any claim indemnified against hereunder,

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Landlord shall have the right to appoint its own legal counsel, the reasonable fees, costs and expenses of which shall be included as part of Tenant’s indemnity obligation hereunder. The indemnification contained in this Section 16.2 shall extend to the officers, directors, shareholders, partners, employees, agents and representatives of Landlord.

16.3. Indemnification of Tenant. Landlord shall indemnify, defend, protect and hold Tenant harmless of and from any and all loss, liens, liability, claims, causes of action, damage, injury, cost or expense arising out of or in connection with (i) any breach or default by Landlord in the performance of any of its obligations under this Lease, or (ii) Landlord’s gross negligence or willful misconduct, or (iii) any loss or damage to property or injury to person occurring in the public entrances, stairways, corridors, elevators and elevator lobbies, and other public areas in the Building or the other public areas in the Building (except for such loss, damage or injury for which Tenant is obligated to indemnify Landlord under Section 16.2). Landlord’s indemnity obligation includes reasonable attorneys’ fees and costs, investigation costs and other reasonable costs and expenses incurred by Tenant. The indemnification contained in this Section 16.3 shall extend to the officers, directors, shareholders, partners, employees, agents and representatives of Tenant.

17. Assignment and Subletting.

17.1. Compliance Required. Tenant shall not, directly or indirectly, voluntary or by operation of law, sell, assign or otherwise transfer this Lease, or any interest herein (collectively, “assign” or “assignment”), or sublet the Premises, or any part thereof, or permit the occupancy of the Premises by any person other than Tenant (collectively, “sublease” or “subletting”, the assignee or sublessee under an assignment or sublease being referred to as a “transferee”), without Landlord’s prior consent given or withheld in accordance with the express standards and conditions of this Article 17 and compliance with the other provisions of this Article 17. Any assignment or subletting made in violation of this Article 17, shall be void. As used herein, an “assignment” includes any sale or other transfer (such as by consolidation, merger or reorganization) of a majority of the voting stock of Tenant, if Tenant is a corporation (other than a corporation publicly traded on The New York Stock Exchange or NASDAQ or similar exchange), or any sale or other transfer of a majority of the beneficial interest in Tenant, if Tenant is any other form of entity. Tenant acknowledges and agrees that the limitations on Tenant’s right to sublet or assign which are set forth in this Article 17 are reasonable and, in particular, that the express standards and conditions upon Tenant’s right to assign or sublet which are set forth in this Article 17 are reasonable as of the Lease Date.

17.2. Request by Tenant; Landlord Response. If Tenant desires to effect an assignment or sublease, Tenant shall submit to Landlord a request for consent together with the identity of the parties to the transaction, the nature of the transferee’s proposed business use for the Premises, the proposed documentation for and terms of the transaction, and all other information reasonably requested by Landlord concerning the proposed transaction and the parties involved therein, including certified financial information, credit reports, the business background and references regarding the transferee, and an opportunity to meet and interview the transferee. Within twenty (20) days after the later of such interview or the receipt of all such information required by Landlord, or within thirty (30) days after the date of Tenant’s request to Landlord if Landlord does not request additional information or an interview, Landlord shall have the right, by notice to Tenant, to: (i) consent to the assignment or sublease, subject to the terms of this Article 17; (ii) decline to consent to the assignment or sublease; (iii) in the case of a subletting of at least one floor of the Premises for a term in excess of six (6) months (other than a sublease of the Fourth Floor Portion during the first three (3) years of the Term), to sublet from Tenant the portion of the Premises proposed to be sublet on the terms and conditions set forth in Tenant’s request to Landlord; or (iv) in the case of an assignment, to terminate this Lease as of the date specified by Tenant as the effective date of the proposed assignment, in which event Tenant will be relieved of all unaccrued obligations hereunder as of such date, other than those obligations

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which survive termination of this Lease; notwithstanding the foregoing, with respect to items (iii) and (iv) above, to the extent that any such request for sublease or assignment is also made under the Annex Lease, then Landlord’s actions shall be consistent with its actions under the Annex Lease. If Landlord elects so to terminate, Tenant shall have the right, by notice to Landlord within five (5) days after Landlord’s exercise of such right, to rescind its request for the proposed assignment, in which event this Lease shall not terminate and shall remain in full force and effect. Notwithstanding any provision of this Section 17.2 to the contrary, if Tenant desires to sublease or assign all or a portion of the Fourth Floor Portion and concurrently desires to sublease or assign to the same subtenant a portion of the premises under the Annex Lease, and if Tenant does not obtain all necessary consents for the sublease or assignment of such space in the Annex, then Tenant shall have the right to rescind its request to sublease or assign all or a portion of the Fourth Floor Portion by delivering notice to Landlord within five (5) days after receipt of refusal of such consent by the landlord under the Annex Lease.

17.3. Conditions for Landlord Approval. In the event Landlord elects not to sublet from Tenant or terminate this Lease (in whole or in part) as provided in clauses (iii) and (iv) of Section 17.2, Landlord shall not unreasonably withhold its consent to a proposed subletting or assignment by Tenant. Without limiting the grounds on which it may be reasonable for Landlord to withhold its consent to an assignment or sublease, Tenant agrees that Landlord would be acting reasonably in withholding its consent in the following instances: (i) if Tenant is in default under this Lease; (ii) if the transferee is a governmental or quasi-governmental agency, foreign or domestic; (iii) if the transferee is an existing tenant in the Building; (iv) if, in Landlord’s sole judgment, the transferee’s business, use and/or occupancy of the Premises would (A) violate any of the terms of this Lease or the lease of any other tenant in the Building, or (B) not be comparable to and compatible with the types of use by other tenants in the Building, (C) fall within any category of use for which Landlord would not then lease space in the Building under its leasing guidelines and policies then in effect, (D) require any Alterations which would reduce the value of the existing leasehold improvements in the Premises, or (E) result in increased density per floor in excess of one person/200 square feet of Rentable Area, or require increased services by Landlord; (v) in the case of a sublease, it would result in more than four (4) occupancies on one floor of the Premises, including Tenant and subtenants; or (vi) if the financial condition of the transferee does not meet the requirements applied by Landlord for other tenants in the Building under leases with comparable terms, or in Landlord’s reasonable judgment the business reputation of the transferee is not consistent with that of other tenants of the Building. If Landlord consents to an assignment or sublease, the terms of such assignment or sublease transaction shall not be modified without Landlord’s prior written consent pursuant to this Article 17. Landlord’s consent to an assignment or subletting shall not be deemed consent to any subsequent assignment or subletting.

17.4. Costs and Expenses. As a condition to the effectiveness of any assignment or subletting under this Article 17, Tenant shall pay to Landlord a processing fee of Five Hundred Dollars ($500.00) and all reasonable costs and expenses, including reasonable attorneys’ fees and disbursements, incurred by Landlord in evaluating Tenant’s requests for assignment or sublease, whether or not Landlord consents to an assignment or sublease. Tenant shall pay the processing fee with Tenant’s request for Landlord’s consent under Section 17.2. Tenant shall also pay to Landlord all costs and expenses incurred by Landlord due to a transferee taking possession of the Premises, including freight elevator operation, security service, janitorial service and rubbish removal.

17.5. Payment of Excess Rent and Other Consideration. Tenant shall also pay to Landlord, promptly upon Tenant’s receipt thereof, fifty percent (50%) of any and all rent, sums or other consideration, howsoever denominated, realized by Tenant in connection with any assignment or sublease transaction in excess of the Base Rent and Escalation Rent payable hereunder (prorated to reflect the Rent allocable to the portion of the Premises if a sublease), after first deducting, (i) in the case of an assignment, the unamortized

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actual out of pocket, third-party, costs of Alterations paid for by Tenant and actual out of pocket third party real estate commissions paid by Tenant solely in connection with such assignment, and (ii) in the case of a sublease, the actual out of pocket, third-party, cost of Alterations made to the Premises at Tenant’s cost to effect the sublease, and the actual amount of any real estate commissions paid by Tenant to a third party solely in connection with such sublease, both amortized over the term of the sublease.

17.6. Assumption of Obligations; Further Restrictions on Subletting. Each assignee shall, concurrently with any assignment, assume all obligations of Tenant under this Lease. Each sublease shall be made subject to this Lease and all of the terms, covenants and conditions contained herein; and the surrender of this Lease by Tenant, or a mutual cancellation thereof, or the termination of this Lease in accordance with its terms, shall not work a merger and shall, at the option of Landlord, terminate all or any existing subleases or operate as an assignment to Landlord of any or all such subleases. No sublessee (other than Landlord) shall have the right further to sublet more than one additional time, without Landlord’s prior written consent, which may be withheld in Landlord’s sole discretion; provided, however, that such sublessee shall have one right further to sublet subject to obtaining Landlord’s reasonable consent. Any assignment by a sublessee of its sublease shall be subject to Landlord’s prior consent in the same manner as a sublease by Tenant. No sublease, once consented to by Landlord, shall be modified without Landlord’s prior consent. No assignment or sublease shall be binding on Landlord unless the transferee delivers to Landlord a fully executed counterpart of the assignment or sublease which contains the assumption by the assignee, or recognition by the sublessee, of the provisions of this Section 17.6, in form and substance satisfactory to Landlord, but the failure or refusal of a transferee to deliver such instrument shall not release or discharge such transferee from the provisions and obligations of this Section 17.6, but such failure shall constitute a default by Tenant under this Lease.

17.7. No Release. No assignment or sublease shall release Tenant from its obligations under this Lease, whether arising before or after the assignment or sublease. The acceptance of Rent by Landlord from any other person shall not be deemed a waiver by Landlord of any provision of this Article 17. On a default by any assignee of Tenant in the performance of any of the terms, covenants or conditions of this Lease, Landlord may proceed directly against Tenant without the necessity of commencing or exhausting remedies against such assignee. No consent by Landlord to any further assignments or sublettings of this Lease, or any modification, amendment or termination of this Lease, or extension, waiver or modification of payment or any other obligations under this Lease, or any other action by Landlord with respect to any assignee or sublessee, or the insolvency, or bankruptcy or default of any such assignee or sublessee, shall affect the continuing liability of Tenant for its obligations under this Lease and Tenant waives any defense arising out of or based thereon, including any suretyship defense of exoneration. Landlord shall have no obligation to notify Tenant or obtain Tenant’s consent with respect to any of the foregoing matters.

17.8. No Encumbrance. Notwithstanding anything to the contrary contained in this Article 17, Tenant shall have no right to encumber, pledge, hypothecate or otherwise transfer this Lease, or any of Tenant’s interest or rights hereunder, as security for any obligation or liability of Tenant.

17.9 Assignment or Sublease to Related Entity. As long as no Suspension Condition then exists, Tenant shall have the right, subject to the terms and conditions set forth in this Section 17.9, without the consent of Landlord, but without in any way releasing Salesforce.com, Inc. from any of its obligations under this Lease, to (a) assign its interest in this Lease to (i) any corporation which is a successor to Tenant either by merger or consolidation, or (ii) a purchaser of all or substantially all of Tenant’s assets (provided such purchaser shall have also assumed substantially all of Tenant’s liabilities), or (iii) to a corporation or other entity which shall control, be under the control of, or be under common control with Salesforce.com, Inc. (the term “control” as used herein shall be deemed to mean ownership

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of more than fifty percent (50%) of the outstanding voting stock of a corporation, or other majority equity and control interest if Tenant is not a corporation) (any such entity being a “Related Entity”), or (b) sublease all or any portion of the Premises to a Related Entity, so long as such sublease does not result in the demising of any space in the Premises. Any assignment or sublease to a Related Entity pursuant to this Section 17.9 shall be subject to the following conditions: (i) the principal purpose of such assignment or sublease is not the acquisition of Tenant’s interest in this Lease (except if such assignment or sublease is made to a Related Entity and is made for a valid intra-corporate business purpose and is not made to circumvent the provisions of this Article 17), (ii) such assignment or sublease shall be subject to the terms of this Lease, including the provisions of Sections 17.6 and 17.7, and (iii) such Related Entity shall have executed all documents reasonably requested by Landlord to memorialize the foregoing. Tenant shall, within ten (10) business days after execution thereof, deliver to Landlord (A) a duplicate original instrument of assignment in form and substance reasonably satisfactory to Landlord, duly executed by Tenant, (B) if applicable, evidence reasonably satisfactory to Landlord establishing compliance by the assignee with the net worth, income and cash flow requirements of clause (b)(ii) above, (C) an instrument in form and substance reasonably satisfactory to Landlord, duly executed by the assignee, in which such assignee shall assume observance and performance of, and agree to be personally bound by, all of the terms, covenants and conditions of this Lease on Tenant’s part to be observed and performed or (D) a duplicate original sublease in form and substance reasonably satisfactory to Landlord, duly executed by Tenant and subtenant.

18. Rules and Regulations. Tenant shall observe and comply, and shall cause its sublessees, employees, agents, contractors, licensees and invitees to observe and comply, with the Rules and Regulations of the Building, a copy of which are attached to this Lease as Exhibit D, and, after notice thereof, with all reasonable modifications and additions thereto from time to time promulgated in writing by Landlord. Landlord shall not be responsible to Tenant, or Tenant’s sublessees, employees, agents, contractors, licensees or invitees, for noncompliance with any Rules and Regulations of the Building by any other tenant, sublessee, employee, agent, contractor, licensee, invitee or other occupant of the Building. Such Rules and Regulations shall be enforced by Landlord in a non-discriminatory manner. In case of a conflict between the Lease and the Rules and Regulations, the Lease shall prevail.

19. Entry of Premises by Landlord.

19.1. Right to Enter. Upon 24 hours advance notice to Tenant (except in emergencies or in order to provide regularly scheduled or other routine Building standard services or additional services requested by Tenant, or post notices of nonresponsibility or other notices permitted or required by law when no such notice shall be required), Landlord and its authorized agents, employees, and contractors may enter the Premises at reasonable hours to: (i) inspect the same; (ii) determine Tenant’s compliance with its obligations hereunder; (iii) exhibit the same to prospective purchasers, lenders or tenants; (iv) supply any services to be provided by Landlord hereunder; (v) post notices of nonresponsibility or other notices permitted or required by law; (vi) make repairs, improvements or alterations, or perform maintenance in or to, the Premises or any other portion of the Building, including Building systems; and (vii) perform such other functions as Landlord deems reasonably necessary or desirable. Landlord may also grant access to the Premises to government or utility representatives and bring and use on or about the Premises such equipment as reasonably necessary to accomplish the purposes of Landlord’s entry. Landlord shall use reasonable good faith efforts to effect all entries and perform all work hereunder in such manner as to minimize interference with Tenant’s use and occupancy of the Premises. Landlord shall have and retain keys with which to unlock all of the doors in or to the Premises (excluding Tenant’s vaults, safes and similar secure areas designated in writing by Tenant in advance), and Landlord shall have the right to use any and all means which Landlord may deem proper in an emergency in order to obtain entry to the Premises, including secure areas.

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19.2. Tenant Waiver of Claims. Except for damages to persons or property caused by the negligence or willful misconduct of Landlord or its employees, Tenant waives any claim for damages for any inconvenience to or interference with Tenant’s business, or any loss of occupancy or quiet enjoyment of the Premises, or any other loss, occasioned by any entry effected or work performed under this Article 19, and Tenant shall not be entitled to any abatement of Rent by reason of the exercise of any such right of entry or performance of such work. No entry to the Premises by Landlord or anyone acting under Landlord occasioned by any entry effected or work performed under this Article 19, shall constitute a forcible or unlawful entry into, or a detainer of, the Premises or an eviction, actual or constructive, of Tenant from the Premises, or any portion thereof.

20. Default and Remedies.

20.1. Events of Default. The occurrence of any of the following events shall constitute a default by Tenant under this Lease:

a. Nonpayment of Rent. Failure to pay any Rent when due.

b. Unpermitted Assignment. An assignment or sublease made in contravention of any of the provisions of Article 17 above.

c. Abandonment. Abandonment of the Premises for a continuous period in excess of five (5) business days. For purposes hereof, “abandonment” shall have the meaning provided under California law.

d. Other Obligations. Failure to perform or fulfill any other obligation, covenant, condition or agreement under this Lease.

e. Bankruptcy and Insolvency. A general assignment by Tenant for the benefit of creditors, any action or proceeding commenced by Tenant under any insolvency or bankruptcy act or under any other statute or regulation for protection from creditors, or any such action commenced against Tenant and not discharged within sixty (60) days after the date of commencement; the employment or appointment of a receiver or trustee to take possession of all or substantially all of Tenant’s assets or the Premises; the attachment, execution or other judicial seizure of all or substantially all of Tenant’s assets or the Premises, if such attachment or other seizure remains undismissed or undischarged for a period of ten (10) days after the levy thereof; the admission by Tenant in writing of its inability to pay its debts as they become due; or the filing by Tenant of a petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, the filing by Tenant of an answer admitting or failing timely to contest a material allegation of a petition filed against Tenant in any such proceeding or, if within thirty (30) days after the commencement of any such proceeding against Tenant, such proceeding is not dismissed. For purposes of this Section 20.1(e), “Tenant” means Tenant and any partner of Tenant, if Tenant is a partnership, or any person or entity comprising Tenant, if Tenant is comprised of more than one person or entity, or any guarantor of Tenant’s obligations, or any of them, under this Lease.

f. Annex Lease. The occurrence of a default (after expiration of any applicable cure period) by Tenant under the Annex Lease.

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20.2. Notice to Tenant. Upon the occurrence of any default, Landlord shall give Tenant notice thereof. Such notice shall replace rather than supplement any equivalent or similar statutory notice, including any notices required by California Code of Civil Procedure Section 1161 or any similar or successor statute; and giving of such notice in the manner required by Article 28 shall replace and satisfy any service-of-notice procedures set forth in any statute, including those required by California Code of Civil Procedure Section 1162 or any similar or successor statute. If a time period is specified below for cure of such default, then Tenant may cure such default within such time period. To the fullest extent allowed by law, Tenant hereby waives any right under law now or hereinafter enacted to any other time period for cure of default.

a. Nonpayment of Rent. For failure to pay Rent, within five (5) days after Landlord’s notice.

b. Other Obligations. For failure to perform any obligation, covenant, condition or agreement under this Lease (other than nonpayment of Rent, an assignment or subletting in violation of Article 17 or Tenant’s abandonment of the Premises) within ten (10) days after Landlord’s notice or, if the failure is of a nature requiring more than 10 days to cure, then an additional sixty (60) days after the expiration of such 10-day period, but only if Tenant commences cure within such 10-day period and thereafter diligently pursues such cure to completion within such additional 60-day period. If Tenant has failed to perform any such obligation, covenant, condition or agreement more than two (2) times during the Term and notice of such event of default has been given by Landlord in each instance, then no cure period shall apply.

c. No Cure Period. No cure period shall apply for any other event of default specified in Section 20.1.

20.3. Remedies Upon Occurrence of Default. On the occurrence of a default which Tenant fails to cure after notice and expiration of the time period for cure, if any, specified in Section 20.2 above, Landlord shall have the right either (i) to terminate this Lease and recover possession of the Premises, or (ii) to continue this Lease in effect and enforce all Landlord’s rights and remedies under California Civil Code Section 1951.4 (by which Landlord may recover Rent as it becomes due, subject to Tenant’s right to assign pursuant to Article 17). Landlord may store any property of Tenant located in the Premises at Tenant’s expense or otherwise dispose of such property in the manner provided by law. If Landlord does not terminate this Lease, Tenant shall in addition to continuing to pay all Rent when due, also pay Landlord’s costs of attempting to relet the Premises, any repairs and alterations necessary to prepare the Premises for such reletting, and brokerage commissions and attorneys’ fees incurred in connection therewith, less the rents, if any, actually received from such reletting. Notwithstanding Landlord’s election to continue this Lease in effect, Landlord may at any time thereafter terminate this Lease pursuant to this Section 20.3.

20.4. Damages Upon Termination. If and when Landlord terminates this Lease pursuant to Section 20.3, Landlord may exercise all its rights and remedies available under California Civil Code Section 1951.2, including the right to recover from Tenant the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such Rent loss that the Tenant proves could have been reasonably avoided. As used herein and in Civil Code Section 1951.2, “time of award” means either the date upon which Tenant pays to Landlord the amount recoverable by Landlord, or the date of entry of any determination, order or judgment of any court or other legally constituted body determining the amount recoverable, whichever occurs first.

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20.5. Computation of Certain Rent for Purposes of Default. For purposes of computing unpaid Rent pursuant to Section 20.4 above, Escalation Rent for the balance of the Term shall be determined by averaging the amount paid by Tenant as Escalation Rent for the calendar year prior to the year in which the default occurred (or, if the prior year is the Base Year or such default occurs during the Base Year, Escalation Rent shall be based on Landlord’s operating budget for the Building for the Base Year), increasing such average amount for each calendar year (or portion thereof) remaining in the balance of the Term at a per annum compounded rate equal to the mean average rate of increase for the preceding five (5) calendar years in the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index (All Urban Consumers, All Items, 1982-1984 = 100) for the Metropolitan Area of which San Francisco, California, is a part, and adding together the resulting amounts. If such Index is discontinued or revised, such computation shall be made by reference to the index designated as the successor or substitute index by the United States Department of Labor, Bureau of Labor Statistics, or its successor agency, and if none is designated, by a comparable index as determined by Landlord in its sole discretion, which would likely achieve a comparable result to that achieved by the use of the Consumer Price Index. If the base year of the Consumer Price Index is changed, then the conversion factor specified by the Bureau, or successor agency, shall be utilized to determine the Consumer Price Index.

20.6. Right to Cure Defaults. If Tenant fails to pay Rent (other than Base Rent and Escalation Rent) required to be paid by it hereunder, or fails to perform any other obligation under this Lease, and Tenant fails to cure such default within the applicable cure period, if any, specified in Section 20.2 above, then Landlord may, without waiving any of Landlord’s rights in connection therewith or releasing Tenant from any of its obligations or such default, make any such payment or perform such other obligation on behalf of Tenant. Prior to commencing such payment or performing such obligation on behalf of Tenant, Landlord shall notify Tenant of its intentions to do so. All payments so made by Landlord, and all costs and expenses incurred by Landlord to perform such obligations, shall be due and payable by Tenant as Rent immediately upon receipt of Landlord’s demand therefor. If Landlord fails to perform its obligations under this Lease within fifteen (15) days after written notice from Tenant (provided Landlord shall have a longer time if reasonably necessary if Landlord commences cure within such fifteen (15) day period and diligently prosecutes such cure to completion) and such failure materially and adversely affects Tenant’s use of the Premises, then Tenant shall give Landlord an additional three (3) business days prior notice. If Landlord has not commenced performance of its obligation within such three (3) business day period, Tenant shall have the right to perform such obligation on Landlord’s behalf, and Landlord shall reimburse Tenant for the reasonable cost thereof within thirty (30) days after presentation of a reasonably detailed invoice demonstrating the expenses incurred by Tenant. In the event Tenant makes any repairs to the Premises on Landlord’s behalf pursuant to this Section 20.6, Tenant shall be responsible for damages or injuries caused by Tenant or its employees, contractors and subcontractors in making such repairs or any defect therein and shall indemnify Landlord against any liability, cost or expense (including attorneys’ fees) arising out of such repair or any defect in the work performed.

20.7. Remedies Cumulative. The rights and remedies of Landlord under this Lease are cumulative and in addition to, and not in lieu of, any other rights and remedies available to Landlord at law or in equity. Landlord’s pursuit of any such right or remedy shall not constitute a waiver or election of remedies with respect to any other right or remedy.

21. Subordination, Attornment and Nondisturbance.

21.1. Subordination and Attornment. This Lease and all of Tenant’s rights hereunder shall be subordinate to any ground lease or underlying lease, and the lien of any mortgage, deed of trust, or any other security instrument now or hereafter affecting or encumbering the Building, or any part thereof or

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interest therein, and to any and all advances made on the security thereof or Landlord’s interest therein, and to all renewals, modifications, consolidations, replacements and extensions thereof (an “encumbrance”, the holder of the beneficial interest thereunder being referred to as an “encumbrancer”). An encumbrancer may, however, subordinate its encumbrance to this Lease, and if an encumbrancer so elects by notice to Tenant, this Lease shall be deemed prior to such encumbrance. If any encumbrance to which this Lease is subordinate is foreclosed, or a deed in lieu of foreclosure is given to the encumbrancer thereunder, Tenant shall attorn to the purchaser at the foreclosure sale or to the grantee under the deed in lieu of foreclosure; and if any encumbrance consisting of a ground lease or underlying lease to which this Lease is subordinate is terminated, Tenant shall attorn to the lessor thereof. Tenant shall execute, acknowledge and deliver in the form requested by Landlord or any encumbrancer, any documents required to evidence or effectuate the subordination hereunder, or to make this Lease prior to the lien of any encumbrance, or to evidence such attornment.

21.2. Nondisturbance. If any encumbrance to which this Lease is subordinate is foreclosed, or a deed in lieu of foreclosure is given to the encumbrancer thereunder, or if any encumbrance consisting of a ground lease or underlying lease to which this Lease is subordinate is terminated, this Lease shall not terminate, and the rights and possession of Tenant under this Lease shall not be disturbed if (i) no default by Tenant then exists under this Lease; (ii) Tenant attorns to the purchaser, grantee, or successor lessor as provided in Section 21.1 above or, if requested, enters into a new lease for the balance of the Term upon the same terms and provisions contained in this Lease; and (iii) Tenant enters into a written agreement in a form reasonably acceptable to such encumbrancer with respect to subordination, attornment and non-disturbance.

22. Sale or Transfer by Landlord; Lease Non-Recourse.

22.1. Release of Landlord on Transfer. Landlord may at any time transfer, in whole or in part, its right, title and interest under this Lease and in the Building, or any portion thereof. If the original Landlord hereunder, or any successor to such original Landlord, transfers (by sale, assignment or otherwise) its right, title or interest in the Building, all liabilities and obligations of the original Landlord or such successor under this Lease accruing after such transfer shall terminate, the original Landlord or such successor shall automatically be released therefrom, and thereupon all such liabilities and obligations shall be binding upon the new owner. Tenant shall attorn to each such new owner.

22.2. Lease Nonrecourse to Landlord. Landlord shall in no event be personally liable under this Lease, and Tenant shall look solely to Landlord’s interest in, or rents and profits held by a receiver with respect to, the Building, for recovery of any damages for breach of this Lease by Landlord or on any judgment in connection therewith. None of the persons or entities comprising or representing Landlord (whether partners, shareholders, officers, directors, trustees, employees, beneficiaries, agents or otherwise) shall ever be personally liable under this Lease or liable for any such damages or judgment and Tenant shall have no right to effect any levy of execution against any assets of such persons or entities on account of any such liability or judgment. Any lien obtained by Tenant to enforce any such judgment, and any levy of execution thereon, shall be subject and subordinate to all encumbrances as specified in Article 21 above.

23. Estoppel Certificate.

23.1. Procedure and Content. From time to time, and within ten (10) days after written notice by Landlord, Tenant shall execute, acknowledge, and deliver to Landlord a certificate as specified by Landlord certifying: (i) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect, as modified, and identifying each modification); (ii) the Commencement Date and Expiration Date; (iii) that Tenant has accepted the Premises (or the reasons

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Tenant has not accepted the Premises), and if Landlord has agreed to make any alterations or improvements to the Premises, that Landlord has properly completed such alterations or improvements (or the reasons why Landlord has not done so); (iv) the amount of the Base Rent and current Escalation Rent, if any, and the date to which such Rent has been paid; (v) that Tenant has not committed any event of default, except as to any events of default specified in the certificate, and whether there are any existing defenses against the enforcement of Tenant’s obligations under this Lease; (vi) that no default of Landlord is claimed by Tenant, except as to any defaults specified in the certificate; and (vii) such other matters as may reasonably be requested by Landlord.

23.2. Effect of Certificate. Any such certificate may be relied upon by any prospective purchaser of any part or interest in the Building or encumbrancer (as defined in Section 21.1) and, at Landlord’s request, Tenant shall deliver such certificate to Landlord and/or to any such entity and shall agree to such notice and cure provisions and such other matters as such entity may reasonably require. In addition, at Landlord’s request, Tenant shall provide to Landlord for delivery to any such entity such information, including financial information, that may reasonably be requested by any such entity. Any such certificate shall constitute a waiver by Tenant of any claims Tenant may have in contravention to the information contained in such certificate and Tenant shall be estopped from asserting any such claim. If Tenant fails or refuses to give a certificate hereunder within the time period herein specified, Landlord shall have the right to treat such failure or refusal as a default by Tenant.

23.3 Landlord’s Estoppel Certificate. If Tenant is required by an unaffiliated third party to produce an estoppel certificate, Landlord shall, within thirty (30) days after Tenant’s request, execute and deliver to Tenant an estoppel certificate in favor of Tenant and such other persons as Tenant shall reasonably request, setting forth the following: (a) the Commencement Date and the Expiration Date; (b) that this Lease is in full force and effect and has not been assigned, modified, supplemented or amended (except by such writing as shall be stated); (c) that all conditions under this Lease to be performed by Tenant have, to Landlord’s knowledge, been satisfied, or, in the alternative, those claimed by Landlord to be unsatisfied; (d) that, to Landlord’s knowledge, no defenses or offsets exist against the enforcement of this Lease by Landlord, or in the alternative, those claimed by Landlord; (e) that the amount of advance Rent, if any (or none if such is the case), has been paid by Tenant; (f) the date to which Rent has been paid; and (g) such other information as Tenant may reasonably request.

24. No Light, Air, or View Easement. Nothing contained in this Lease shall be deemed, either expressly or by implication, to create any easement for light and air or access to any view. Any diminution or shutting off of light, air or view to or from the Premises by any structure which now exists or which may hereafter be erected, whether by Landlord or any other person, shall in no way affect this Lease or Tenant’s obligations hereunder, entitle Tenant to any reduction of Rent, or impose any liability on Landlord.

25. Holding Over. No holding over by Tenant shall operate to extend the Term. If Tenant remains in possession of the Premises after expiration or termination of this Lease, unless otherwise agreed by Landlord in writing, then (i) Tenant shall become a tenant at sufferance upon all the applicable terms and conditions of this Lease, except that Base Rent shall be increased to equal 150% of the Base Rent then in effect; (ii) Tenant shall indemnify, defend, protect and hold harmless Landlord, and any tenant to whom Landlord has leased all or part of the Premises, from any and all liability, loss, damages, costs or expense (including loss of Rent to Landlord or additional rent payable by such tenant and reasonable attorneys’ fees) suffered or incurred by either Landlord or such tenant resulting from Tenant’s failure timely to vacate the Premises; and (iii) such holding over by Tenant shall constitute a default by Tenant.

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26. Security Deposit.

26.1 Initial Security Deposit. If so specified in the Basic Lease Information, Tenant shall deposit with Landlord, in cash, the Security Deposit on or before a date three (3) days after the full execution of this Lease by Landlord and Tenant. At Tenant’s option, the Security Deposit may be in the form of an unconditional, clean, irrevocable, standby letter of credit (“L-C”). The Security Deposit shall be held by Landlord as security for the performance by Tenant of all its obligations under this Lease. If Tenant fails to pay any Rent due hereunder, or otherwise commits a default with respect to any provision of this Lease, Landlord may use, apply or retain all or any portion of the Security Deposit for the payment of any such Rent or for the payment of any other amounts expended or incurred by Landlord by reason of Tenant’s default, or to compensate Landlord for any loss or damage which Landlord may incur thereby (and in this regard Tenant hereby waives the provisions of California Civil Code Section 1950.7(c) and any similar or successor statute providing that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of Rent, to repair damage caused by Tenant, or to clean the Premises). Exercise by Landlord of its rights hereunder shall not constitute a waiver of, or relieve Tenant from any liability for, any default. If Landlord so uses or applies all or any portion of the Security Deposit, Tenant shall, within ten (10) days after demand by Landlord, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its then appropriate amount as set forth in this Article 26. If Tenant performs all of Tenant’s obligations hereunder, the Security Deposit, or so much thereof as has not theretofore been applied by Landlord, shall be returned, without interest, to Tenant (or, at Landlord’s option, to the last assignee, if any, of Tenant’s interest under this Lease, or to such person as Landlord and Tenant otherwise agree) within thirty (30) days after the later of (i) the date of expiration or earlier termination of this Lease, or (ii) vacation of the Premises by Tenant if the Premises has been left in the condition specified by this Lease. Landlord’s receipt and retention of the Security Deposit shall not create any trust or fiduciary relationship between Landlord and Tenant and Landlord need not keep the Security Deposit separate from its general accounts. Upon termination of the original Landlord’s (or any successor owner’s) interest in the Premises, the original Landlord (or such successor) shall be released from further liability with respect to the Security Deposit upon the original Landlord’s (or such successor’s) compliance with California Civil Code Section 1950.7(d), or successor statute.

26.2 Release Provisions. If Tenant completes an initial public offering of stock in Tenant in which the gross proceeds exceeds $100,000,000.00 (an “IPO”), then on the later of the date five days after the date of such IPO or a date eighteen (18) months after the Commencement Date, the Security Deposit shall be reduced by 20%; provided, however, that if the IPO results in gross proceeds of less than $100,000,000.00 but more than $90,000,000.00, then if Tenant subsequently completes a secondary public offering of stock in Tenant (the “Secondary Offering”) in which the aggregate gross proceeds cumulated with the IPO exceeds $100,000,000.00, then on the later of the date five days after the date of such Secondary Offering or a date eighteen (18) months after the Commencement Date, the Security Deposit shall be reduced by 20%. The date on which a 20% portion of the Security Deposit is released pursuant to the foregoing sentence shall be referred to as the “Initial Release Date”. Thereafter, but only if Tenant has received a 20% reduction pursuant to the first sentence of this Section 26.2, the Security Deposit shall be reduced, at the following times and in the following amounts, upon Tenant’s satisfaction of the following requirements: (i) on each anniversary of the Initial Release Date, the Security Deposit shall be reduced by an amount equal to ten percent (10%) of the original amount of the Security Deposit if Tenant has achieved profitable operations during the preceding twelve (12) month period and Tenant during such twelve (12) month period has achieved a coverage ratio in which its after tax cash flow (adding back depreciation and amortization) equals 4 or more times all fixed debt service and lease payments, including rent under this Lease, all as reasonably determined by Landlord; and (ii) on a one time basis, if on the date twelve (12) months after the Initial Release Date Tenant has equaled or exceeded its targeted annual profit objectives for the previous twelve (12) month period (which are targeted to be $50,000,000.00), as reasonably determined by Landlord, then the

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Security Deposit shall be reduced by an amount equal to twenty percent (20%) of the original amount of the Security Deposit. Notwithstanding any of the foregoing to the contrary, the reduction of the amount of the Security Deposit pursuant to this Section 26.2 shall be subject to the following: (A) if Tenant is in default under any term of this Lease on any date on which Tenant would otherwise be entitled to a reduction, then the Security Deposit shall not be reduced on such date, and (B) if the Security Deposit is not reduced pursuant to clause (A) hereof, the Security Deposit may be reduced by the scheduled amount at such time that such default is cured. If the Security Deposit is in the form of cash, Landlord shall pay to Tenant the excess amount of the Security Deposit within fifteen (15) days after the applicable reduction date or if the Security Deposit is in the form of an L-C, then Tenant may, not less than fifteen (15) days after the applicable reduction date, replace the L-C with an L-C (in the form and on terms satisfying the provisions of this Section 26) in an amount equal to the reduced amount of the Security Deposit. Tenant shall promptly deliver to Landlord any books, records, audited financial statements or other materials reasonably requested by Landlord to determine whether Tenant has satisfied any of the provisions of this Section 26.2. The Security Deposit shall not be reduced pursuant to this Section 26.2 if Tenant fails to deliver to Landlord any of the documents requested by Landlord.

26.3 Letter of Credit Provisions. If at any time Tenant elects to deposit an L-C as the Security Deposit, the L-C shall be issued by a bank reasonably acceptable to Landlord, shall be issued for a term of at least twelve (12) months, shall be unconditional, clean and irrevocable, and shall be in a form and with such content reasonably acceptable to Landlord. The L-C shall be payable on sight with the bearer’s draft. The L-C shall state that it shall be payable against sight drafts presented by Landlord, accompanied by Landlord’s statement that said drawing is in accordance with the terms and conditions of this Lease; no other document or certification from Landlord shall be required to negotiate the L-C. Landlord may designate any bank as Landlord’s advising bank for collection purposes and any sight drafts for the collection of the L-C may be presented by the advising bank on Landlord’s behalf. Tenant shall either replace the expiring L-C with an L-C in an amount equal to the original L-C or renew the expiring L-C, in any event no later than thirty (30) days prior to the expiration of the term of the L-C then in effect. If Tenant fails to deposit a replacement L-C or renew the expiring L-C, Landlord shall have the right to draw upon the expiring L-C for the full amount thereof and hold the same as the Security Deposit; provided, however, that if Tenant provides a replacement L-C that meets the requirements of this Article 26, then Landlord shall return to Tenant promptly in cash that amount of the L-C that had been drawn upon by Landlord. The fee for the maintenance of the L-C shall be at Tenant’s sole cost and expense. The L-C shall not be mortgaged, assigned or encumbered in any manner whatsoever by Tenant without the prior written consent of Landlord. The L-C shall be transferable to any of the following parties: (i) any secured or unsecured lender of Landlord, (ii) any assignee, successor, transferee or other purchaser of all or any portion of the Building, or any interest in the Building, (iii) any partner, shareholder, member or other direct or indirect beneficial owner in Landlord (to the extent of their interest in the Lease). Further, in the event of any sale, assignment or transfer by the Landlord of its interest in the Premises or the Lease, Landlord shall have the right to assign or transfer the L-C to its grantee, assignee or transferee and in the event of any sale, assignment or transfer; the landlord so assigning or transferring the L-C shall have no liability to the Tenant for the return of the L-C, and Tenant shall look solely to such grantee, assignee or transferee for such return. The use, application or retention of the L-C, or any portion thereof, by Landlord shall not prevent Landlord from exercising any other right or remedy provided by this Lease or by law, it being intended that Landlord shall not first be required to proceed against the L-C, and such use, application or retention shall not operate as a limitation on any recovery to which Landlord may otherwise be entitled.

27. Waiver. Failure of Landlord or Tenant to declare a default by the other upon occurrence thereof, or delay in taking any action in connection therewith, shall not waive such default, but the non-defaulting party shall have the right to declare such default at any time after its occurrence. To be effective, a waiver

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of any provision of this Lease, or any default, shall be in writing and signed by the waiving party. Any waiver hereunder shall not be deemed a waiver of subsequent performance of any such provision or subsequent defaults. The subsequent acceptance of Rent hereunder, or endorsement of any check by Landlord, shall not be deemed to constitute an accord and satisfaction or a waiver of any preceding default by Tenant, except as to the particular Rent so accepted, regardless of Landlord’s knowledge of the preceding default at the time of acceptance of the Rent. No course of conduct between Landlord and Tenant, and no acceptance of the keys to or possession of the Premises by Landlord before the Expiration Date shall constitute a waiver of any provision of this Lease or of any default, or operate as a surrender of this Lease.

28. Notices and Consents; Tenant’s Agent for Service. All notices, approvals, consents, demands and other communications from one party to the other given pursuant to this Lease shall be in writing and shall be made by personal delivery, by facsimile, use of a reputable overnight courier service or by deposit in the United States mail, certified, registered or Express, postage prepaid and return receipt requested. Notices shall be addressed if to Landlord, to Landlord’s Address, and if to Tenant, to Tenant’s Address. Landlord and Tenant may each change their respective Addresses from time to time by giving written notice to the other of such change in accordance with the terms of this Article 28, at least ten (10) days before such change is to be effected. Any notice given in accordance with this Article 28 shall be deemed to have been given (i) on the date of personal delivery or (ii) on the earlier of the date of delivery or attempted delivery (as shown by the return receipt or other delivery record) if sent by courier service or mailed.

29. Authority. Tenant, and each of the persons executing this Lease on behalf of Tenant, represent and warrant that (i) Tenant is a duly formed, authorized and existing corporation, partnership or trust (as the case may be), (ii) Tenant is qualified to do business in California, (iii) Tenant has the full right and authority to enter into this Lease and to perform all of Tenant’s obligations hereunder, and (iv) each person signing on behalf of Tenant is authorized to do so. Tenant shall deliver to Landlord, upon Landlord’s request, such reasonable written assurances authorizing Tenant’s execution and delivery of this Lease. Landlord, and each of the persons executing this Lease on behalf of Landlord, represent and warrant that (i) Landlord is a duly formed, authorized and existing corporation, partnership or trust (as the case may be), (ii) Landlord is qualified to do business in California, (iii) Landlord has the full right and authority to enter into this Lease and to perform all of Landlord’s obligations hereunder, and (iv) each person signing on behalf of Landlord is authorized to do so. Landlord shall deliver to Tenant, upon Tenant’s request, such reasonable written assurances authorizing Landlord’s execution and delivery of this Lease.

30. Automobile Parking. There shall be no parking provided to Tenant in the Building or at any other location except as set forth in this Article 30. Pursuant to the terms of the lease between the owner of the Annex and TMG/One Market, L.P. for the Annex (the “Annex Master Lease”), Landlord currently has the right to use a certain number of parking spaces located at the 75 Howard Street garage (as such number of spaces increase or decrease, the “Landlord Parking Rights”). For as long as Landlord maintains the Landlord Parking Rights, then Landlord shall provide to Tenant, at market rate costs to be paid by Tenant to Landlord, a number of spaces at 75 Howard Street (or a substitute location provided by the master landlord under the Annex Master Lease) equal to Tenant’s Percentage Share of the Landlord Parking Rights, which shall initially be 3 spaces.

31. Tenant to Furnish Financial Statements. In order to induce Landlord to enter into this Lease, Tenant agrees that it shall promptly deliver to Landlord, from time to time, upon Landlord’s written request, financial statements (including a balance sheet and statement of income and expenses on an annualized basis) reflecting Tenant’s then current financial condition; provided, however, that so long as Tenant is a company publicly traded on The New York Stock Exchange or NASDAQ, then Tenant shall no longer be obligated to provide to Landlord the financial statements required pursuant to this Section 31. Such statements shall

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be delivered to Landlord within fifteen (15) days after Tenant’s receipt of Landlord’s request. Tenant represents and warrants that all financial statements, records, and information furnished by Tenant to Landlord in connection with this Lease are and shall be true, correct and complete in all respects.

32. Tenant’s Signs. Without Landlord’s prior consent, which Landlord may withhold in its sole discretion, Tenant shall not place on the Premises or on the Building any exterior signs nor any interior signs that are visible from the exterior of the Premises or Building; provided, however, that so long as the Premises under this Lease contains the First Floor Portion, Tenant shall have the right, at Tenant’s sole cost and expense, to place 2 signs (not exceeding 14 feet and 8.5 inches in length by 1 foot and 6 5/8 inches in width, each) in exterior locations reasonably designated in writing by Landlord, which shall be substantially at the corner of Market and Spear Streets. Except as set forth in the previous sentence, Tenant shall pay all costs and expenses relating to any such sign approved by Landlord, including without limitation, the cost of the installation and maintenance of the sign. On the date of expiration or earlier termination of this Lease, Tenant, at its sole cost and expense, shall remove all signs and repair any damage caused by such removal.

33. Miscellaneous.

33.1. No Joint Venture. This Lease does not create any partnership or joint venture or similar relationship between Landlord and Tenant.

33.2. Successors and Assigns. Subject to the provisions of Article 17 regarding assignment, all of the provisions, terms, covenants and conditions contained in this Lease shall bind, and inure to the benefit of, the parties and their respective successors and assigns.

33.3. Construction and Interpretation. The words “Landlord” and “Tenant” include the plural as well as the singular. If there is more than one person comprising Tenant or Landlord, the obligations under this Lease imposed on Tenant or Landlord (as applicable) are joint and several. References to a party or parties refers to Landlord or Tenant, or both, as the context may require. The captions preceding the Articles, Sections and subsections of this Lease are inserted solely for convenience of reference and shall have no effect upon, and shall be disregarded in connection with, the construction and interpretation of this Lease. Use in this Lease of the words “including”, “such as”, or words of similar import when following a general matter, shall not be construed to limit such matter to the enumerated items or matters whether or not language of nonlimitation (such as “without limitation”) is used with reference thereto. All provisions of this Lease have been negotiated at arm’s length between the parties and after advice by counsel and other representatives chosen by each party and the parties are fully informed with respect thereto. Therefore, this Lease shall not be construed for or against either party by reason of the authorship or alleged authorship of any provision hereof, or by reason of the status of the parties as Landlord or Tenant, and the provisions of this Lease and the Exhibits hereto shall be construed as a whole according to their common meaning in order to effectuate the intent of the parties under the terms of this Lease.

33.4. Severability. If any provision of this Lease, or the application thereof to any person or circumstance, is determined to be illegal, invalid or unenforceable, the remainder of this Lease, or its application to persons or circumstances other than those as to which it is illegal, invalid or unenforceable, shall not be affected thereby and shall remain in full force and effect, unless enforcement of this Lease as so invalidated would be unreasonable or grossly inequitable under the circumstances, or would frustrate the purposes of this Lease.

33.5. Entire Agreement; Amendments. This Lease, together with the Exhibits hereto and any Addenda identified on the Basic Lease Information, contains all the representations and the entire

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agreement between the parties with respect to the subject matter hereof and any prior negotiations, correspondence, memoranda, agreements, representations or warranties are replaced in total by this Lease, the Exhibits hereto and such Addenda. Neither Landlord nor Landlord’s agents have made any warranties or representations with respect to the Premises or any other portion of the Building, except as expressly set forth in this Lease. This Lease may be modified or amended only by an agreement in writing signed by both parties.

33.6. Governing Law. This Lease shall be governed by and construed pursuant to the laws of the State of California.

33.7. Litigation Expenses. If either party brings any action or proceeding against the other (including any cross-complaint, counterclaim or third party claim) to enforce or interpret this Lease or otherwise arising out of this Lease, the prevailing party in such action or proceeding shall be entitled to its costs and expenses of suit, including reasonable attorneys’ fees and accountants’ fees.

33.8. Standards of Performance and Approvals. Unless otherwise provided in this Lease, (1) each party shall act in a reasonable manner in exercising or undertaking its rights, duties and obligations under this Lease and (ii) whenever approval, consent or satisfaction (collectively, an “approval”) is required of a party pursuant to this Lease or an Exhibit hereto, such approval shall not be unreasonably withheld or delayed. Unless provision is made for a specific time period, approval (or disapproval) shall be given within thirty (30) days after receipt of the request for approval. Nothing contained in this Lease shall, however, limit the right of a party to act or exercise its business judgment in a subjective manner with respect to any matter as to which it has been (A) specifically granted such right, (B) granted the right to act in its sole discretion or sole judgment, or (C) granted the right to make a subjective judgment hereunder, whether “objectively” reasonable under the circumstances and any such exercise shall not be deemed inconsistent with any covenant of good faith and fair dealing implied by law to be part of this Lease. The parties have set forth in this Lease their entire understanding with respect to the terms, covenants, conditions and standards pursuant to which their obligations are to be judged and their performance measured, including the provisions of Article 17 with respect to assignments and sublettings.

33.9. Brokers. Landlord shall pay to Landlord’s Broker and Tenant’s Broker, if any as specified in the Basic Lease Information of this Lease, a commission in connection with such Brokers’ negotiation of this Lease pursuant to a separate agreement or agreements between Landlord and such Brokers. Other than such Brokers, Landlord and Tenant each represent and warrant to the other that no broker, agent, or finder has procured or was involved in the negotiation of this Lease and no such broker, agent or finder is or may be entitled to a commission or compensation in connection with this Lease. Landlord and Tenant shall each indemnify, defend, protect and hold the other harmless from and against any and all liability, loss, damages, claims, costs and expenses (including reasonable attorneys’ fees) resulting from claims that may be asserted against the indemnified party in breach of the foregoing covenant and warranty and representation.

33.10. Memorandum of Lease. Tenant shall, upon request of Landlord, execute, acknowledge and deliver a short form memorandum of this Lease (and any amendment hereto) in form suitable for recording. In no event shall this Lease be recorded by Tenant. Tenant shall have the right to record the memorandum and, if Tenant elects to do so, Tenant shall pay all recording fees and transfer taxes in connection therewith. In addition, Landlord shall have the right to record the memorandum and, if Landlord elects to do so, Landlord shall pay all recording fees and transfer taxes in connection therewith. Upon termination or expiration of the Lease, Tenant shall promptly execute and record a quit claim deed or other instrument required to remove such memorandum from the records of the San Francisco County Recorder’s office.

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33.11. Quiet Enjoyment. Upon paying the Rent and performing all its obligations under this Lease, Tenant may peacefully and quietly enjoy the Premises during the Term as against all persons or entities claiming by or through Landlord, subject, however, to the provisions of this Lease and any encumbrances as specified in Article 21.

33.12. Surrender of Premises. Upon the Expiration Date or earlier termination of this Lease, Tenant shall quietly and peacefully surrender the Premises to Landlord in the condition specified in Article 9 above. On or before the Expiration Date or earlier termination of this Lease, Tenant shall remove all of its personal property from the Premises and repair at its cost and expense all damage to the Premises or Building caused by such removal. All personal property of Tenant not removed hereunder shall be deemed, at Landlord’s option, to be abandoned by Tenant and Landlord may store such property in Tenant’s name at Tenant’s expense and/or dispose of the same in any manner permitted by law.

33.13. Building Directory. Landlord shall install a computerized touch screen Building directory for purposes of identifying the name, divisions and/or principal employees of tenants in the Building. Tenant shall be entitled to a reasonable number of entries in the directory commensurate with Tenant’s Percentage Share.

33.14. Name of Building; Address. Tenant shall not use the name of the Building for any purpose other than as the address of the business conducted by Tenant in the Premises. Tenant shall, in connection with all correspondence, mail or deliveries made to or from the Premises, use the official Building address specified from time to time by Landlord.

33.15. Exhibits. The Exhibits specified in the Basic Lease Information are by this reference made a part hereof.

33.16 Final Lease. As a material covenant of this Lease, Landlord shall deliver to Tenant and its counsel via e-mail or computer disk the final form of this Lease and all documents executed in connection therewith within five (5) days of the Lease Date.

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33.17. Time of the Essence. Time is of the essence of this Lease and of the performance of each of the provisions contained in this Lease.

IN WITNESS WHEREOF, the parties have executed this Lease as of the Lease Date.

LANDLORD:
TMG/ONE MARKET, L.P., A Delaware limited partnership
By:	Martin/One Market LLC, A California limited liability company Its General Partner
	By:	The Martin Group of Companies, Inc., A California corporation Its Managing Member
	By:	/s/ Illegible
	Its:	SVP
CROSSMARKET, LLC A Nevada limited liability company
By:	Martin/Crossman, LLC A California limited liability company Its: managing member
	By:	/s/ Michael A. Covarrubias
		Michael A. Covarrubias Managing Member
TENANT:
SALESFORCE.COM, INC., a Delaware Corporation
By:	/s/ Andrew Hyde
	Andrew Hyde Chief Financial Officer

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EXHIBIT A

[GRAPHIC]

THE LANDMARK @ ONE MARKET

THIRD FLOOR

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EXHIBIT A

[GRAPHIC]

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[GRAPHIC]

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[GRAPHIC]

EXHIBIT A

THE LANDMARK @ONE MARKET

FOURTH FLOOR

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EXHIBIT A

STORAGE SPACE

[GRAPHIC]

PAGE 1 OF 2

[GRAPHIC]

PAGE 2 OF 2

EXHIBIT B

LEGAL DESCRIPTION

A piece or parcel of land situate, lying and being in the City and County of San Francisco. State of California, more particularly described as follows:

Beginning at a point in the southwesterly line of Steuart Street that is distant North 44° 51’ 51” West 334.33 feet, from the northwesterly line of Mission Street; thence South 45° 08’ 09” West being parallel with and distant 334.33 feet northwesterly, measured at right angles, from said northwesterly line of Mission Street 32 feet 4-1/2 inches; thence North 44° 51’ 51” West 6 feet 1-1/2 inches; thence South 45° 08’ 09” West 16 feet 4 inches; thence North 44° 51’ 51” West 112 feet 5-1/8 inches; thence South 45° 08’ 09” West 177 feet 7-1/2 inches; thence South 44° 51’ 51” East 112 feet 5-1/8 inches, then South 45° 08’ 09” West 16 feet 3-1/2 inches; thence South 44° 51’ 51” East 6 feet 1-1/2 inches to a point in said line that is parallel with and distant 334.33 feet northwesterly, measured at right angles, from said northwesterly line of Mission Street; thence South 45° 08’ 09” West along said parallel line, 32 feet 4-1/2 inches to a point in the northeasterly line of Spear Street; thence North 44° 51’ 51” West along said northeasterly line 216 feet to a point in the southeasterly line of Market Street; thence North 45° 08’ 09” East along said southeasterly line, 275 feet to a point in said southwesterly line of Steuart Street; thence South 44° 51’ 51” East along last said line 216 feet to the point of beginning, containing an area of 38143 square feet, more or less.

Lot 006, Block 3713

EXHIBIT C

TENANT IMPROVEMENT AGREEMENT

THIS TENANT IMPROVEMENT AGREEMENT (“Agreement”) is made and entered into by and between Landlord and Tenant as of the date of the Lease. This Agreement shall be deemed a part of the Lease to which it is attached. Capitalized terms which are used in this Agreement and defined in the Lease shall have the meaning given in the Lease.

1. General.

1.1. The Parties’ Respective Obligations. At Landlord’s sole cost and expense, in a good and workman like manner and in compliance with all workplans approved by the city, Landlord shall construct and deliver the Premises in “shell” condition which shall include only the work described on Schedule 1 attached to this Agreement (the “Landlord’s Work”). The Landlord’s Work shall not include the construction of a staircase between the floors of the Premises, but, to the extent required by laws applicable as of the Possession Date, and to the extent that the Mezzanine or the First Floor Portion has not been deleted from the Premises, the Landlord’s Work shall include two stairways and an elevator connecting the First Floor Portion of the Premises and the Mezzanine. In all other respects, Tenant acknowledges that it shall lease the Premises in their “as is” condition, subject to completion of any punchlist items with respect thereto, and Landlord shall have no obligation to make any other improvements or to perform any other work in the Premises except as otherwise expressly set forth herein or in the Lease. Tenant shall be responsible for performing all other work required to prepare the Premises for Tenant’s occupancy pursuant to the Lease and as otherwise may be required to comply with applicable law. The work which is to be performed by Tenant pursuant to the Lease and this Agreement is referred to as the “Tenant’s Work”. Tenant’s Work shall be performed at Tenant’s sole cost and expense, subject to the Construction Allowance described below. Tenant acknowledges that the Tenant’s Work in the Fourth Floor Portion shall utilize an open work environment similar to the space configured by Scient in the Building, and shall utilize the same exterior wall finishes and mechanical and lighting specifications as Scient.

1.2. Payment of Construction Costs. In the manner provided in this Section 1.2, Landlord shall pay to Tenant a “Construction Allowance” equal to the sum of: (i) Fifty Thousand Dollars, plus (ii) Thirty-Seven and 50/100s Dollars ($37.50) multiplied by the Rentable Area of the Premises (excluding the Storage Space). Tenant shall have the right to exercise any of its remedies at law if Landlord fails to disburse the Construction Allowance to Tenant in accordance with the provisions of this Lease. Tenant shall not be entitled to a credit for any unused portion of the Construction Allowance in the form of rent abatement or otherwise. Before commencement of any portion of Tenant’s Work, Tenant shall pay to Landlord or Landlord’s lender an amount reasonably determined by Landlord to be the costs of constructing and purchasing all elements of the Tenant’s Work, minus the amount of the Construction Allowance (the “Tenant Deposit”). If permitted by Landlord’s lender, the Tenant’s Deposit shall be deposited in a non-interest bearing account. Monthly during the construction of the Tenant’s Work, Landlord shall disburse to Tenant, or at Landlord’s option directly to Tenant’s contractors or materialmen, a portion of the Construction Allowance and a portion of the Tenant Deposit (in the ratios which the Construction Allowance and the Tenant Deposit bear to each other) to pay 90% of all hard and soft costs of construction incurred during such month in connection with the Tenant’s Work. Landlord obligation to make such disbursement shall be subject to Landlord’s receipt of the following: (i) copies of paid invoices and conditional lien waivers in connection with all such work, (ii) a certification by Tenant’s architect that all such work has been performed

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in accordance with plans and specifications approved by Landlord, and (iii) such other information that may be reasonably requested by Landlord or Landlord’s lender. Upon substantial completion of Tenant’s Work, Tenant shall submit to Landlord a written notice indicating that Tenant has completed Tenant’s Work, which notice shall be accompanied by all of the following (collectively, “Tenant’s Completion Notice”): (i) copies of paid invoices and unconditional lien waivers from Tenant’s general contractor and all subcontractors and material suppliers, showing that full payment has been received for the construction of all aspects of Tenant’s Work; (ii) certification from Tenant’s architect that to the best of its knowledge all of Tenant’s Work has been completed substantially in accordance with the plans and specifications therefor approved by Landlord and all local governmental and quasi-governmental authorities with jurisdiction; and (iii) a copy of the building permit or job card for Tenant’s Work, showing that Tenant’s Work has been finally approved by the appropriate building inspector, plus any other evidence reasonably required by Landlord indicating that all legal requirements for Tenant’s occupancy of the Premises have been satisfied. Landlord shall pay any properly payable withheld portion of the Construction Allowance and the Tenant Deposit to Tenant within thirty (30) days after the date of Landlord’s receipt of Tenant’s Completion Notice (including all of the material specified above).

2. Approval of Plans for Tenant’s Work.

2.1. Notification of Architect. Within ninety (90) days after execution of the Lease, Tenant shall notify Landlord in writing of the name and address of the licensed architect which Tenant desires to engage for the preparation of plans for Tenant’s Work. Tenant’s architect shall be subject to Landlord’s prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed. Tenant shall retain such architect’s administrative services throughout the performance of Tenant’s Work. Designers who are not licensed architects will not be acceptable, unless such designers work in conjunction with a licensed architect of record.

2.2. Submittal of Plans.

2.2.1. Tenant’s Preliminary Plans. On or before sixty (60) days after execution of this Lease, Tenant shall deliver to Landlord, for Landlord’s review and approval, “Tenant’s Preliminary Plans” which shall include the following: (i) interior elevations; (ii) floor plans; (iii) architectural finish schedule; (iv) reflected ceiling plans; (v) electrical, mechanical and plumbing plans; and (vi) outline specifications. Within ten (10) business days after Landlord’s receipt of Tenant’s Preliminary Plans, Landlord shall either approve or disapprove Tenant’s Preliminary Plans, which approval shall not be unreasonably withheld. Failure by Landlord to respond within such ten (10) day period shall be conclusively deemed approval. If Landlord disapproves Tenant’s Preliminary Plans, then Landlord shall state in reasonable detail the changes which Landlord requires to be made thereto.

2.2.2. Tenant’s Final Plans. Within one hundred twenty (120) days after Landlord’s approval of Tenant’s Preliminary Plans, Tenant shall deliver to Landlord, for Landlord’s review and approval, complete plans, specifications and working drawings which incorporate and are consistent with Tenant’s Preliminary Plans, as previously approved by Landlord, and which show in detail the intended design, construction and finishing of all portions of Tenant’s Work, in sufficient detail for construction (“Tenant’s Final Plans”). Within ten (10) business days after Landlord’s receipt of Tenant’s Final Plans, Landlord shall either approve or disapprove Tenant’s Final Plans, which approval shall not be unreasonably withheld. Failure by Landlord to respond within such ten (10) day period shall be conclusively

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deemed approval. If Landlord disapproves Tenant’s Final Plans, then Landlord shall state in reasonable detail the changes which Landlord requires to be made thereto.

2.2.3. Tenant shall be entitled to prepare separate and distinct Tenant’s Preliminary Plans for the Third Floor Portion, the Fourth Floor Portion and the First Floor Portion. If Tenant submits separate plans, Landlord shall respond to each set of plans in the manner and in the time periods described in Sections 2.2.1 and 2.2.2 as if each set of plans were Tenant’s Preliminary Plans and Tenant’s Final Plans. Because of the uncertainty as to whether the First Floor Portion or the Mezzanine will be included in the Premises, Landlord consents to the bifurcation of Tenant’s Work at Tenant’s election in the manner described herein.

2.3. Landlord’s Approval. Landlord’s approval of any of Tenant’s plans, signs or materials samples shall not be valid unless such approval is in writing and signed by Landlord, or otherwise deemed approved in accordance with the provisions of Sections 2.2.1 and or 2.2.2 of this Agreement. Landlord’s approval of any of Tenant’s plans, including any preliminary draft or version thereof, shall not be deemed to be a representation as to their completeness, adequacy for Tenant’s intended use of the Premises or compliance with applicable law.

3. Standard of Construction. Tenant’s Work shall comply with all applicable laws, codes, rules and regulations of all governmental and quasi-governmental authorities with jurisdiction. Only new and firstclass materials shall be used in the construction of Tenant’s Work. Tenant shall not change in any material respect any portion of Tenant’s Work from the description thereof contained in Tenant’s Final Plans, as approved by Landlord, unless Tenant first obtains Landlord’s written approval, which approval shall not be unreasonably withheld or delayed and shall be conclusively deemed granted if specific objections thereto are not made within five (5) business days of notice thereof.

4. Prior to Commencement of Tenant’s Work.

4.1. Approval of Contractors. Tenant’s general contractor and primary subcontractors shall be subject to Landlord’s prior written approval (which approval shall not be unreasonably withheld, delayed or conditioned, including Landlord’s reasonable approval of the contractor’s bonding capability and Landlord’s lender’s review and approval of the contractor’s bonding capability), and Tenant shall submit to Landlord, no later than thirty (30) days after execution of this Lease, by notice given in the manner specified in the Lease, the following information: (i) the name and address of the general contractor and (as of a date 60 days before the commencement of the Tenant’s Work) all subcontractors which Tenant proposes to engage for the performance of Tenant’s Work; (ii) a fully completed Contractor’s Qualification Statement (AIA Document A305) for Tenant’s proposed general contractor and each of Tenant’s proposed primary subcontractors; (iii) the construction cost breakdown and total cost for all portions of Tenant’s Work; (iv) the actual commencement date of construction and the estimated date of completion of Tenant’s Work, including fixturization; (v) evidence of insurance as required by Section 6; and (vi) Tenant’s contractor’s performance and/or labor and materials bonds, if required by Landlord’s lender. Landlord hereby preapproves Plant Construction Company, Turner Construction and BCCI. All contractors engaged by Tenant shall employ only union labor and shall be bondable, licensed contractors, possessing good labor relations, capable of performing quality workmanship and working in harmony with Landlord’s construction manager and other contractors on the job.

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4.2. Landlord’s Approval of Sufficiency of Funds. Prior to commencing any portion of Tenant’s Work, Tenant shall furnish to Landlord, for Landlord’s review and approval, funding commitments or evidence of other financing arrangements that provide for payment of Tenant’s funding obligation. Such evidence shall be in a form reasonably satisfactory to Landlord and shall satisfy the provisions of Section 1.2 of this Agreement.

4.3. Notice of Nonresponsibility. Prior to the commencement of construction, Landlord shall have the right to post in a conspicuous location on the Premises, as well as to record in the San Francisco County Recorder’s office, a Notice of Nonresponsibility.

5. Commencement and Performance of Tenant’s Work.

5.1. Possession Date.

5.1.1. Initial Work. Landlord shall deliver the Third Floor Portion, the Fourth Floor Portion and the Storage Space to Tenant on the Initial Possession Date. The term “Initial Possession Date” shall mean June 23, 2000. On or before July 23, 2000, Tenant shall conduct a walk-through inspection of the Third Floor Portion and the Fourth Floor Portion with Landlord and complete a punch-list of items needing additional work.

5.1.2. Completion All Work. Upon Landlord’s reasonable determination that all of the Landlord’s Work for all portions of the Premises has been substantially completed to the extent reasonably necessary for the commencement of the Tenant’s Work, and provided that the completion of the remainder of the Landlord’s Work shall not unreasonably delay or unreasonably interfere with the performance of Tenant’s Work, as confirmed in a certificate by Landlord’s architect, Landlord shall deliver the remainder of the Premises to Tenant (the “Possession Date”). In no event shall the Possession Date occur prior to the delivery of the following two notices: (a) either the Office Permits Notice or the First Floor Notice and (b) either the Mezzanine Acceptance Notice or the Mezzanine Notice. Tenant shall commence Tenant’s Work promptly following the Possession Date. Tenant shall diligently proceed with Tenant’s Work and shall complete Tenant’s Work as soon as practicable. Within thirty (30) days after completion of Landlord’s Work, Tenant shall conduct a walk-through inspection of the Building with Landlord and complete a punch-list of items needing additional work. Landlord shall provide Tenant with status reports regarding the Landlord’s Work every thirty days following the Lease Date. Landlord shall use reasonable efforts to provide Tenant at least thirty (30) days notice before the anticipated Possession Date.

5.1.3. Early Occupancy. To the extent that (i) Tenant desires to take occupancy of all or any portion of the First Floor Portion in advance of the Possession Date for the purpose of commencing all or any portion of the Tenant’s Work, and (ii) Landlord determines in its sole discretion that Tenant’s early occupancy shall not delay the completion of the improvements to the First Floor Portion, then Landlord shall deliver the First Floor Portion to Tenant in advance of the Possession Date on a date mutually agreed upon by Landlord and Tenant.

5.2. Coordination of Tenant’s Work. Tenant’s contractors shall perform Tenant’s Work in a manner and at times that do not unreasonably interfere with the ongoing construction or business operations in the Building, the completion of the Landlord’s Work or the performance of other tenant improvement work in the Building. Tenant and its contractors shall not do anything that would jeopardize the labor relations of others in the Building. Any delays in the completion of Tenant’s Work, and any damage to any work caused by Tenant’s contractors, shall be at Tenant’s cost and expense.

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5.3. Staging Areas. Storage of Tenant’s contractors’ construction materials, tools and equipment shall be confined within portions of the Premises designated by Landlord and in any other areas designated for such purposes by Landlord. If such materials, tools and equipment are assigned space or spaces outside the Premises, they shall be moved to such other space as Landlord may direct from time to time in order to avoid interference or delays with other work or the ongoing construction or business operations in the Building. In no event shall any materials or debris be stored in the common areas of the Building or in the premises of other tenants. Tenant’s contractors shall not run pipes or conduits over or through any other tenant’s space, or the common areas of the Building, except as directed by Landlord.

5.4. Supervision of Contractors. Tenant’s Work shall be performed in accordance with such reasonable rules and regulations as Landlord shall promulgate from time to time. Tenant acknowledges that other construction work may be in progress at the Building and that conflicts between Tenant’s Work and such other work shall be subject to final resolution by Landlord’s representatives. Tenant shall be fully responsible for, and shall indemnify, defend and protect Landlord with respect to, the operations and activities of Tenant’s general contractor and all subcontractors employed by such general contractor, and all other individuals or contractors employed by Tenant in the completion of Tenant’s Work. All such contractors and/or individuals shall repair any damage which they may cause to any work in the Premises or the Building, and Tenant shall reimburse Landlord for any and all expenses reasonably and actually incurred by Landlord by reason of faulty work performed by Tenant’s contractor or subcontractors, damage to other work in the Building caused by Tenant’s contractor or contractors, and delays caused by such work as the result of inadequate clean-up. In addition, Tenant shall pay to Landlord, on demand, an amount equal to $150,000.00 as a supervision fee; provided, however, that the supervision fee shall be reduced to $50,000.00 if Tenant’s general contractor is Plant Construction.

5.5. Changes to Tenant’s Work. Tenant shall obtain Landlord’s written approval (which shall not be unreasonably withheld) prior to performing any work that deviates in any material respect from Tenant’s Final Plans (for this purpose, a change that costs less than $10,000.00 and does not adversely affect the structure or electrical or mechanical systems of the Building shall be deemed non-material), as previously approved by Landlord, or making any material modifications to Landlord’s building shell and/or utilities or other work not explicitly shown on Tenant’s Final Plans, as previously approved in writing by Landlord.

5.6 Separate Contractors. If Tenant’s general contractor is not the same as Landlord’s general contractor, then the following provisions shall apply: (i) all of Tenant’s Work shall be sequenced in a manner reasonably approved by Landlord, (ii) Tenant shall take no actions or omissions that would in any way unreasonably delay Landlord in the completion of Landlord’s Work or the completion of any other tenant improvements in the Building, and (iii) Tenant shall use mechanical, electrical, plumbing and fire sprinkler subcontractors who are listed on Landlord’s list of pre-qualified subcontractors.

6. Insurance Required of Tenant and Tenant’s Contractors.

6.1. Workers’ Compensation and Liability Insurance. Tenant’s general contractor and all subcontractors shall carry, at a minimum, the following coverages, with the following limits of liability:

(a) Workers’ Compensation. Workers’ Compensation, as required by state law, plus Employer’s Liability Insurance, with a limit of not less than five hundred thousand dollars ($500,000.00), and any other insurance required by any employee benefit statute or other similar statute.

(b) Liability. Commercial General Liability Insurance (including Contractor’s Protective Liability) with a minimum combined single limit of liability of not less than Five Million Dollars

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($5,000,000.00) provided that the insurance limits applicable to subcontractors shall be Two Million Dollars ($2,000,000.00). Such insurance shall provide for explosion, collapse and underground coverage. All such insurance shall provide coverage against any and all claims for bodily injury, including death resulting therefrom, and damage to or destruction of property of any kind whatsoever and to whomsoever belonging and arising from such contractor’s operations, whether such operations are performed by Tenant’s general contractor, subcontractors or any of their subcontractors, or by anyone directly or indirectly employed by any of them.

6.2. Tenant’s Liability Insurance. At all times during the performance of Tenant’s Work, Tenant shall obtain and maintain the liability insurance required to be maintained pursuant to the Lease. If required in order to provide such coverage, such policy shall be endorsed to insure against any loss or damage arising out of the performance of Tenant’s Work.

6.3. Tenant’s Builder’s Risk Insurance. Tenant shall obtain an “All Physical Loss” Builder’s Risk Insurance policy covering Tenant’s Work. The policy shall name Landlord and Tenant as named insureds. The amount of insurance to be provided shall be one hundred percent (100%) of the replacement cost of Tenant’s Work.

6.4. Additional Insureds. Except as otherwise required by the express terms of this Agreement, all such insurance policies required under this Agreement shall include Landlord, Landlord’s lenders and Landlord’s agents as additional insureds, except Workers’ Compensation Insurance, which shall contain an endorsement waiving all rights of subrogation against Landlord and its agents. All of Tenant’s insurance in which Landlord is required to be an additional insured shall provide that such insurance coverage shall not be reduced or canceled except upon thirty (30) days’ prior written notice to Landlord. Tenant shall provide Landlord with certificates of insurance prior to the commencement of Tenant’s Work. Such certificates shall indicate that such insurance complies with the requirements of this Section 6, including the requirement that such insurance coverage shall not be reduced or canceled except upon thirty (30) days’ prior written notice to Landlord.

6.5. Bonds; Liens. Upon completion of Tenant’s Work, Tenant shall deliver to Landlord unconditional lien waivers from Tenant’s general contractor and all subcontractors and suppliers. Tenant shall keep the Premises free and clear of all claims and liens and shall indemnify, defend and protect Landlord against, and hold Landlord harmless from, any and all such claims and liens including, but not be limited to, attorneys’ fees and costs.

7. As-Built Plans. Upon completion of Tenant’s Work, Tenant shall submit to Landlord two (2) complete sets of as-built plans (one (1) of which shall be reproducible) and specifications describing all portions of Tenant’s Work.

8. Inspection. Landlord, and its agents, architects and contractors, shall have the right, but not the obligation, to inspect the Tenant’s Work at any reasonable time during the construction thereof provided such rights are exercised in a manner intended not to impede the performance of Tenant’s Work. If Landlord discovers faulty construction or any deviation from the Tenant’s Final Plans approved by Landlord, then Tenant, at its cost and expense, shall cause its contractors or subcontractors to make corrections promptly; provided, however, that neither the privilege herein granted to Landlord to make such inspections, nor the making of such inspection by Landlord to require conformance by Tenant to the terms and conditions of this Agreement, shall constitute a representation or warranty by Landlord that the Tenant’s Work have been constructed in accordance with applicable law or any other standard.

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IN WITNESS WHEREOF, Landlord and Tenant have each caused their duly authorized representatives to execute this Agreement on their respective behalf as of the day and year first above written.

LANDLORD:
TMG/ONE MARKET, L.P., A Delaware limited partnership
By:	Martin/One Market LLC, A California limited liability company Its General Partner
	By:	The Martin Group of Companies, Inc., A California corporation Its Managing Member
	By:	/s/ Illegible
	Its:	SVP
CROSSMARKET, LLC A Nevada limited liability company
By:	Martin/Crossman, LLC A California limited liability company Its: managing member
	By:	/s/ Michael A. Covarrubias
		Michael A. Covarrubias
		Managing Member

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

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SCHEDULE 1 TO TENANT IMPROVEMENT AGREEMENT

LANDLORD’S BASE BUILDING IMPROVEMENTS

LANDLORD’S WORK

STANDARD BASE BUILDING IMPROVEMENTS

The following Base Building Improvements shall be completed by TMG/One Market LP, at its sole expense.

BASE BUILDING:

1. Architectural Systems:

A) Main Building Lobby:

1) Finished main entrance lobby consistent with other Class “A” office buildings in downtown San Francisco;

2) Main Building directory;

3) Handicap accessible path of travel, fully compliant with current codes or as may be approved by appropriate governmental authorities.

B) Passenger and Service Elevators:

1) Four (4) Mitsubishi elevators serving Floors 1 – 10 and Two (2) Mitsubishi elevator serving Floors 1 - 11. All cabs shall be complete with finished interiors consistent with other Class A buildings in San Francisco;

2) One (1) freight elevator with extended cab height and 6,000 lb. capacity;

3) Handicap accessible elevator controls and other code required items;

4) Within each elevator lobbies: handicap accessible controls, signage, floor indicators and other code required items.

C) Exit Stairs:

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

D) Building Enclosure:

1) Water tight roof and exterior walls;

2) Completed exterior wall and window refurbishment.

E) Security System:

1) Base Building perimeter security system, consisting of card readers at all entrance doors, stairwell doors and service areas. Card readers at stairwell doors to be provided by Tenant.

2) Provide adequate keys and /or access cards to the Tenant

F) Storage Area:

1) Lighted and demised.

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2. Structural System:

A) Structural loading capacity for live and dead loads consistent with other comparable Class A Buildings in San Francisco;

B) Seismic code compliance for the Base Building structural system.

3. Mechanical System:

A) Fully functioning Base Building cooling system capable of providing conditioned air, during normal working hours and under normal office occupancy loads of 20 cfm per person based on 133 sq. ft. per person;

B) Central mechanical system with primary vertical distribution with stub outs to each floor for tenant connection and distribution;

C) Central Direct Digital Controls (DDC) for Energy Management System for the Base. Building mechanical system. DDC links to VAV controls in the Leased Premises would be installed by Tenant but shall be excluded from the Base Building Work;

D) Code required dampers and fire protection for all penetrations at rated, vertical shafts.

E) Capability to provide 24-hour HVAC

4. Plumbing System:

A) Domestic tepid water service for Tenant’s requirements;

B) Adequate water pressure;

C) Accessible wet stack for connections to Tenant’s plumbing requirements.

5. Fire Protection System:

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

6. Electrical System:

Vertical bus and panel board riser supplying electrical power sufficient to operate an average of approximately Five (5) watts per rentable square foot for general electrical use by Tenant including lighting. Additional capacity is available for up to a total of 8.3 watts per floor, including HVAC, at Tenant’s sole cost and expense.

A) Emergency Life/ Safety Generator for elevator, lighting and smoke control systems;

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7. Fire Life Safety System:

A) System to include coverage in all required building areas:

1) Fireman’s control panel

2) Alarm system and pull stations

3) Elevator recall

4) Annunciation system

5) Emergency lighting and strobes as required in public areas

6) Smoke detection

7) All other items as required by local codes or as may be approved by appropriate governmental authorities.

FLOORS

1. Clear Height

Twelve foot six inches, slab to slab.

2. Passenger and Service Elevator Lobbies

A) Handicap accessible call buttons and audible signals;

B) Handicap approved floor indicator lights;

C) Handicap approved signage;

D) Rated doors as required for smoke control;

E) Pre-finished elevator doors and frames on lobby side;

F) Fire life safety devices: Strobes, speakers and smoke detectors;

G) Elevator lobby partitions: Gypsum board supplied as required and fire taped.

3. Toilet Rooms:

A) Men’s and Women’s restrooms on each floor finished to building standard consistent with other Class A buildings in San Francisco and fully compliant with current ADA and Title 24 accessibility codes;

B) Mechanical supply and exhaust system;

C) Fire protection, life safety devices complete with strobes, speakers and smoke detectors.

1. Base Building Partitions:

A) Core Walls: Delivered with gypsum board, fire taped;

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B) Interior Side of Exterior Walls: Exposed brick in a consistent “as-is” condition.

C) Windows: Prepared and primed, new building standard hardware, reasonably smooth operation, new temporary inside guide stops pending installation of window trim moldings as part of Tenant’s Work. No window casement is provided.

2. Floors:

Concrete floors for the Leased Premises, reasonably smooth, ready to accept carpet with minor preparation. All original construction devices (fasteners, nails, clips, etc.) shall be removed or cut off from concrete under slab areas.

3. Mechanical System:

A) Primary Variable Air Volume (VAV) cooling system with risers stubbed out to each floor of the Leased Premises, but exclusive of horizontal distribution (ductwork) and control equipment within the Leased Premises;

B) Hot water stubbed out to each floor for tenant’s perimeter heating needs supplied from a heat exchanger, in the basement, converting heat from steam.

C) Condenser water loop stubbed out to each floor for Tenant’s special requirements.

4. Plumbing System:

A) Drinking fountain: minimum one per floor and handicap accessible;

B) Wet columns with stub outs on each wing and within the east structural tube for Tenant’s use.

5. Fire Protection System:

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

6. Electrical:

Separate telephone and electrical rooms on each floor of the Leased Premises, with a vertical chase between floors. The following equipment shall be provided:

(A) One (1) 227/480v, 3p, 4w, 200 amp, 42 ckt, main lug only panel with 42-20 amp lp-circuit breakers. Panel is fed from one 200-amp bus tap switch,

(B) One (1) 112.5kva 480/120-208, 3p, 4w, transformer. The transformer is fed by a 200 amp fused bus tap switch with 125 amp fuses,

(C) The transformer feeds the following panel: one (1) 400 amp 120/208 volt 3p, 4w, panel with one (1) 350 amp circuit breaker and two (2) 200 amp sub feed circuit breakers and 36 - 20 amp lp circuit breakers.

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7. Multi-Tenant Floors:

A) For multi-tenant floors, Landlord will provide completely finished common areas, including, but not limited to, the elevator lobby and multi-tenant corridors, finished to Building Standard;

B) Landlord will provide tenant demising partitions, which will be full height, slab-to-slab complying with prevailing building codes or as may be approved by appropriate governmental authorities.

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EXHIBIT D

RULES AND REGULATIONS

1. No sidewalks, entrance or passages shall be obstructed or encumbered by Tenant or used for any purpose other than ingress and egress to and from the Premises.

2. All curtains, blinds, shades, drapes, screens and other similar fixtures in the Premises must be of a uniform quality, type, design, color, material and general appearance approved by Landlord.

3. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by Tenant on any part of the outside or inside of the Premises except inside the Building, without the prior written consent of Landlord. In the event of the violation of the foregoing by Tenant, Landlord may remove same without any liability, and may charge the expense incurred by such removal to Tenant. Interior signs on doors and directory tablet shall be inscribed, painted or affixed for Tenant by Landlord at the expense of Tenant.

4. No show cases or other articles shall be put in front of or affixed to any part of the exterior of the Building without the prior written consent of Landlord.

5. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags or other substances shall be thrown therein.

6. Tenant shall not make, or permit to be made, any unseemly or disturbing noises which disturb or interfere with the occupants of neighboring buildings or premises or those having business with them. Tenant shall not throw anything out of the doors, windows or skylights.

7. Neither Tenant nor any of Tenant’s agents, servants, employees, contractors, visitors or licensees shall at any time bring or keep upon the Premises any inflammable, combustible or explosive fluid, chemical or substance.

8. Tenant must, upon the termination of the tenancy, restore to Landlord all keys of offices and toilet rooms, either furnished to, or otherwise procured by Tenant, and in the event of the loss of any keys so furnished, Tenant shall pay to Landlord the cost thereof.

9. Tenant shall not occupy or permit any portion of Premises to be occupied as an office that is (a) for a physician’s or dentist’s office, a dance or music studio, a school, a beauty salon or barber shop, the business of photographic or multilith or multigraph reproductions or offset printing (not precluding using any part of the Premises for photographic, multilith or multigraph reproductions or off-set printing solely in connection with Tenant’s own business and/or activities), an outside news or cigar stand, or as a radio or television or recording studio, theater or exhibition-hall, for manufacturing, for the sale of merchandise, goods or property of any kind at auction, or for lodging, sleeping or for any immoral purpose including but not limited to any use (i) for a banking, trust company, depository, guarantee, or safe deposit business, (ii) as a savings bank, or as savings and loan association, or as a loan company, (iii) for the sale of travelers checks, money orders, drafts, foreign exchange or letters of credit or for the receipt of money for transmission, (iv) as a stock broker’s or dealer’s office or for the underwriting of securities, or (v) a

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government office or foreign embassy or consulate, or (vi) tourist or travel bureau, or (b) a use which would be prohibited by any other portion of this lease (including but not limited to any other Rules and Regulations) or in violation of law. Tenant shall not engage or pay any employees on the Premises, except those actually working for Tenant on the Premises nor shall Tenant advertise for laborers giving an address at the Premises.

10. Landlord shall have the right to prohibit any advertising or business conducted by Tenant referring to the Building which, in Landlord’s reasonable opinion, tends to impair the reputation of the Building and upon notice from Landlord, Tenant shall refrain from or discontinue such advertising.

11. If the Premises is or becomes infested with vermin as a result of the use or any misuse or neglect of demised premise by Tenant, its agents, servants, employees, contractors, visitors, or licensees, exterminated from time to time to the satisfaction of Landlord and shall employ such licensed exterminators as shall be approved in writing in advance by Landlord.

12. No air conditioning unit or system or other apparatus shall be installed or used by Tenant without the written consent of Landlord.

13. Tenant, Tenant’s agents, servants, employees, contractors, licensees or visitors shall not park any vehicles in any driveways, service entrances, or areas posted as No Parking.

14. Tenant shall not use the name of The Landmark @ One Market for any purpose other than as the address of the business to be conducted by Tenant in the Premises, nor in its advertising, stationery or in any other manner without the prior written permission of Landlord. Landlord expressly reserves the right at any time to change said name without in any manner being liable to Tenant therefor.

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EXHIBIT E

CONFIRMATION OF LEASE TERM

LANDLORD:

TENANT:

LEASE DATE: June     , 2000

PREMISES:                                                          

Pursuant to Section 3 of the above referenced Lease, the Commencement Date as defined in Section 3 shall be                                     .

LANDLORD:
TMG/ONE MARKET, L.P., A Delaware limited partnership
By:	Martin/One Market LLC, A California limited liability company Its General Partner
	By:	The Martin Group of Companies, Inc., A California corporation Its Managing Member
	By:
	Its:
CROSSMARKET, LLC A Nevada limited liability company
By:	Martin/Crossman, LLC A California limited liability company Its: managing member
	By:
		Michael A. Covarrubias Managing Member

TENANT: SALESFORCE.COM, INC., a Delaware Corporation
By:
	Andrew Hyde Chief Financial Officer

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EXHIBIT F

JANITORIAL SPECIFICATIONS BUILDING STANDARD JANITORIAL

AND CLEANING SERVICES

The following building standard janitorial and cleaning services shall be done by Landlord Monday through Friday. It is understood that no services of the character provided for in this Exhibit F shall be provided on Saturdays, Sundays or days recognized as Holidays pursuant to this Lease, unless specifically requested and the cost for such service shall be borne by tenant.

This cleaning specification may be changed or altered by Landlord from time-to-time to facilitate conformity with the latest methods of maintenance and cleaning technology generally recognized as acceptable for first class office buildings in San Francisco, California, and Landlord reserves the right to alter the level of such services from time-to-time as determined by Landlord to be appropriate for a firstclass office building. If Tenant requires a higher level of services to suit its particular needs, the cost of such additional service shall be borne by Tenant. However, in no event will the level or quality of the services be diminished by such changes.

Office Areas

Empty all waste receptacles and remove waste paper and rubbish from the Premises nightly.

Vacuum nightly all rugs and carpeted areas in the Premises, lobbies and corridors.

Nightly damp wipe all glass furniture tops.

Nightly remove finger marks and smudges from vertical surfaces, including doors, door frames, glass, around light switches, private entrance glass and partitions.

Sweep all private stairways nightly, vacuum nightly if carpeted.

Police all stairwells throughout the Project daily and keep in clean clear condition.

Nightly damp mop spillage in non-carpeted office and public areas.

Nightly feather dust all telephones, desks and other furniture tops that are free of files, computers or personal property.

Washrooms (Including Private Washrooms)

Mop, rinse and dry floors nightly.

Scrub floors as necessary.

Clean all mirrors, bright work and enameled surfaces nightly.

Wash and disinfect all basins, urinals and bowls nightly using nonabrasive cleaners to remove stains and nightly clean undersides of rim of urinals and bowls.

Wash both sides of all toilet seats with soap, water and disinfectant nightly.

Nightly damp wipe and wash with disinfectant when necessary, partitions, tile walls and outside surface of dispensers and receptacles.

Empty and sanitize receptacles and sanitary disposals nightly; thoroughly clean and wash at least once per week.

Fill toilet tissue, soap, towel and sanitary napkin dispensers nightly.

Clean flush meter, piping toilet seat hinges and other metal work nightly.

Wash and polish walls, partitions, tile walls and enamel surfaces from trim to floor monthly.

Vacuum all louvers, ventilating grilles and dust light fixtures weekly.

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NOTE: It is the intention to keep washrooms thoroughly cleaned and not to use a disinfectant to kill odor. If a disinfectant is necessary, an odorless product will be used.

Floors

Ceramic tile, marble and terrazzo floors to be swept nightly and washed, scrubbed and buffed as needed.

Vinyl, rubber or other composition floors and bases to be swept nightly using dust down preparation; such floors in public areas on multi-tenancy floors to be waxed and buffed monthly.

Tile floors in office areas will be waxed and buffed monthly.

Floors re-waxed and old wax removed as necessary.

Carpeted areas and rugs to be vacuum cleaned nightly.

All floor areas to be spot cleaned nightly.

Glass

Clean all perimeter glass every six (6) months outside and every six (6) months inside. Any additional cleaning to be at Tenant’s expense.

Clean glass lobby and tenant lobby entrance doors and adjacent glass panels nightly.

Clean partition glass and interior glass doors quarterly.

Clean exterior of ground floor glass as needed.

High Dusting (Quarterly)

Dust and wipe clean closet shelving when empty and carpet sweep and dry mop floors in closets if such are empty.

Dust clean all vertical surfaces such as walls, partitions, doors, door bucks and other surfaces above shoulder height.

Damp dust ceiling air-conditioning diffusers, wall grilles, registers and other ventilating louvers.

Dust the exterior surfaces of lighting fixtures, including glass and plastic enclosures and aluminum louvers.

Day Service

At least once, but not more than twice during the day, check men’s washrooms for toilet tissue replacement.

At least once, but not more than twice during the day, check women’s washrooms for toilet tissue and sanitary napkin replacement.

Supply toilet tissue, soup and towels in men’s and women’s washrooms and sanitary napkins in women’s washrooms.

As needed, vacuuming of elevator cabs will be performed.

General

Wipe all interior metal window frames, mullions, and other unpainted interior metal surfaces of the perimeter walls of the building each time the interior of the windows is washed.

Keep slop sink rooms in a clean, neat and orderly condition at all times.

Wipe clean all metal hardware fixtures nightly and polish bright work as necessary.

Dust and/or wash all directory boards as required and remove fingerprints and smudges nightly.

Maintain building lobby, corridors and other public areas in a clean condition.

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EXHIBIT F-1

BUILDING HOLIDAYS

Below is a list of current Holidays on which the Building is officially closed. However, tenants are permitted into the Building at any time with a proper Building Access Card.

• New Year’s Day

• Martin Luther King Day

• President’s Day

• Memorial Day

• Independence Day

• Labor Day

• Thanksgiving Day and the Day After Thanksgiving

• Christmas Day

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EXHIBIT F-2

DESCRIPTION OF SECURITY SERVICES

Landlord will provide on-site monitoring of the access and Fire Life Safety System to the Building twenty-four (24) hours per day seven (7) days per week. On-site security personnel will respond to emergencies and conduct daily security and Fire Life Safety Patrols within the Building. Security personnel shall be on duty 24 hours/day seven days/week during the Term.

Landlord will install and maintain throughout the public access areas a card access system that will allow Tenant and Landlord the ability to limit after hour access to the Building, the elevators and tenant floors.

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June 23, 2000

VIA HAND DELIVERY

Salesforce.com, Inc.

101 Spear Street #203,

San Francisco, CA 94105

Attn.: Andrew Hyde

Re:     One Market

Dear Andy:

I am writing this letter in connection with that certain lease (the “Lease”) dated June 23, 2000 between Salesforce.com, Inc. (“Tenant”) and TMG/One Market L.P. and Crossmarket, LLC (collectively, “Landlord”). Terms defined in the Lease shall have the same meanings when used in this letter.

Pursuant to Section 2.4 of the Lease, Landlord and Tenant have certain specific rights to terminate the Lease with respect to the Fourth Floor Portion if Landlord fails to obtain Master Landlord’s consent to the Annex Lease. Sections 2.4 and 2.5 of the Lease also contain certain provisions that describe formulas for the reduction of the Base Rent and Security Deposit upon the occurrence of certain events. Landlord and Tenant hereby agree that if the Lease is terminated with respect to the Fourth Floor Portion pursuant to Section 2.4, then the rental adjustment provisions in Sections 2.4 and 2.5 of the Lease shall be adjusted to reflect the following: (i) the Preliminary Base Rent for any portion of the Premises located on the First Floor Portion shall be $54.00/square foot, (ii) the Initial Base Rent for any portion of the Premises located on the First Floor Portion shall be $56.00/square foot, (iii) the Middle Base Rent for any portion of the Premises located on the First Floor Portion shall be $59.00/square foot, and (iv) the Final Base Rent for any portion of the Premises located on the First Floor Portion shall be $60.00/square foot. In addition, the Security Deposit shall be reduced as set forth in the Lease utilizing the revised rent structure for the First Floor Portion.

Landlord and Tenant hereby agree that this letter shall not modify the Lease in any way with respect to a termination of the Lease as to the Fourth Floor Portion pursuant to Section 2.2 of the Lease. Landlord and Tenant also hereby agree that this letter shall not modify in any way the rent adjustment formulas set forth in Sections 2.2 or 2.6 of the Lease.

This letter shall automatically terminate on the date that Landlord obtains Master Landlord’s approval of the Annex Lease, so long as such approval is obtained before this Lease is terminated with respect to the Fourth Floor Portion. Upon any such termination of this letter, the following shall be applicable: (i) this letter shall not constitute an amendment of the Lease, (ii) the terms and provisions of this letter shall be null and void, and (iii) neither Landlord nor Tenant shall refer to this letter as an amendment or modification of the Lease.

Landlord shall disclose the terms of this letter to Union Bank before Union Bank executes the SNDA. Failure of Union Bank to consent to the terms of this letter shall be grounds for Tenant to terminate the Lease in accordance with the first sentence of Section 2.4. If the foregoing is acceptable to you, please execute the enclosed copy of this letter.

Very truly yours,

TMG/ONE MARKET, L.P.,

A Delaware limited partnership

By:	Martin/One Market LLC,
	A California limited liability company Its General Partner
	By:	The Martin Group of Companies, Inc., A California corporation Its Managing Member
	By:	/s/ [ILLEGIBLE]
	Its:	SVP
CROSSMARKET, LLC
A Nevada limited liability company
By:	Martin/Crossman, LLC
	A California limited liability company Its: managing member
	By:	/s/ Michael A. Covarrubias
		Michael A. Covarrubias Managing Member

The foregoing is hereby agree to

And accepted as of June 23, 2000.

SALESFORCE.COM, INC., a

Delaware Corporation

By:	/s/ Andrew Hyde
	Andrew Hyde
	Chief Financial Officer

FIRST AMENDMENT TO LEASE

THIS FIRST AMENDMENT TO LEASE (“Amendment”) is entered into this 13th day of November, 2000, by and between TMG/ONE MARKET, L.P., a Delaware limited partnership (“Landlord”) and SALESFORCE.COM, INC., a Delaware corporation (“Tenant”), in the following factual context.

RECITALS

This Amendment is based upon the following facts, understandings and intentions of the parties.

A. Tenant and Landlord entered into that certain Lease dated as of June 23, 2000 (the “Lease”) of certain premises located in the building commonly known as The Landmark @ One Market, California, more particularly described in the Lease. CROSSMARKET, LLC, a Nevada limited liability company has conveyed its entire interest in the Property to Landlord.

B. The parties acknowledge that the Office Permits Notice, as defined in the Lease, has been delivered and accepted. The parties also acknowledge that neither Landlord nor Tenant has any continuing right to terminate the Lease pursuant to the provisions of Section 2.4 of the Lease.

C. Landlord and Tenant now desire to amend the Lease to delete the Mezzanine and to modify certain other provisions of the Lease.

NOW, therefore, in consideration of the mutual covenants and promises set forth in this Amendment and other valuable consideration, receipt of which is hereby acknowledged, the parties do hereby agree as follows:

1. Definitions. Terms defined in the Lease shall have the same meanings when used in this Amendment.

2. Description of Premises. The description of the “Premises” set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place:

54,022 square feet of Rentable Area located on the Bayside portion of the 3rd Floor of the Building (28,513 square feet of Rentable Area, the “Third Floor Portion”), on the Cityside portion of the Fourth (4^th) Floor of the Building (13,562 square feet of Rentable Area, the “Fourth Floor Portion”) and on the First (1st) Floor of the Building (11,947 square feet of Rentable Area, the “First Floor Portion”), as shown on the Floor Plans attached as Exhibit A. The Premises shall also include the storage area outlined on the Floor Plan attached as Exhibit A, located in the basement of the Building containing approximately 3,500 square feet (the “Storage Space”). The entire Building contains 356,021 square feet of Rentable Area.

3. Base Rent. The description of the “Base Rent” set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place:

Period of Term	Amount
Initial Commencement Date to Secondary Commencement Date	$151,387.93/month (“Start Rent”)

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Secondary Commencement Date to Commencement Date	$229,306.60/month
Commencement Date to Second anniversary of Commencement Date	$3,797,086.00/year (“Preliminary Base Rent”)
Second anniversary of Commencement Date to Fourth anniversary of Commencement Date	$3,946,086.00/year (“Initial Base Rent”)
Fourth anniversary of Commencement Date to Seventh anniversary of Commencement Date	$4,100,591.20/year (“Middle Base Rent”)
Seventh anniversary of Commencement Date to End of Initial Term	$4,182,962.20/year (“Final Base Rent”)
Extended Term:	The fair market rent for the Premises (including Storage Space) as of the first day of the Extended Term, as determined in accordance with Section 3.2 of the Lease.

4. Tenant’s Share. The description of the “Tenant’s Percentage Share” set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place: “15.179% (Excludes Storage Space)”.

5. Commencement Date. The definition of “Commencement Date” and “Initial Commencement Date” set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place:

The Commencement Date shall be one hundred five (105) days after the Possession Date. The term “Initial Commencement Date” shall mean October 28, 2000. The term “Secondary Commencement Date” shall mean November 27, 2000.

6. Exhibit A. The Plan of the Fourth Floor Portion included in Exhibit A attached to the Lease is hereby deleted in its entirety and the plan attached to this Amendment as Exhibit A is hereby substituted in its place.

7. Rentable Area. The definition of Rentable Area set forth in the Lease is hereby amended to provide that the number “15,947” set forth in such definition is hereby changed to “11,947”.

8. Section 2.2. The third sentence of Section 2.2 of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place:

The Deletion Amendment shall provide the following: (i) the definition of the Premises shall

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be modified to exclude the Fourth Floor Portion, (ii) Tenant’s Percentage Share shall be decreased to reflect the deletion of the Fourth Floor Portion from the Premises, (iii) the Initial Base Rent shall be reduced by $979,722.00 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $759,472.00), (iv) the Middle Base Rent shall be reduced by $1,001,512.20 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $800,158.00), (v) the Final Base Rent shall be reduced by $1,023,886.20 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $813,720.00), and (vi) the then current amount of the Security Deposit shall be proportionately reduced to reflect the reduction in the aggregate Base Rent under this Lease and the Annex Lease in proportion to the then current aggregate Base Rent under this Lease and the Annex Lease.

9. Premises. The first paragraph of Section 2.5 of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place:

Use Change. Landlord and Tenant acknowledge that the First Floor Portion may not currently be used for office purposes. Landlord shall use reasonable efforts to obtain all approvals necessary to permit the use of the First Floor Portion for office purposes, at Landlord’s sole cost and expense (the “Office Permits”). Landlord shall promptly notify Tenant upon its receipt of all Office Permits (“Office Permits Notice”). The parties acknowledge that the Office Permits Notice was properly and timely delivered.

10. Mezzanine and Office Permits. Sections 2.5.1 and 2.5.2 of the Lease are hereby deleted in their entirety. The following clause in Section 7.6.2 of the Lease is hereby deleted in its entirety: “provided further, however, that Landlord shall be responsible for compliance with the requirements of the ADA with respect to the initial construction of an elevator and stairways in the First Floor Portion of the Premises as part of Landlord’s Work”. The last sentence of Section 2.2.3 of the Work Letter is hereby deleted in its entirety. The second sentence of Section 5.1.2 of the Work Letter is hereby deleted in its entirety.

11. Construction. The first sentence of Section 1.2 of the Work Letter is hereby deleted in its entirety and the following is hereby substituted in its place:

In the manner provided in this Section 1.2, Landlord shall pay to Tenant a “Construction Allowance” equal to Three Million Four Hundred Thirty-Five Thousand Eight Hundred Twenty-Five Dollars ($3,435,825.00).

12. Representations and Warranties of Tenant. As a material inducement to Landlord to enter into this Amendment, Tenant represents and warrants to Landlord that, as of the date of this Amendment:

12.1. No Defaults. The Lease is in full force and effect. There are no defaults by Landlord or Tenant under the Lease, and no circumstance has occurred which, but for the expiration of an applicable grace period, would constitute an event of default by Landlord or Tenant under the Lease. Tenant has no defenses or rights of offset under the Lease.

12.2. Authority. Tenant has full right, power and authority to enter into this Amendment, and has obtained all necessary consents and resolutions from its members required under the documents governing its affairs in order to consummate this transaction, and the persons executing this Amendment have been duly authorized to do so. The Amendment and the Lease are binding obligations of Tenant, enforceable in accordance with their terms.

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12.3 No Assignments. Tenant is the sole lawful tenant under the Lease, and Tenant has not sublet, assigned or otherwise transferred any of the right, title or interest of Tenant under the Lease or arising from its use or occupancy of the Premises, and no other person, partnership, corporation or other entity has any right, title or interest in the Lease or the Premises, or the right to occupy or use all or any part of the Premises.

13. Representations and Warranties of Landlord. As a material inducement to Tenant to enter into this Amendment, Landlord represents and warrants to Tenant that, as of the date of this Amendment:

13.1. No Defaults. The Lease is in full force and effect. There are no defaults by Landlord or Tenant under the Lease, and no circumstance has occurred which, but for the expiration of an applicable grace period, would constitute an event of default by Landlord or Tenant under the Lease. Tenant has no defenses or rights of offset under the Lease.

13.2. Authority. Landlord has full right, power and authority to enter into this Amendment, and has obtained all necessary consents and resolutions from its members required under the documents governing its affairs in order to consummate this transaction, and the persons executing this Amendment have been duly authorized to do so. The Amendment and the Lease are binding obligations of Landlord, enforceable in accordance with their terms.

14. Amendment to Lease. This Amendment is and shall constitute an amendment to the Lease and shall be effective as of the date of this Amendment. Except as modified hereby, all of the terms and conditions of the Lease shall remain in full force and effect.

15. Construction. Section 1.1 of the Work Letter is hereby amended to delete the following language from the last sentence of Section 1.1: “, and shall utilize the same exterior wall finishes and mechanical and lighting specifications as Scient.”

16. Letter of Credit. Landlord hereby agrees that Landlord shall pay any actual transfer fee payable by Tenant to its lender arising out of any required assignment of the L-C as a result of the financing of the Building with Credit Suisse First Boston Mortgage Capital LLC.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment the day and year first above written.

LANDLORD:

TMG/ONE MARKET, L.P.,

A Delaware limited partnership

By:	Martin/One Market LLC,
	A California limited liability company Its General Partner
	By:	The Martin Group of Companies, Inc., A California corporation Its Managing Member

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By:	/s/ [ILLEGIBLE]
Its:	SVP

TENANT:

SALESFORCE.COM, INC., a

Delaware Corporation

By:	/s/ Andrew Hyde
	Andrew Hyde
	Chief Financial Officer

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EXHIBIT A

FLOOR PLANS

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Exhibit A

Page 1 of 5

1^st Amendment

[GRAPHIC APPEARS HERE]

Exhibit A

Page 2 of 5

1^st Amendment

[GRAPHIC APPEARS HERE]

Exhibit A

Page 3 of 5

1^st Amendment

[GRAPHIC APPEARS HERE]

Exhibit A

STORAGE SPACE

Page 4 of 5

1^st Amendment

[GRAPHIC APPEARS HERE]

Exhibit A

Page 5 of 5

1^st Amendment

[GRAPHIC APPEARS HERE]

CONFIRMATION OF LEASE TERM

LANDLORD:	TMG/ONE MARKET, L.P., A California limited partnership
TENANT:	Salesforce.com
	A Delaware corporation
LEASE DATE:	June 23, 2000
PREMISES:	54,092 square feet of Rentable Area located on the Bayside portion of the 3rd Floor of the Building (28,583 square feet of Rentable Area, the “Third Floor Portion”), on the Cityside portion of the Fourth (4th) Floor of the Building (13,562 square feet of Rentable Area, the “Fourth Floor Portion”) and on the First (1st) Floor of the Building (11,947 square feet of Rentable Area, the “First Floor Portion”). The Premises shall also include storage space located in the basement of the Building containing approximately 3,500 square feet (the “Storage Space”).

Pursuant to Section 5 of the First Amendment to Lease dated November 13, 2000, the Commencement Date as defined in Section 5 shall be one hundred five 105 days after the Possession Date. The Possession date is January 15, 2001. The Commencement Date shall be May 1, 2001.

LANDLORD:

TMG/ONE MARKET, L.P.,

A Delaware limited partnership

By:	Martin/One Market LLC,
	A California limited Liability Company It’s General Partner
	By:	The Martin Group of Companies, Inc., A California corporation
		Its Managing Member
	By:	/s/ [ILLEGIBLE]
	Its:	SVP

TENANT:

Salesforce.com

A Delaware corporation

By:	/s/ [ILLEGIBLE]
Its:	CFO
By:
Its:

SECOND AMENDMENT TO LEASE

THIS SECOND AMENDMENT TO LEASE (“Amendment”) is entered into this 17^TH day of April, 2001, by and between TMG/ONE MARKET, L.P., a Delaware limited partnership (“Landlord”) and SALESFORCE.COM, INC., a Delaware corporation (“Tenant”), in the following factual context.

RECITALS

This Amendment is based upon the following facts, understandings and intentions of the parties.

A. Tenant and Landlord entered into that certain Lease dated as of June 23, 2000, as amended by that certain First Amendment to Lease dated November 13, 2000 (collectively, the “Lease”) of certain premises located in the building commonly known as The Landmark @ One Market, California, more particularly described in the Lease. CROSSMARKET, LLC, a Nevada limited liability company has conveyed its entire interest in the Property to Landlord.

B. Landlord and Tenant now desire to amend the Lease to reflect the increase in the Rentable Area of the Premises on the third floor of the Building. The Construction Allowance shall automatically be adjusted to reflect the increase in the Rentable Area of the Premises.

NOW, therefore, in consideration of the mutual covenants and promises set forth in this Amendment and other valuable consideration, receipt of which is hereby acknowledged, the parties do hereby agree as follows:

1. Definitions. Terms defined in the Lease shall have the same meanings when used in this Amendment.

2. Description of Premises. The description of the “Premises” set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place:

54,092 square feet of Rentable Area located on the Bayside portion of the 3rd Floor of the Building (28,583 square feet of Rentable Area, the “Third Floor Portion”), on the Cityside portion of the Fourth (4^th) Floor of the Building (13,562 square feet of Rentable Area, the “Fourth Floor Portion”) and on the First (1st) Floor of the Building (11,947 square feet of Rentable Area, the “First Floor Portion”), as shown on the Floor Plans attached as Exhibit A. The Premises shall also include the storage area outlined on the Floor Plan attached as Exhibit A, located in the basement of the Building containing approximately 3,500 square feet (the “Storage Space”). The entire Building contains 356,021 square feet of Rentable Area.

3. Tenant’s Share. The description of the “Tenant’s Percentage Share” set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place: “15.19% (Excludes Storage Space)”.

4. Rent. In connection with this Amendment, notwithstanding any provision of the Lease to the contrary, the Base Rent payable by Tenant as set forth in the Lease shall be increased in the following amounts during the following periods: (i) during the period from the Commencement Date until the fourth anniversary of the Commencement Date, $398.80/month, (ii) during the period from the fourth anniversary of the Commencement Date until the eighth anniversary of the Commencement Date, $416.92/month, and (iii) during the remainder of the Initial Term, $435.05/month.

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5. Exhibit A. Exhibit A attached to the Lease is hereby modified to substitute the 3^rd Floor plan attached to this Amendment as Exhibit A in place of the 3^rd Floor plan attached to the Lease.

6. Amendment to Lease. This Amendment is and shall constitute an amendment to the Lease and shall be effective as of the date of this Amendment. Except as modified hereby, all of the terms and conditions of the Lease shall remain in full force and effect. This Amendment shall not be effective until it has been executed by Landlord’s lender, as provided below.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment the day and year first above written.

LANDLORD:

TMG/ONE MARKET, L.P.,

A Delaware limited partnership

By:	Martin/One Market LLC,
	A California limited liability company Its General Partner
	By:	The Martin Group of Companies, Inc., A California corporation
		Its Managing Member
	By:	/s/ [ILLEGIBLE]
	Its:	SVP

TENANT:

SALESFORCE.COM, INC., a

Delaware Corporation

By:	/s/ Andrew Hyde
	Andrew Hyde
	Chief Financial Officer

The foregoing is hereby approved

This 17^TH day of April, 2001

Credit Suisse First Boston Mortgage Capital LLC,

a Delaware limited liability company

By:
	Its:

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[GRAPHIC APPEARS HERE]

THIRD AMENDMENT TO OFFICE LEASE

THIS THIRD AMENDMENT TO OFFICE LEASE (the “Third Amendment to Lease”) is made and entered into as of August 27, 2003 (the “Effective Date”) by and between TMG/ONE MARKET, L.P., a Delaware limited partnership (“Landlord”) and SALESFORCE.COM, INC., a Delaware corporation (“Tenant”).

RECITALS

A. Landlord and Tenant entered into that certain Lease dated as of June 23, 2000 (the “Original Lease”), as amended by that certain First Amendment to Lease, dated November 13, 2000 (the “First Amendment to Lease”) and that certain Second Amendment to Lease, dated April 17, 2001 (the “Second Amendment to Lease”) covering certain premises located in the building commonly known as The Landmark @ One Market, San Francisco, California, as more particularly described in the Lease (as defined below). CROSSMARKET, LLC, a Nevada limited liability company, which was a party to the Original Lease has conveyed its entire interest in the Property and the Lease to Landlord.

B. The Original Lease, as amended by the First Amendment to Lease and the Second Amendment to Lease, is referred to herein as the “Lease”. Terms defined in the Lease shall have the same meanings when used in this Third Amendment to Lease.

C. Landlord and Tenant now desire to amend the Lease to eliminate a portion of the first floor space that has been a part of the Premises (the “Surrendered First Floor Space”) from the description of the Premises. The Surrendered First Floor Space contains 7,191 square feet of Rentable Area on the ground floor of the Building and is more particularly described in Exhibit A-l attached hereto.

NOW, THEREFORE, for good and valuable consideration, including the mutual covenants contained in the Lease and in this Third Amendment to Lease, Landlord and Tenant hereby agree as follows:

1. Surrender of First Floor Portion. As of the Effective Date, the Surrendered First Floor Space shall be deemed surrendered by Tenant to Landlord, the Lease shall be terminated with respect to the Surrendered First Floor Space, and the “Premises” as defined in the Lease shall be deemed to exclude the Surrendered First Floor Space. Landlord acknowledges that the Surrendered First Floor Space has been delivered to Landlord by Tenant as of the Effective Date in its “as is” condition and is accepted by Landlord in such condition, notwithstanding anything in the Lease to the contrary.

2. Revised Description of the Premises; Replacement of Exhibit A to the Lease. As of the Effective Date, Exhibit A to the Lease is hereby deleted and replaced with the 5 pages of floor plans attached as Exhibit A-2 to this Third Amendment to Lease.

3. Basic Lease Information. The Basic Lease Information that is a part of the Lease is hereby deleted and replaced with the Amended and Restated Basic Lease Information attached as Exhibit B to this Third Amendment to Lease (the “Amended and Restated BLI”). Among other things, the Amended and Restated BLI confirms that, as of the Effective Date, (a) the Premises shall contain a total of 46,901 square feet of Rentable Area in the Building, of which only 4,756 square feet of Rentable Area shall comprise the First Floor Portion; (b) Base Rent shall be as set forth in Schedule 1 to the Amended and Restated BLI, and (c) Tenant’s Percentage Share shall remain at 15.19% (excluding storage space) through February 14, 2004 and, as of February 15, 2004, shall be reduced to 13.174% (excluding storage space).

4. Costs for Releasing Surrendered First Floor Space.

(a) Section 1.2 of the Work Letter attached to the Lease provides for a Construction Allowance (the “Allowance”) payable by Landlord on terms and conditions set forth therein. The balance of such Allowance, as of the date of this Third Amendment to Lease, is Seven Hundred Fifty-Eight Thousand Eight Hundred Fifty-One and 61/100 Dollars ($758,851.61). In consideration of Landlord’s willingness to enter into this Third Amendment to Lease and Landlord’s releasing of a portion of the Surrendered First Floor Space (the “BofA Space”) to Bank of America, N.A., Tenant acknowledges and agrees that the Allowance is hereby reduced by Four Hundred Fifty Six Thousand Seven Hundred Fifty-Nine and 18/100s Dollars ($456,759.18), which amount shall be used by Landlord for costs associated with the releasing of the BofA Space. Accordingly, Landlord and Tenant acknowledge that the remaining Allowance is now Three Hundred Two Thousand Ninety and 43/100 Dollars ($302,092.43).

(b) If, any funds remain in the Allowance following (i) the releasing and improvement of the remainder of the First Floor Portion of the Premises for occupancy by third party tenants (or the occupancy by Tenant of such space and the improvement of such space for Tenant’s use), and (ii) the payment of all costs associated with such releasing and/or occupancy and improvement, including legal, architectural, engineering, hard and soft constructions costs, tenant improvement allowances, leasing commissions and other similar and customary costs, then such remaining funds shall be credited to Tenant’s Rent obligations under the Lease.

5. Additional Amendments to Lease. The definition “Scient Lease”, Sections 2.2, and 2.4 of the Lease are hereby deleted in their entirety.

6. Tenant’s Signs. Section 32 of the Lease is hereby amended and restated in its entirety as follows:

32. Tenant’s Signs. Without Landlord’s prior written consent, which Landlord may withhold in its sole discretion, Tenant shall not place on the Premises or on the Building any exterior signs nor any interior signs that are visible from the exterior of the Premises or the Building. Notwithstanding the foregoing, Tenant shall be permitted to maintain its signage existing as of the Effective Date of the Third Amendment to Lease (or signage that Landlord determines, in its sole discretion, is substantially similar thereto), on all exterior windows of the First Floor Portion of the Premises as it exists after the Effective Date of the Third Amendment to Lease for so long as such space is

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unoccupied. Tenant shall pay all costs and expenses relating to any such signs approved by Landlord or for which no approval is required, including, without limitation, the cost of the installation and maintenance of such signs. On the date of expiration or earlier termination of this Lease (or, if applicable, the elimination of the applicable portion of the Ground Floor Portion from the Premises), Tenant, at its sole cost and expense, shall remove all signs and repair any and all damage caused by the installation or removal of such sign.

7. Access for Landlord’s Contractor; Landlord’s Indemnity. In connection with Landlord’s construction of improvements in the Surrendered First Floor Space and until such time as such improvements are substantially completed, (a) Tenant agrees that Landlord’s contractors and subcontractors shall have access to the remaining First Floor Portion of the Premises as reasonably necessary to perform such contractors’ and subcontractors’ work in the Surrendered First Floor Space, and (b) Landlord shall indemnify, defend, protect and hold Tenant harmless of and from loss, liens, liability, claims, causes of action, damage, injury, cost or expense arising out of or in connection with injury to or death of persons or damage to property occurring or resulting directly or indirectly from acts, neglect or omissions of Landlord’s contractors or subcontractors in or about the remaining First Floor Portion of Premises, except to the extent such injury, death or damage is due to Tenant’s gross negligence or willful misconduct.

8. No Further Amendment. Except as amended by this Third Amendment to Lease, the Lease shall continue in full force and effect and in accordance with all of its terms. This Third Amendment to Lease and the Lease shall be construed as a whole in order to effectuate the intent of the parties to amend the Lease in the manner specified in this Third Amendment to Lease. All provisions of the Lease affected by this Third Amendment to Lease shall be deemed amended regardless of whether so specified in this Third Amendment to Lease. Subject to the foregoing, if any provision of the Lease conflicts, with the terms of this Third Amendment to Lease, then the provisions of this Third Amendment to Lease shall control.

9. Governing Law. This Third Amendment to Lease shall be construed in accordance with and governed by the laws of the State of California.

10. Partial Invalidity. If any one or more of the provisions contained in this Third Amendment to Lease shall be invalid, illegal or unenforceable in any respect, the remaining provisions contained herein shall not be affected in any way thereby.

11. Effective Date of Amendment. The effective date of this Third Amendment to Lease and each and every provision herein is the Effective Date first written above unless otherwise stated herein.

12. Representations and Warranties.

(a) As a material inducement to Landlord to enter into this Third Amendment to Lease, Tenant represents and warrants to Landlord that, as of the date of this Third Amendment to Lease:

(i) The Lease is in full force and effect.

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(ii) Tenant is the sole lawful tenant under the Lease, and Tenant has not sublet, assigned, conveyed, encumbered or otherwise transferred any of the right, title or interest of Tenant under the Lease or arising from its use or occupancy of the Premises, and no other person, partnership, corporation or other entity has any right, title or interest in the Lease or the Premises, or the right to occupy or use all or any part of the Premises.

(iii) Tenant is a duly formed and existing entity qualified to do business in the State of California. Tenant has full right and authority to execute and deliver this Third Amendment to Lease and each person signing on behalf of Tenant is authorized to do so and no consent of any party is required on behalf of Tenant for this Third Amendment to Lease to be in full force and effect.

(b) As a material inducement to Tenant to enter into this Third Amendment to Lease, Landlord represents and warrants to Tenant that, as of the date of this Third Amendment to Lease: Landlord is a duly formed and existing entity qualified to do business in the State of California; Landlord has full right and authority to execute and deliver this Third Amendment to Lease and each person signing on behalf of Landlord is authorized to do so and no consent of any party is required on behalf of Landlord for this Third Amendment to Lease to be in full force and effect, excluding the lender holding a security interest in the Building.

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IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment to Lease as of the date first written above.

LANDLORD:
TMG/ONE MARKET, L.P., a Delaware limited partnership
By:	MARTIN/ONE MARKET, LLC, a California limited liability company Its: General Partner
	By:	TMG ONE MARKET MANAGER, INC., a California corporation Its: Managing Member
		By:	/s/ Cathy Greenwold
		Name:	Cathy Greenwold
		Its:	EVP

TENANT:
SALESFORCE.COM, INC., a Delaware corporation
	/s/ David Schellhase
By:	David Schellhase
Its:	VP and General Counsel

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EXHIBIT A-1

Description of Surrendered First Floor Space

(1 page-to be attached)

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EXHIBIT A-2

Description of Premises as of Effective Date

of Third Amendment to Lease

(5 pages following this cover sheet)

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EXHIBIT B

Amended and Restated

Basic Lease Information

OFFICE LEASE

THE LANDMARK @ ONE MARKET

San Francisco, California

BASIC LEASE INFORMATION

Lease Date:	June 23, 2000
Landlord:	TMG/ONE MARKET, L.P., a Delaware limited partnership
Tenant:	SALESFORCE.COM, INC., a Delaware corporation
Premises:	46,901 square feet of Rentable Area located in the Building, as follows: 28,583 square feet of Rentable Area on the Bayside portion of the 3rd floor of the Building (the “Third Floor Portion”); 13,562 square feet of Rentable Area on the Cityside portion of the Fourth (4th) Floor of the Building (the “Fourth Floor Portion”); 4,756 square feet of Rentable Area on the First (1st) Floor of the Building (the “First Floor Portion”), as shown on the first three (3) pages of the five (5) pages of Floor Plans attached as Exhibit A-2 to the Third Amendment to Lease (the “Floor Plans”), which five (5) pages, as of the Effective Date of the Third Amendment, constitute Exhibit A to the Lease. The Premises shall also include the storage area outlined on the last two pages of the Floor Plans located in the basement of the Building containing approximately 3,500 square feet (the “Storage Space”). The entire Building contains 360,021 square feet of Rentable Area.
Term:	Commencing on the Initial Possession Date (as defined in Section 5.1 of Exhibit C attached to this Lease) and continuing until May 1, 2011, which is ten (10) years from the Commencement Date (the “Initial Term”), and one (1) option to extend the Term for a single period of five (5) years thereafter (the “Extended Term”).
Anticipated Possession Date:	June 23, 2000
Possession Date:	January 15, 2001
Commencement Date:	May 1, 2001
Expiration Date:	The date that is ten (10) years after the Commencement Date, or the last day of the Extended Term, if the Extended Term is properly exercised.

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Base Rent:	Initial Term: Commencing on the Effective Date of the Third Amendment to Lease and continuing through the Initial Term, the Base Rent shall be as set forth in Schedule 1 to this Third Amendment to Lease.
	Extended Term: The fair market rent for the Premises (including Storage Space) as of the first day of the Extended Term, as determined in accordance with Section 3.2 of the Lease
Base Year:	The 2000 calendar year.
Tenant’s Percentage Share:	Until February 14, 2004: 15.19% (excluding Storage Space); From and after February 15, 2004: 13.174% (excluding Storage Space)
Permitted Use:	General office use; and retail use with respect to the First Floor Portion only.
Security Deposit:	$3,500,000.00
Building Directory Spaces:	See Section 33.13 below
Tenant’s Address:	Salesforce.com, Inc. The Landmark @ One Market San Francisco, CA 94105
Landlord’s Address:	c/o TMG Partners 100 Bush Street, Suite 2600 San Francisco, CA 94104

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

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

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Schedule 1 to the Amended Restated Basic Lease Information

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

FOURTH AMENDMENT TO OFFICE LEASE

THIS FOURTH AMENDMENT TO OFFICE LEASE (the “Fourth Amendment to Lease”) is made and entered into as of July 30, 2004 (the “Effective Date”) by and between TMG/ONE MARKET, L.P., a Delaware limited partnership (“Landlord”) and SALESFORCE.COM, INC., a Delaware corporation (“Tenant”).

RECITALS

A. Landlord and Tenant entered into that certain Lease dated as of June 23, 2000 (the “Original Lease”), as amended by that certain First Amendment to Lease, dated November 13, 2000 (the “First Amendment to Lease”), that certain Second Amendment to Lease, dated April 17, 2001 (the “Second Amendment to Lease”), and that certain Third Amendment to Lease dated as of August 27, 2003 (the “Third Amendment to Lease”) covering certain premises located in the building commonly known as The Landmark @ One Market, San Francisco, California, as more particularly described in the Lease (as defined below). CROSSMARKET, LLC, a Nevada limited liability company, which was a party to the Original Lease has conveyed its entire interest in the Property and the Lease to Landlord.

B. Among other things, the Third Amendment to Lease provides that retail use of the First Floor Portion of the Premises is a “Permitted Use” under Section 7.1 of the Lease. Tenant now desires to enter into a sublease of approximately 670 rentable square feet of the First Floor Portion of the Premises (the “Subleased Premises”) to Chin Park, a sole proprietor doing business as “Print 1” (the “Sublease”) and as a condition of Landlord’s approval to the Sublease, Landlord desires to add certain terms and conditions to the Lease that shall apply to the retail use of the First Floor Portion of the Premises.

C. The Original Lease, as amended by the First Amendment to Lease, the Second Amendment to Lease, and the Third Amendment to Lease, is referred to herein as the “Lease”. Terms defined in the Lease shall have the same meanings when used in this Fourth Amendment to Lease.

NOW, THEREFORE, for good and valuable consideration, including the mutual covenants contained in the Lease and in this Fourth Amendment to Lease, Landlord and Tenant hereby agree as follows:

1. Retail Use of Ground Floor Portion of Premises. The following Section 7.7 shall be added to the Lease as of the Effective Date:

7.7 Retail Use of Ground Floor Portion of Premises. The following provisions shall apply to the retail use of the Ground Floor Portion of the Premises only:

7.7.1 Restrictions on Use. Tenant shall: (a) apply for, secure, maintain and comply with all licenses or permits which may be required for the conduct by Tenant of its business in the Premises, and pay as and when due all license and

permit fees and charges of a similar nature in connection therewith and provide Landlord with copies thereof upon request; (b) use for storage, office or other non-selling purposes only such space within the Premises as is reasonably required for Tenant’s business; or (c) not advertise or conduct any auction, distress, fire, bankruptcy, or real or fictitious going-out-of -business sale, or suffer, permit or conduct the type of business commonly called a “cut price,” “outlet,” “discount,” or “cut rate” business or store, flea market or temporary outlet for toys or other goods.

7.7.2 Manner of Operations. Tenant shall conduct its business on the Premises at all times during the Term of this Lease in a professional, first-class manner in keeping with the overall quality and prestige of the Building, and Tenant acknowledges that this covenant represents material consideration for Landlord’s agreeing to enter into this Lease in light of the prominent ground floor location of the Premises. Tenant shall not do any act tending to injure the reputation or image of the Building. Tenant shall not install or operate any radio, television, loudspeaker or other similar device in the Premises which can be heard outside the Premises or which will disturb another tenant of the Building. Tenant shall not solicit business nor distribute any handbills or other advertising matters in any part of the Building. Tenant shall not obstruct the sidewalk, entrances, passages, elevators, stairways or corridors in or about the Building or use such areas for any purpose other than ingress and egress from the Premises. All deliveries to the Premises (other than deliveries during ordinary business hours by UPS and similar delivery services) shall take place at times designated by Landlord and Tenant’s use of the loading dock shall be in accordance with all existing rules and regulations and any reasonable rules and regulations as Landlord may from time to time establish after the date hereof.

7.7.3 Failure to Comply. Tenant’s failure to comply with the provisions of this Section 7.7 shall constitute a material breach of this Lease.

7.7.4 Additional Requirements Regarding Appearance. Tenant shall at all times maintain the interior and exterior windows of the Premises in a clean and neat condition. The visual appearance of all windows and any merchandise or other displays which are to be viewed from outside the Premises shall be subject to the prior approval of Landlord. Tenant shall make such changes as Landlord may reasonably direct in order to modify the visual appearance of the Premises (including any portion of the interior of the Premises which is visible from outside the Premises) to the satisfaction of Landlord. Should Tenant fail to comply with Landlord’s reasonable directions, Landlord may immediately and without prior notice to Tenant, enter the Premises and remove any and all objectionable items from the Premises.

2. Continuous Operations Provision Applicable to Subleased Premises. Tenant shall use commercially reasonable efforts to enforce Section 6.C. of the Sublease (Continuous Operations) for so long as the Sublease is in effect, including, if necessary, by terminating the Sublease and the rights of Print 1 in and to the Subleased Premises; provided that, the breach by Print 1 of Section 6.C. of the Sublease shall not be a breach by Tenant of the terms of the Lease unless

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thereafter Tenant shall fail to use commercially reasonable efforts to enforce the terms of the Sublease against Print 1 to the extent permitted by applicable laws. Tenant’s failure to comply with the provisions of this Section 2 shall constitute a material breach of the Lease.

3. No Further Amendment. Except as amended by this Fourth Amendment to Lease, the Lease shall continue in full force and effect and in accordance with all of its terms. This Fourth Amendment to Lease and the Lease shall be construed as a whole in order to effectuate the intent of the parties to amend the Lease in the manner specified in this Fourth Amendment to Lease. All provisions of the Lease affected by this Fourth Amendment to Lease shall be deemed amended regardless of whether so specified in this Fourth Amendment to Lease. Subject to the foregoing, if any provision of the Lease conflicts with the terms of this Fourth Amendment to Lease, then the provisions of this Fourth Amendment to Lease shall control.

4. Governing Law. This Fourth Amendment to Lease shall be construed in accordance with and governed by the laws of the State of California.

5. Partial Invalidity. If any one or more of the provisions contained in this Fourth Amendment to Lease shall be invalid, illegal or unenforceable in any respect, the remaining provisions contained herein shall not be affected in any way thereby.

6. Effective Date of Amendment. The effective date of this Fourth Amendment to Lease and each and every provision herein is the Effective Date first written above unless otherwise stated herein.

7. Representations and Warranties.

(a) As a material inducement to Landlord to enter into this Fourth Amendment to Lease, Tenant represents and warrants to Landlord that, as of the date of this Fourth Amendment to Lease:

(i) The Lease is in full force and effect.

(ii) Tenant is the sole lawful tenant under the Lease, and Tenant has not sublet, assigned, conveyed, encumbered or otherwise transferred any of the right, title or interest of Tenant under the Lease or arising from its use or occupancy of the Premises, and no other person, partnership, corporation or other entity has any right, title or interest in the Lease or the Premises, or the right to occupy or use all or any part of the Premises.

(iii) Tenant is a duly formed and existing entity qualified to do business in the State of California. Tenant has full right and authority to execute and deliver this Fourth Amendment to Lease and each person signing on behalf of Tenant is authorized to do so and no consent of any party is required on behalf of Tenant for this Fourth Amendment to Lease to be in full force and effect.

(b) As a material inducement to Tenant to enter into this Fourth Amendment to Lease, Landlord represents and warrants to Tenant that, as of the date of this Fourth Amendment to Lease: Landlord is a duly formed and existing entity qualified to do business in the State of

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California; Landlord has full right and authority to execute and deliver this Fourth Amendment to Lease and each person signing on behalf of Landlord is authorized to do so and no consent of any party is required on behalf of Landlord for this Fourth Amendment to Lease to be in full force and effect, excluding the lender holding a security interest in the Building.

IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment to Lease as of the date first written above.

LANDLORD:
TMG/ONE MARKET, L.P., a Delaware limited partnership
By:	MARTIN/ONE MARKET, LLC, a California limited liability company Its: General Partner
	By:	TMG ONE MARKET MANAGER, INC., a California corporation Its: Managing Member
		By:	/s/ Cathy Greenwold
		Name:	Cathy Greenwold
		Its:	Executive Vice President

TENANT:
SALESFORCE.COM, INC., a Delaware corporation
By:	/s/ David Schellhase
Its:	VP and General Counsel

FIFTH AMENDMENT TO OFFICE LEASE

THIS FIFTH AMENDMENT TO OFFICE LEASE (the “Fifth Amendment”) is made and entered into as of the 10 day of March, 2005 by and between TMG/ONE MARKET, L.P, a Delaware limited partnership (“Landlord”), and SALESFORCE.COM, INC., a Delaware corporation (“Tenant”).

RECITALS

A. Landlord and Tenant entered into that certain Office Lease dated as of June 23, 2000 (the “Original Lease”), as amended by that certain First Amendment to Lease dated November 13, 2000 (the “First Amendment”), as further amended by that certain Second Amendment to Lease dated April 17, 2001 (the “Second Amendment”), as further amended by that certain Third Amendment to Office Lease dated August 27, 2003 (the “Third Amendment”) and as further amended by that certain Fourth Amendment to Office Lease dated July 30, 2004 (the “Fourth Amendment”), whereby Landlord demised to Tenant and Tenant leased from Landlord premises located on the first, third, and fourth floors and storage space located in the basement of that certain building commonly known as The Landmark@One Market located in the City and County of San Francisco, California (the “Building”). The Original Lease, as amended by the First Amendment, Second Amendment, Third Amendment and Fourth Amendment, is referred to herein as the “Existing Lease.”

B. Landlord leases the entire seventh and eighth floors of the Building to Vignette Corporation, a Delaware corporation (“Vignette”), pursuant to that certain Office Lease dated April 23, 2001, between Landlord and Epicentric, Inc., a California corporation and predecessor-in-interest to Vignette (the “Vignette Lease”).

C. Tenant subleases from Vignette certain premises consisting of approximately 37,488 square feet located on the entire seventh floor of the Building and approximately 9,200 square feet located on the eighth floor of the Building pursuant to that certain Sublease Agreement dated as of August 5, 2003 between Vignette, as sublandlord, and Tenant, as subtenant, as amended by that certain First Amendment to Sublease Agreement dated as of October 8, 2004 (collectively, the “Salesforce Sublease”).

D. Tenant, as sublandlord, and Chin Park, a sole proprietor doing business as Print 1, as subtenant, entered into that certain Sublease Agreement dated as of July 30, 2004 (the “Print 1 Sublease”), for certain premises consisting of approximately 670 square feet located on the ground floor of the Building.

E. The parties now wish to (i) add the premises demised under the Salesforce Sublease to the premises demised under the Existing Lease, subject to the termination of the Vignette Lease and the Salesforce Sublease, (ii) modify the rent and the term of the Existing Lease, (iii) grant to Tenant certain expansion rights, (iv) eliminate the first floor of the Building from the premises under the Existing Lease and (v) make certain other modifications to the Existing Lease on the basis of, and subject to, the terms, covenants and conditions hereinafter set

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forth. The Existing Lease, as amended by this Fifth Amendment, is sometimes referred to herein as the “Lease.”

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1. Use of Defined Terms; Recitals.

a. Definitions. All capitalized terms used herein shall have the defined meanings ascribed to them in the Existing Lease.

b. Recitals. The provisions of the Recitals above are fully incorporated herein by this reference.

c. Effective Date. The “Effective Date” hereunder shall be the later of (i) March 15, 2005 and (ii) the satisfaction or waiver of the conditions to the effectiveness of the Fifth Amendment set forth in Paragraph 17 of this Fifth Amendment.

2. Basic Lease Information. From and after the Effective Date, the Basic Lease Information of the Existing Lease is hereby amended to delete therefrom the definitions of Premises, Term, Anticipated Possession Date, Possession Date, Commencement Date, Expiration Date, Base Rent, Base Year, Tenant’s Percentage Share, Permitted Use and Security Deposit and to insert in place thereof the following definitions:

Premises:

116,851 square feet of Rentable Area located in the Building consisting of 28,583 square feet of Rentable Area being a portion of the 3rd floor of the Building (the “Third Floor Portion”), 13,562 square feet of Rentable Area being a portion of the 4th Floor (the “Fourth Floor Portion”), 37,353 square feet of Rentable Area being the entire 7th floor of the Building (the “Seventh Floor Portion”) and 37,353 square feet of Rentable Area being the entire 8th floor of the Building (the “Eighth Floor Portion”), as shown on the floor plans attached as Exhibit A. The Premises shall also include the 3,500 square feet of storage area located in the basement of the Building designated as the “Original Storage Space” on the floor plans attached as Exhibit A and the 5,000 square feet of storage area located in the basement of the Building and identified as the “Additional Storage Space” on the floor plans attached as Exhibit A. The entire Building contains 355,912 square feet of Rentable Area.

Term:

As to the Third Floor Portion, the Fourth Floor Portion and the Original Storage Space, commencing on January 15, 2001 and continuing until April 30, 2011, with two (2) five-year options pursuant to Section 3.2.

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	As to the Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space, commencing on the Possession Date and continuing until June 30, 2013, with two (2) five-year options pursuant to Section 3.2.
Anticipated Possession Date:	As to the Third Floor Portion, the Fourth Floor Portion and the Original Storage Space, June 23, 2000.
	As to the Seventh Floor Portion and the Eighth Floor Portion, March 15, 2005.
	As to the Additional Storage Space, as soon as reasonably practicable after Landlord obtains possession of the Additional Storage Space and Tenant elects to lease the Additional Storage Space pursuant to Section 3.1.1.
Possession Date:	As to the Third Floor Portion, the Fourth Floor Portion and the Storage Space, January 15, 2001.
	As to the Seventh Floor Portion and the Eighth Floor Portion, the Effective Date defined in the Fifth Amendment to Office Lease between Landlord and Tenant (the “Fifth Amendment”).
	As to the Additional Storage Space, the date upon which Landlord delivers possession of the Additional Storage Space pursuant to Section 3.1.1 of the Lease.
Commencement Date:	As to the Third Floor Portion, the Fourth Floor Portion and the Original Storage Space, May 1, 2001.
	As to the Seventh Floor Portion and the Eighth Floor Portion, the Effective Date.
	As to the Additional Storage Space, the Possession Date.
Expiration Date:	As to the Third Floor Portion, the Fourth Floor Portion and the Original Storage Space, April 30, 2011.
	As to the Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space, June 30, 2013.
Base Rent:	Initial Term: As shown on Schedule 1 to the Fifth Amendment.

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	Extended Terms: The fair market rent as determined in accordance with Section 3.2 of the Lease.
Base Year:	As to the Third Floor Portion, the Fourth Floor Portion and the Original Storage Space, calendar year 2000.
	As to the Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space, calendar year 2004 until June 14, 2006; as of June 15, 2006, the Base Year shall be reset to calendar year 2006.
Tenant’s Percentage Share:	15.19% until February 14, 2004.
	13.174% collectively for the Third Floor Portion and Fourth Floor Portion from February 15, 2004 to the Effective Date.
	13.179% collectively for the Third Floor Portion and Fourth Floor Portion from and after the Effective Date.
	20.99% collectively for the Seventh Floor Portion and Eighth Floor Portion.
Permitted Use:	General office use.
Security Deposit:	$3,500,000 subject to reduction pursuant to Section 26.2, plus an additional $205,469 as of the Effective Date.

3. Surrender of First Floor Portion. As of the Effective Date, the First Floor Portion of the Premises shall be deemed surrendered by Tenant to Landlord, the Lease shall be terminated with respect to the First Floor Portion of the Premises, and the “Premises” as defined in the Existing Lease shall be deemed to exclude the First Floor Portion. Landlord acknowledges that the First Floor Portion shall be delivered to Landlord by Tenant as of the Effective Date in its “as is” condition and is accepted by Landlord in such condition, notwithstanding anything in the Existing Lease to the contrary. All reference in the Lease to the First Floor Portion, including without limitation the reference in the definition of Rentable Area in Section 1.1, shall be deleted. Tenant shall have no obligation to effect the termination of the Print 1 Sublease or to surrender the Premises free and clear of Print 1’s subtenancy. Tenant, however, shall remain liable for all unperformed obligations and claims arising out of the Print 1 Sublease prior to the Effective Date. Tenant shall indemnify, protect, defend and hold Landlord harmless of and from loss, liens, liability, claims, causes of action, damage, injury, cost or expense arising out of or in connection with Tenant’s obligations as sublandlord under the Print 1 Sublease first arising or accruing prior to the Effective Date. Landlord shall indemnify, defend, protect and hold Tenant harmless of and from loss, liens, liability, claims, causes of action, damage, injury, cost or expense first arising or accruing from and after the Effective Date with respect to the Print 1 Sublease and the continuation of the Print 1 Sublease or Print 1’s continued right to occupy any portion of the First Floor Portion. Except as otherwise provided in this Fifth Amendment, the indemnification obligations of Tenant under Section 17.2 of the Existing Lease with respect to

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the First Floor Portion prior to the Effective Date and the indemnification obligations of Landlord under Section 17.3 of the Existing Lease with respect to the First Floor Portion prior to the Effective Date shall survive the early termination of the Existing Lease as to the First Floor Portion of the Premises.

4. Term. As of the Effective Date, the definition of Term set forth in Section 1.1 of the Existing Lease is hereby deleted and the following definition is inserted in place thereof:

Term: As to the Third Floor Portion, the Fourth Floor Portion and the Original Storage Space, the period from January 15, 2001 to April 30, 2011, or the last date of an Extended Term applicable to the Third Floor Portion, the Fourth Floor Portion and the Original Storage Space pursuant to a properly exercised Extension Option; and as to the Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space, the period from the Possession Date as to the Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space to June 30, 2013 or the last date of an Extended Term applicable to the Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space pursuant to a properly exercised Extension Option. The term Initial Term as used herein shall be the period from January 15, 2001 to April 30, 2011 as to the Third Floor Portion, the Fourth Floor Portion and the Original Storage Space and the period from the Possession Date to June 30, 2013 as to the Seventh Floor Portion, the Eighth Floor Portion and Additional Storage Space.

5. Use Change. As of the Effective Date, Section 2.5 of the Existing Lease is hereby deleted in its entirety.

6. Term Commencement and Acceptance of Premises. Section 3.1 of the Existing Lease provides the terms and conditions of delivery and acceptance of the Third Floor Portion and the Fourth Floor Portion, for which Tenant has previously accepted delivery and in which Tenant is in occupancy as of the date of this Fifth Amendment. As of the Effective Date, the following new Sections 3.1.1, 3.1.2, 3.1.3 and 3.1.4 are hereby added to the Existing Lease with respect to the terms and conditions of delivery and acceptance of the Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space only:

3.1.1 Term and Acceptance of Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space. Except as hereinafter provided, and unless terminated pursuant to the provisions of this Lease, the Term of this Lease as to the Seventh Floor Portion and the Eighth Floor Portion shall commence upon the Possession Date as to the Seventh Floor Portion and the Eighth Floor Portion and the Term of this Lease as to the Additional Storage Space shall commence upon the Possession Date as to the Additional Storage Space. At such time as Landlord obtains possession of the Additional Storage Space, Landlord shall send written notice to Tenant of Landlord’s ability to lease the Additional Storage Space. Within thirty (30) days after receipt of such notice, Tenant shall send written notice to Landlord indicating whether or not Tenant elects to lease the Additional Storage Space. If Tenant elects to lease the Additional Storage Space, Landlord shall deliver possession of the Additional Storage Space to Tenant within three (3)

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days after receipt of Tenant’s notice to lease and, commencing upon delivery of the Additional Storage Space and continuing thereafter for the remaining Term, Tenant shall pay Base Rent for such Additional Storage Space in the amount of Eighteen and 00/100 Dollars ($18.00) per square foot. If Tenant fails to respond within the thirty-day period following Landlord’s notice of the availability of the Additional Storage Space, Tenant shall be deemed to have elected to not lease the Additional Storage Space. The Term as to the Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space shall end on the Expiration Date set forth in the Basic Lease Information as to the Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space. No delay in delivery of the Seventh Floor Portion and the Eighth Floor Portion for any reason whatsoever shall operate to extend the Expiration Date or the Term. In the event that the Seventh Floor Portion and the Eighth Floor Portion are delivered to Tenant on any date other than the Anticipated Possession Date set forth in the Basic Lease Information of this Lease, Landlord and Tenant shall execute a Confirmation of Lease Term in the form as set forth in Exhibit E attached to this Lease. At such time as the Additional Storage Space is delivered, Landlord and Tenant shall likewise execute a Confirmation of Lease Term in the form as set forth in Exhibit E.

3.1.2 Condition of the Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space. Tenant is currently occupying the entire Seventh Floor Portion of the Premises and a portion of the Eighth Floor Portion of the Premises pursuant to the Salesforce Sublease and Tenant has had an opportunity to inspect the current condition of the remaining portion of the Eighth Floor Portion (the “Vignette Eighth Floor Portion”). Landlord shall deliver the Seventh Floor Portion, the Eighth Floor Portion and the Additional Storage Space to Tenant in its “as is” condition; provided that the Vignette Eighth Floor Portion shall be delivered in a clean and orderly, but otherwise “as-is,” condition, with all fixtures left in place, and with all personal property of Vignette removed except such personal property which is being purchased by Tenant pursuant to that certain Sublease Termination Agreement by and between Vignette and Tenant dated March 7, 2005 (the “Sublease Termination Agreement”). Landlord shall have no responsibility for failure of Vignette to surrender the Premises with the personal property being purchased pursuant to the Sublease Termination Agreement left in place or Vignette’s failure to otherwise perform its obligations under the Sublease Termination Agreement. Except as provided herein, Tenant shall be responsible for performing and paying the costs of any improvements or alterations required to prepare the Seventh Floor Portion and the Eighth Floor Portion for Tenant’s occupancy pursuant to the Lease. Any initial improvements or alterations to the Seventh Floor Portion and Eighth Floor Portion following the Effective Date shall be performed in compliance with Article 10 of the Lease and Paragraphs 3, 4, 5.3, 6, 7 and 8 of the Work Letter such that references to Tenant’s Work shall be deemed to be references to the improvements and alterations to the Seventh Floor Portion and Eighth floor Portion; any improvements following the initial improvements to the Seventh Floor Portion

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and Eighth Floor Portion shall be performed solely in compliance with Article 10 of the Lease.

3.1.3 Remaining Allowance. An amount equal to Three Hundred Two Thousand Ninety Two and 43/100 Dollars ($302,092.43) has not been disbursed by Landlord from the Construction Allowance provided in the Work Letter (the “Remaining Allowance”). Landlord and Tenant agree that, notwithstanding anything to the contrary contained herein or in the Work Letter, the Remaining Allowance shall be (a) first disbursed to Landlord to pay for (i) the tenant improvement allowance payable to OfficeMax (or any replacement tenant should OfficeMax fail to occupy any portion of the First Floor Portion); (ii) the tenant improvement allowance payable to Print 1 under the Print 1 Sublease in an amount not to exceed $40,200; (iii) the brokerage commissions payable to a third-party broker with respect to the leasing of the First Floor Portion to OfficeMax (or any replacement tenant should OfficeMax fail to occupy any portion of the First Floor Portion); (iv) attorneys’ fees incurred by Landlord in connection with the negotiation and documentation of the lease with Office Max (or any replacement tenant should OfficeMax fail to occupy); and (v) lender review fees incurred by Landlord in connection with the lender’s review of the Fifth Amendment, the lease with Office Max (or any replacement tenant should OfficeMax fail to occupy) and any other matter set forth as a condition precedent in Paragraph 17 requiring lender’s review or approval, and (b) then, if any amount remains, added to the 7^th and 8^th Floor Allowance (as defined below) and disbursed in accordance with the terms and conditions for such 7^th and 8^th Floor Allowance.

3.1.4 7th and 8th Floor Allowance. In addition to the availability of the Remaining Allowance, Landlord shall provide an additional allowance in the amount of Two Million Two Hundred Forty One Thousand Four Hundred Eighty and 00/100 Dollars ($2,241,480.00), calculated at the rate of Thirty and 00/100 Dollars ($30.00) multiplied by the Rentable Area of the Seventh Floor Portion and Eighth Floor Portion (the “7^th and 8^th Floor Allowance”). At least One Million Seven Hundred Thousand and 00/100 Dollars ($1,700,000.00) of the 7^th and 8^th Floor Allowance shall be used for the soft and hard costs of alterations or improvements to the Seventh Floor Portion and the Eighth Floor Portion. Disbursement of the 7^th and 8^th Floor Allowance shall be made within thirty (30) days after delivery to Landlord of the items included in Tenant’s Completion Notice as defined in the Work Letter. Provided that at least One Million Seven Hundred Thousand and 00/100 Dollars ($1,700,000.00) of the 7^th and 8^th Floor Allowance has been used and disbursed for alterations or improvements to the Seventh Floor Portion and the Eighth Floor Portion Premises, the remaining balance of the 7^th and 8^th Floor Allowance shall, at Tenant’s election, then be (i) disbursed to Tenant for reimbursement of hard and soft costs of alterations or improvements made by Tenant to the Building prior to the Effective Date and with respect to which Tenant has not been reimbursed from the Construction Allowance previously granted to Tenant, (ii) disbursed to Tenant for reimbursement of hard and soft costs of alterations or improvements made by Tenant to the Building after the Effective Date and/or (iii) paid to Tenant.

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Disbursements of the remaining balance of the 7^th and 8^th Floor Allowance pursuant to the preceding sentence for reimbursement of hard and soft construction costs shall be made within thirty (30) days after delivery to Landlord of copies of paid invoices or receipts relating to the alterations and improvements to the Building for which Tenant is seeking reimbursement.

7. Option to Extend.

a. As of the Effective Date, Section 3.2 of the Existing Lease is hereby amended to grant Tenant two (2) options (in place of the one (1) option granted in the Existing Lease) to extend the applicable Initial Term of the Lease as to the Third Floor Portion, Fourth Floor Portion and Original Storage Space and as to the Seventh Floor Portion, Eighth Floor Portion and Additional Storage Space for two (2) additional periods of five (5) years each. Such options shall collectively be referred to as, the “Extension Options” and individually, as an “Extension Option.” The exercise of any Extension Option shall be governed by the terms and conditions of Section 3.2 of the Existing Lease; provided however that since the lease term for the Third Floor Portion, Fourth Floor Portion and Original Storage Space, on the one hand, and the lease term for the Seventh Floor Portion, Eighth Floor Portion and Additional Storage Space (if such Additional Storage Space has been delivered to Tenant), on the other hand, are not coterminous (a) reference to the Premises in Section 3.2 shall be deemed to refer to either the Third Floor Portion, Fourth Floor Portion and Original Storage Space or to the Seventh Floor Portion, Eighth Floor Portion and Additional Storage Space, as applicable; (b) the second Extension Option as to the Third Floor Portion, Fourth Floor Portion and Original Storage Space shall automatically terminate if Tenant fails to timely and properly exercise the first Extension Option as to the Third Floor Portion, Fourth Floor Portion and Original Storage Space in accordance with the terms and conditions of Section 3.2; and (c) the second Extension Option as to the Seventh Floor Portion, Eighth Floor Portion and Additional Storage Space shall automatically terminate if Tenant fails to timely and properly exercise the first Extension Option as to the Seventh Floor Portion, Eighth Floor Portion and Additional Storage Space.

b. The first sentence of Section 3.2.1 of the Existing Lease is deleted and replaced in its entirety with the following:

If no “Suspension Condition” (as hereinafter defined) exists at the time of Tenant’s exercise of the option to extend the Term or at the commencement of the Extended Term, and, with respect to the option to extend the Fourth Floor Portion, Tenant has timely and properly exercised the option to extend the fourth floor of the Annex set forth in the Annex Lease for the comparable extended term, Tenant shall have two (2) options (each, an “Extension Option”) to extend the Initial Term for additional periods of five (5) years (each, an “Extended Term”).

8. Retail Use. As of the Effective Date, Section 7.7 of the Existing Lease and Section 2 of the Fourth Amendment are each hereby deleted in their entirety.

9. Density. Section 8.4 of the Existing Lease is hereby amended to delete clause (ii) thereof and to insert in place thereof the following clause: “(ii) permit average permanent occupancy levels in excess of one person per one seventy five (175) feet of Rentable Area.”

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Section 17.3 of the Existing Lease is hereby amended to delete (E) thereof and to insert in place thereof the following: “(E) result in increased density per floor in excess of one person/175 square feet of Rentable Area.”

10. Non-Disturbance. The last two sentences of Section 21.1 of the Existing Lease are hereby deleted and the following sentences are inserted in place hereof:

If any proceeding is brought for the foreclosure of any such encumbrance (or if any ground lease is terminated), (a) if requested by such purchaser or encumbrancer, Tenant (i) shall attorn, without any deductions or set-offs whatsoever, to the encumbrancer or purchaser or any successors thereto upon any foreclosure sale or deed in lieu thereof (or to the ground lessor), and (ii) shall recognize such purchaser or encumbrancer as the lessor under this Lease, and (b) such purchaser or encumbrancer shall accept this Lease and shall not disturb Tenant’s occupancy, so long as Tenant timely pays Rent and observes and performs the terms, covenants and conditions of this Lease to be observed and performed by Tenant. Within ten (10) business days after request by Landlord or any encumbrancer, Tenant shall execute such further commercially reasonable instruments or assurances which are consistent with the provisions of this Section 21.1 to evidence or confirm the subordination or superiority of this Lease to any such encumbrance, the attornment by Tenant and the nondisturbance of Tenant.

11. Security Deposit. Landlord and Tenant acknowledge that the amount of the Security Deposit under the Existing Lease has been reduced to Two Million Eight Hundred Thousand Dollars ($2,800,000) as of the date hereof in accordance with the provisions of Section 26.2 of the Existing Lease. Within ten (10) business days after the Effective Date, Tenant shall increase the Security Deposit by the amount of Two Hundred Five Thousand Four Hundred Sixty Nine and 00/100 Dollars ($205,469.00). Tenant shall either deliver such increased Security Deposit to Landlord (i) in immediately available funds; (ii) by providing to Landlord an amendment to the existing L-C held by Landlord pursuant to Section 26 of the Existing Lease increasing the stated amount of the L-C to Three Million Five Thousand Four Hundred Sixty Nine and 00/100 Dollars ($3,005,469); or (iii) by providing to Landlord an additional L-C in the stated amount of Two Hundred Five Thousand Four Hundred Sixty Nine and 00/100 Dollars ($205,469.00). Such amendment to the existing L-C or new L-C shall comply with the requirements of Section 26.3 of the Existing Lease. Landlord agrees that to the extent that the Security Deposit is further reduced pursuant to Section 26.2 of the Existing Lease, Tenant may either replace the existing L-C with a reduced L-C, or cause the existing L-C to be amended to the reduced amount, at Tenant’s election.

12. Automobile Parking. As of the Effective Date, Section 30 of the Existing Lease is hereby deleted in its entirety and the following is inserted in place thereof:

30. Automobile Parking. There shall be no parking provided to Tenant in the Building or at any other location except as set forth in this Article 30. Pursuant to the terms of the lease between the owner of the Annex and Landlord (the “Annex Master Lease”), Landlord currently has the right to use a certain number of parking spaces located within and outside the One Market Tower Project adjacent

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to the Building (as such number of spaces increase or decrease, the “Landlord Parking Rights”). For as long as Landlord maintains the Landlord Parking Rights, then Landlord shall provide to Tenant, at market rate costs to be paid by Tenant to Landlord, ten (10) parking spaces, a minimum of two (2) of such parking spaces shall be located within the One Market Tower project so long as Landlord has the Landlord Parking Rights to the Annex Master Lease for least eight (8) spaces in the One Market Tower project.

13. Signage. As of the Effective Date, Section 32 of the Lease is hereby deleted in its entirety and the following is inserted in place thereof:

32. Tenant’s Sign. Without Landlord’s prior consent, which Landlord may withhold in its sole discretion, Tenant shall not place on the Premises or on the Building any exterior signs nor any interior signs that are visible from the exterior of the Premises or Building. Tenant shall pay all costs and expenses relating to any such sign approved by Landlord, including without limitation, the cost of the installation and maintenance of the sign. On the date of expiration or earlier termination of this Lease, Tenant, at its sole cost and expense, shall remove all signs and repair any damage caused by such removal. Upon the Effective Date of the Fifth Amendment, Tenant shall remove the signs, if any, installed by Tenant pursuant to the Existing Lease at the exterior locations at the corner of Market and Spear Streets. Tenant shall be entitled to maintain its signage in the lobby of the Building existing as of the Effective Date for the remainder of the Term of this Lease. In addition, Landlord shall use commercially reasonable efforts to obtain the consent of Del Monte Corporation to the installation of a second similar sign in the lobby of the Building at the entrance from the One Market project (being the opposite end of the lobby from the existing signage).

14. Expansion Rights. As of the Effective Date, a new Section 34 is hereby added to the Existing Lease:

34. Expansion Rights.

34.1.1 Offer. For the period from the Effective Date until the fifth anniversary of the Effective Date, Tenant shall have a continuing right of first offer (the “Right of First Offer”) to lease (a) the entire second floor, (b) the entire fifth floor, and (c) the entire ninth, tenth and eleventh floors of the Building (each of the space described in clauses (a), (b) and (c) being an “Offering Space”) at such time as the existing tenants therefor fail to exercise their extension options in existence as of the date of the Fifth Amendment or the applicable lease is otherwise terminated (the occurrence of either making the applicable Offering Space “Available for Lease”). Landlord represents and warrants that no party other than the current tenant has any expansion right superior to the right of Tenant hereunder. If Offering Space becomes Available for Lease, Landlord shall not enter into a new lease for any such space without first giving Tenant written notice (an “Advice”) that Offering Space is or will be coming available for leasing and granting Tenant the opportunity to lease such

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space (as well as any other space described therein) in accordance with this Section. Landlord shall provide Tenant with an Advice promptly after Landlord has determined that Offering Space is Available for Lease (but prior to leasing the Offering Space to a third party). The Advice shall describe with specificity the space that Landlord offers to Lease to Tenant (the “Expansion Space”) including, without limitation, Landlord’s determination of gross rentable square feet and location, the date on which the Expansion Space is expected to be available for delivery to Tenant, the parking rights that will be granted, and the base rent, base year and tenant improvement allowance at which the Expansion Space is offered. Tenant may lease the Expansion Space in its entirety only, under such terms, by delivering written notice of exercise to Landlord (“Notice of Exercise”) within ninety (90) days after the receipt of the Advice (“ROFO Exercise Period”), unless the Advice states that the Offering Space became available because of a early termination of the lease for such Offering Space in which case the ROFO Exercise Period shall be forty five (45) days. During such ROFO Exercise Period Landlord shall permit Tenant to physically inspect the Expansion Space. Expansion Space accepted by Tenant shall be deemed to be “Accepted Expansion Space”. Notwithstanding anything herein to the contrary, Tenant shall have no Right of First Offer and Landlord need not provide Tenant with an Advice, if:

(i) Tenant is in default under this Lease (beyond all applicable notice and grace periods) at the time Landlord would otherwise deliver the Advice; or

(ii) the Premises, or more than 32% of the Premises, is sublet to other than a Related Entity at the time Landlord would otherwise deliver the Advice; or

(iii) the Lease has been assigned to other than a Related Entity prior to the date Landlord would otherwise deliver the Advice; or

(iv) neither Tenant nor a Related Entity is occupying the Premises on the date Landlord would otherwise deliver the Advice; or

(v) the Offering Space is not intended for the exclusive use of Tenant or a Related Entity during the Term.

The rights of Tenant hereunder with respect to any applicable Advice shall terminate on the earlier to occur of: (i) Tenant’s failure to exercise its Right of First Offer within the ROFO Exercise Period and (ii) the date Landlord would have provided Tenant an Advice if one or more of the conditions set forth above is satisfied, notice of which shall be concurrently delivered to Tenant.

34.1.2. Tenant’s Exercise. In the event that Tenant exercises its Right of First Offer as provided above, the term for the Accepted Expansion Space shall commence upon the later of (i) the expected delivery date set forth in the Advice

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and (ii) Landlord’s actual delivery of the Accepted Expansion Space and thereupon such Offering Space shall be considered a part of the Premises, provided that all of the terms stated in the Advice shall govern Tenant’s leasing of such Accepted Expansion Space and only to the extent that they do not conflict with the Advice, the terms and conditions of this Lease shall apply to such Accepted Expansion Space. The Offering Space (including improvements and personalty, if any) shall be accepted by Tenant in its “AS-IS” condition and as-built configuration existing on the earlier of the date Tenant takes possession of the Accepted Expansion Space or as of the date the term for such Accepted Expansion Space commences, unless the Advice specifies any work to be performed by Landlord in the Accepted Expansion Space, in which case Landlord shall perform such work in the Accepted Expansion Space. If Tenant exercises its Right of First Offer, Landlord shall prepare an amendment (the “Offering Amendment”) adding the Accepted Expansion Space to the Premises on the terms set forth in the Advice and reflecting the changes in Base Rent, rentable square feet in the Premises, Tenant’s Percentage Share, Base Year and other appropriate terms. A copy of the Offering Amendment shall be (i) sent to Tenant within a reasonable time after receipt of the Notice of Exercise executed by Tenant, and (ii) executed by Tenant and returned to Landlord within thirty (30) days thereafter, but an otherwise valid exercise of the Right of First Offer contained herein shall, at Landlord’s option, be fully effective whether or not the Offering Amendment is executed.

34.1.3 Limitation on Tenant’s Right as to 9^th, 10^th and 11^th Floors Offering Space. With respect to Tenant’s exercise of its Right of First Offer as to Offering Space on the entire 9th, 10^th and 11^th Floors only, Tenant’s Notice of Election to be effective must be accompanied by evidence that Tenant has maintained a credit rating as determined by Moody’s (or other similar credit rating agency reasonably acceptable to Landlord) of BBB+ or better for the twelve-month period preceding Tenant’s delivery of its Notice of Election. Landlord shall advise Tenant within fourteen (14) days after receipt of the Notice of Election and evidence of credit rating whether such evidence is satisfactory to Landlord.

34.1.4 Reinstatement. If Tenant fails to exercise its Right of First Offer within the ROFO Exercise Period, then Landlord shall be free to lease the Offering Space to anyone to whom Landlord desires on any terms Landlord desires; provided however that if any of the economic terms of such lease shall not be 92% or greater than any of the economic terms in the Advice, Tenant’s rights hereunder shall be reinstated and Landlord shall be obligated to offer the Offering Space to Tenant on the revised terms (the “Revised Advise”) in accordance with the procedure set forth in Section 34.1.1, except that Tenant shall be obligated to exercise its Right of First Offer based on the Revised Advise within fifteen (15) days.

12

34.1.5 Consents. At the time Landlord delivers the Accepted Expansion Space, Landlord shall also deliver to Tenant all consents, including any lender’s consent, necessary to effect the Offering Amendment and use commercially reasonable efforts to cause any lender to deliver any amendment or amendments necessary to cause the Accepted Expansion Space to be protected by any Subordination, Attornment and Non-Disturbance Agreement then in place.

15. Elevator Lobbies. Tenant shall have the right at any time during the Term to repaint the elevator lobbies on any floor of the Premises and the Premises to colors selected by Tenant without obtaining any consent or approval from Landlord.

16. Brokerage Commission. Each of Landlord and Tenant represents and warrants to the other that it has not had any dealings with any broker or agent in connection with the negotiation or execution of this Fifth Amendment other than Tenant’s broker Cushman & Wakefield. Landlord agrees to pay a commission to Cushman & Wakefield with respect to this Fifth Amendment per separate written agreement. Tenant agrees to indemnify, defend and hold Landlord harmless from any and all costs (including attorneys’ fees), expenses or liability for commissions or other compensation claimed by any broker or agent other than Cushman & Wakefield claiming to have had dealings with Tenant in connection with this Fifth Amendment. Landlord agrees to indemnify, defend and hold Tenant harmless from any and all costs (including attorneys’ fees), expenses or liability for commissions or other compensation claimed by any broker or agent other than Cushman & Wakefield claiming to have had dealings with Landlord in connection with this Fifth Amendment.

17. Conditions Precedent.

a. Landlord Conditions. The following shall be conditions precedent to the effectiveness of this Fifth Amendment for the benefit of Landlord:

(1) Lease Termination with Vignette. Landlord shall have entered into a termination of the Vignette Lease upon terms and conditions acceptable to Landlord in its sole discretion (the “Vignette Lease Termination”) and Vignette shall have surrendered the Seventh Floor Portion and Eighth Floor Portion in accordance with the terms and conditions of the Vignette Lease Termination.

(2) Annex Lease Amendment. Landlord and Tenant shall have entered into an amendment to the Annex Lease acceptable to Landlord in its sole and absolute discretion (the “Annex Lease Amendment”).

(3) Lender’s Consent. Landlord shall have obtained the consent of the beneficiary of the existing deed of trust encumbering the Building (“Existing Lender”) to (i) this Fifth Amendment and (ii) the Vignette Lease Termination.

If the conditions precedent set forth in this Paragraph 17(a) have not been satisfied or waived by Landlord on or before June 1, 2005, this Fifth Amendment shall be null and void and of no further force or effect. Landlord shall provide written notice to Tenant on or before June 1, 2005 indicating whether such conditions precedent are satisfied, unsatisfied or waived.

13

b. Tenant Conditions. The following shall be conditions precedent to the effectiveness of this Fifth Amendment for the benefit of Tenant:

(1) Annex Lease Amendment. Landlord and Tenant shall have entered into the Annex Lease Amendment acceptable to Tenant in its sole and absolute discretion.

(2) Sublease Termination Agreement. Tenant shall have entered into a termination of the Salesforce Sublease upon terms and conditions acceptable to Tenant in its sole discretion (the “Salesforce Sublease Termination”) and Vignette shall have surrendered the Seventh Floor Portion and portion of the Eighth Floor Portion currently occupied by Tenant in accordance with the terms and conditions of the Salesforce Sublease Termination.

(3) SNDA. Landlord shall have obtained from Existing Lender for the benefit of Tenant a subordination, non-disturbance and attornment agreement acceptable to Tenant with respect to Tenant’s interest in the entire Premises, including the Seventh Floor Portion and Eighth Floor Portion. Nothing contained in this Section 17(b)(3) shall be deemed an obligation or covenant of Landlord to obtain such subordination, non-disturbance and attornment agreement.

If the conditions precedent set forth in this Paragraph 17(b) have not been satisfied or waived by Tenant on or before June 1, 2005, this Fifth Amendment shall be null and void and of no further force or effect. Tenant shall provide written notice to Landlord on or before June 1, 2005 indicating whether such conditions precedent are satisfied, unsatisfied or waived.

18. Representations and Warranties. (a) As a material inducement to Landlord to enter into this Fifth Amendment, Tenant represents and warrants to Landlord that, as of the date of this Fifth Amendment to Lease:

(1) No Defaults. The Existing Lease is in full force and effect. There are no defaults by Tenant under the Existing Lease, and no circumstance has occurred which, but for the expiration of an applicable grace period, would constitute an event of default by Tenant under the Existing Lease. To Tenant’s knowledge, there are no defaults by Landlord under the Existing Lease, and no circumstance has occurred which, but for the expiration of an applicable grace period, would constitute an event of default by Landlord under the Existing Lease. To Tenant’s knowledge, Tenant has no defenses or rights of offset under the Existing Lease.

(2) No Assignment. Tenant is the sole lawful tenant under the Existing Lease, and Tenant has not sublet (other than pursuant to the Print 1 Sublease), assigned, conveyed, encumbered or otherwise transferred any of the right, title or interest of Tenant under the Existing Lease or arising from its use or occupancy of the Premises, and no other person, partnership, corporation or other entity has any right, title or interest in the Existing Lease or the Premises, or the right to occupy or use all or any part of the Premises.

(3) Authority. Tenant is a duly formed and existing entity qualified to do business in the State of California. Tenant has full right and authority to execute and deliver this Fifth Amendment and each person signing on behalf of Tenant is authorized to do so and no

14

consent of any party is required on behalf of Tenant for this Fifth Amendment to be in full force and effect.

(b) As a material inducement to Tenant to enter into this Fifth Amendment, Landlord represents and warrants to Tenant that, as of the date of this Fifth Amendment:

(1) No Defaults. The Existing Lease is in full force and effect. There are no defaults by Landlord under the Existing Lease, and no circumstance has occurred which, but for the expiration of an applicable grace period, would constitute an event of default by Landlord under the Existing Lease. To Landlord’s knowledge, there are no defaults by Tenant under the Existing Lease, and no circumstance has occurred which, but for the expiration of an applicable grace period, would constitute an event of default by Tenant under the Existing Lease.

(2) Authority. Landlord is a duly formed and existing entity qualified to do business in the State of California; Landlord has full right and authority to execute and deliver this Fifth Amendment and each person signing on behalf of Landlord is authorized to do so and no consent of any party is required on behalf of Landlord for this Fifth Amendment to be in full force and effect, excluding the Existing Lender.

19. Interpretation of Amendment. This Fifth Amendment and Existing Lease shall be construed as a whole in order to effectuate the intent of the parties to amend the Existing Lease in the manner specified in this Fifth Amendment. All provisions of the Existing Lease affected by this Fifth Amendment shall be deemed amended regardless of whether so specified in this Fifth Amendment. Subject to the foregoing, if any provision of the Existing Lease conflicts with any provision of this Fifth Amendment, the provision of this Fifth Amendment shall control.

20. No Further Amendment. Except as amended by this Fifth Amendment, the Existing Lease shall continue in full force and effect and in accordance with its terms.

21. Governing Law. This Fifth Amendment shall be construed in accordance with and governed by the laws of the State of California.

22. Partial Invalidity. If any one or more of the provisions contained in this Fifth Amendment shall be invalid, illegal or unenforceable in any respect, the remaining provisions contained herein shall not be affected in any way thereby.

[signatures follow on next page]

15

IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as of the date first hereinabove set forth.

LANDLORD:
TMG/ONE MARKET, L.P., a Delaware limited partnership
By:	Martin/One Market, LLC, a California limited liability company Its General Partner
	By:	TMG One Market Manager, Inc., a California corporation Its Managing Member
		By:	/s/ Cathy Greenwold
		Its:	EVP

TENANT:
SALESFORCE.COM, INC., a Delaware corporation
By:	/s/ David Schellhase
Its:	SVP & General Counsel

16

EXHIBIT A

DESCRIPTION OF PREMISES AS OF THE EFFECTIVE DATE

[GRAPHIC]

1

SCHEDULE 1 TO THE FIFTH AMENDMENT TO OFFICE LEASE

March 1, 2005	$403,924.28	January 1, 2010	$591,105.25
April 1, 2005	$505,395.21	February 1, 2010	$591,105.25
May 1, 2005	$518,288.76	March 1, 2010	$591,105.25
June 1, 2005	$518,288.76	April 1, 2010	$591,105.25
July 1, 2005	$518,288.76	May 1, 2010	$591,105.25
August 1, 2005	$518,288.76	June 1, 2010	$591,105.25
September 1, 2005	$504,061.93	July 1, 2010	$596,553.30
October 1, 2005	$504,061.93	August 1, 2010	$596,553.30
November 1, 2005	$504,061.93	September 1, 2010	$596,553.30
December 1, 2005	$504,008.34	October 1, 2010	$596,553.30
January 1, 2006	$504,008.34	November 1, 2010	$596,553.30
February 1, 2006	$504,008.34	December 1, 2010	$596,491.17
March 1, 2006	$504,008.34	January 1, 2011	$596,491.17
April 1, 2006	$504,008.34	February 1, 2011	$596,491.17
May 1, 2006	$504,008.34	March 1, 2011	$596,491.17
June 1, 2006	$538,253.17	April 1, 2011	$596,491.17
July 1, 2006	$572,498.00	May 1, 2011	$295,750.83
August 1, 2006	$572,498.00	June 1, 2011	$295,750.83
September 1, 2006	$572,498.00	July 1, 2011	$301,198.88
October 1, 2006	$572,498.00	August 1, 2011	$301,198.88
November 1, 2006	$572,498.00	September 1, 2011	$301,198.88
December 1, 2006	$572,442.84	October 1, 2011	$301,198.88
January 1, 2007	$572,442.84	November 1, 2011	$301,198.88
February 1, 2007	$572,442.84	December 1, 2011	$301,198.88
March 1, 2007	$572,442.84	January 1, 2012	$301,198.88
April 1, 2007	$572,442.84	February 1, 2012	$301,198.88
May 1, 2007	$572,442.84	March 1, 2012	$301,198.88
June 1, 2007	$572,442.84	April 1, 2012	$301,198.88
July 1, 2007	$577,890.89	May 1, 2012	$301,198.88
August 1, 2007	$577,890.89	June 1, 2012	$301,198.88
September 1, 2007	$577,890.89	July 1, 2011	$306,646.92
October 1, 2007	$577,890.89	August 1, 2011	$306,646.92
November 1, 2007	$577,890.89	September 1, 2011	$306,646.92
December 1, 2007	$577,833.97	October 1, 2011	$306,646.92
January 1, 2008	$577,833.97	November 1, 2011	$306,646.92
February 1, 2008	$577,833.97	December 1, 2011	$306,646.92
March 1, 2008	$577,833.97	January 1, 2012	$306,646.92
April 1, 2008	$577,833.97	February 1, 2012	$306,646.92
May 1, 2008	$584,698.22	March 1, 2012	$306,646.92
June 1, 2008	$584,698.22	April 1, 2012	$306,646.92
July 1, 2008	$589,147.62	May 1, 2012	$306,646.92
August 1, 2008	$589,147.62	June 1, 2012	$306,646.92
September 1, 2008	$589,147.62	July 1, 2012	$306,646.92
October 1, 2008	$589,147.62	August 1, 2012	$306,646.92
November 1, 2008	$589,147.62	September 1, 2012	$306,646.92
December 1, 2008	$589,089.03	October 1, 2012	$306,646.92
January 1, 2009	$589,089.03	November 1, 2012	$306,646.92
February 1, 2009	$587,394.22	December 1, 2012	$306,646.92
March 1, 2009	$585,699.41	January 1, 2013	$306,646.92
April 1, 2009	$585,699.41	February 1, 2013	$306,646.92
May 1, 2009	$585,717.54	March 1, 2013	$306,646.92
June 1, 2009	$585,717.54	April 1, 2013	$306,646.92
July 1, 2009	$591,165.58	May 1, 2013	$306,646.92
August 1, 2009	$591,165.58	June 1, 2013	$306,646.92
September 1, 2009	$591,165.58		$306,646.92
October 1, 2009	$591,165.58
November 1, 2009	$591,165.58
December 1, 2009	$591,105.25

1

SIXTH AMENDMENT TO OFFICE LEASE

THIS SIXTH AMENDMENT TO OFFICE LEASE (the “Sixth Amendment”) is made and entered into as of the 24th day of June, 2005 by and between LANDMARK VENTURE HOLDINGS, LLC, a Delaware limited liability company and LANDMARK FIREHILL HOLDINGS, LLC, a Delaware limited liability company, as tenants-in-common (collectively, “Landlord”), and SALESFORCE.COM, INC., a Delaware corporation (“Tenant”).

RECITALS

A. Landlord (as successor-in-interest to TMG/ONE MARKET, L.P, a Delaware limited partnership) and Tenant entered into that certain Office Lease dated as of June 23, 2000 (the “Original Lease”), as amended by that certain First Amendment to Lease dated November 13, 2000 (the “First Amendment”), as further amended by that certain Second Amendment to Lease dated April 17, 2001 (the “Second Amendment”), as further amended by that certain Third Amendment to Office Lease dated August 27, 2003 (the “Third Amendment”), as further amended by that certain Fourth Amendment to Office Lease dated July 30, 2004 (the “Fourth Amendment”), and as further amended by that certain Fifth Amendment to Office Lease dated March 10, 2005 (the “Fifth Amendment”) whereby Landlord demised to Tenant and Tenant leased from Landlord premises located on the third, fourth, seventh and eighth floors and storage space located in the basement of that certain building commonly known as The Landmark@One Market located in the City and County of San Francisco, California (the “Building”). The Original Lease, as amended by the First Amendment, Second Amendment, Third Amendment, Fourth Amendment and Fifth Amendment, is referred to herein as the “Existing Lease.”

B. Tenant desires to utilize a conduit pipe located in the basement of the Building, and Landlord has agreed to Tenant’s use of such conduit pipe subject to the terms, covenants and conditions hereinafter set forth. The Existing Lease, as amended by this Sixth Amendment, is sometimes referred to herein as the “Lease.”

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1. Use of Defined Terms; Recitals.

a. Definitions. All capitalized terms used herein shall have the defined meanings ascribed to them in the Existing Lease.

b. Recitals. The provisions of the Recitals above are fully incorporated herein by this reference.

2. Use of Conduit. Subject to the terms and conditions set forth in this Section 2, Tenant shall be permitted during the Term of the Lease at no additional cost to Tenant (except as otherwise required herein) to utilize, on a non-exclusive basis the conduit pipes (the “Conduit”) depicted on Exhibit A, attached hereto, for the installation, maintenance and repair of communications or computer wires and cables (collectively, the “Lines”) provided that

(i) Tenant will only have the right to use one of the two (2) parallel 4” conduit pipes that connect to the “4x4 CAN” from Spear Street (the “Street Pipes”) and (ii) Tenant will only have the right to use one of the four (4) 4” conduit pipes that connect the “4x4 CAN” to the MPOE (the “Connector Pipes”). Tenant, in Tenant’s sole and absolute discretion, may choose which of the Street Pipes and the Connector Pipes Tenant will utilize by giving advance written notice of its selection to Landlord; provided, however, that once Tenant selects its intended Street Pipe and Connector Pipe, Tenant shall not have the right to utilize (or switch to) the other Street Pipe of the other Connector Pipes. Tenant acknowledges and agrees that Landlord is making no representations regarding the suitability of the Conduit for Tenant’s purposes or the condition of the Conduit. Tenant’s use of the Conduit is on an “as-is” basis. Tenant’s use and maintenance of the Conduit and the installation, maintenance and repair of the Lines shall be subject to the following conditions: (a) Tenant shall provide Landlord prior written notice of any installation, maintenance or repair of the Lines (except for any installation, maintenance or repair of the Lines which will occur within the Premises provided that prior written notice is not otherwise required under the Existing Lease) and maintenance or repair of the Conduit; (b) Tenant shall use an experienced and qualified contractor reasonably approved in writing by Landlord; (c) the Lines shall be appropriately insulated to prevent excessive electromagnetic fields or radiation, and shall be surrounded by a protective conduit reasonably acceptable to Landlord; (d) Tenant’s use and maintenance of the Conduit and the installation, maintenance and repair of the Lines shall comply with all applicable governmental laws and regulations; (e) Tenant shall pay all costs in connection with the installation of the Lines and Tenant’s maintenance of the Conduit; and (f) Tenant shall repair any damage to the Conduit directly caused by Tenant’s use and/or maintenance of the Conduit and installation of the Lines. Neither Landlord nor Tenant shall have any obligation to maintain the Conduit, provided that Tenant may, in its sole and absolute discretion, maintain the Conduit in good condition provided Tenant complies with the conditions set forth in (a)-(f) above. Tenant shall protect, defend, indemnify and hold Landlord and its agents, affiliates, representatives, employees, predecessors, successors and assigns (collectively, “Landlord Parties”) harmless from and against any claim, demand, cause of action, obligation, liability, loss, cost or expense (including reasonable attorneys’ fees) which may be asserted against or incurred by Landlord Parties as a result of Tenant’s use and maintenance of the Conduit and the installation, maintenance and repair of the Lines, except for claims, demands, causes of action, obligations, liabilities, losses, costs or expenses due to Landlord’s gross negligence or willful misconduct.

3. Termination of Use. Tenant agrees to remove the Lines on or before the termination of the Lease and Tenant shall repair any damage in connection with such removal. Notwithstanding the foregoing, Landlord reserves the right to require that Tenant remove any Lines located in the Conduit and may terminate Tenant’s right to uses the Conduit in the following circumstances: (a) if the Lines are installed in violation of these provisions, or (b) if the Lines or the use of the Conduit are at any time in violation of any applicable governmental laws or regulations or represent a dangerous or potentially dangerous condition in Landlord’s reasonable opinion. In the event of an early termination of Tenant’s right to use the Conduit pursuant to this Section 3, Tenant shall be required to remove such Lines and repair any damage caused by the installation and removal of the Lines within ten (10) days of receipt of written notice from Landlord.

4. Representations and Warranties. (a) As a material inducement to Landlord to enter into this Sixth Amendment, Tenant represents and warrants to Landlord that, as of the date of this Sixth Amendment to Lease:

(1) No Defaults. The Existing Lease is in full force and effect. There are no defaults by Tenant under the Existing Lease, and no circumstance has occurred which, but for the expiration of an applicable grace period, would constitute an event of default by Tenant under the Existing Lease. To Tenant’s knowledge, there are no defaults by Landlord under the Existing Lease, and no circumstance has occurred which, but for the expiration of an applicable grace period, would constitute an event of default by Landlord under the Existing Lease. To Tenant’s knowledge, Tenant has no defenses or rights of offset under the Existing Lease.

(2) No Assignment. Tenant is the sole lawful tenant under the Existing Lease, and Tenant has not sublet (other than pursuant to the Print 1 Sublease), assigned, conveyed, encumbered or otherwise transferred any of the right, title or interest of Tenant under the Existing Lease or arising from its use or occupancy of the Premises, and no other person, partnership, corporation or other entity has any right, title or interest in the Existing Lease or the Premises, or the right to occupy or use all or any part of the Premises.

(3) Authority. Tenant is a duly formed and existing entity qualified to do business in the State of California. Tenant has full right and authority to execute and deliver this Sixth Amendment and each person signing on behalf of Tenant is authorized to do so and no consent of any party is required on behalf of Tenant for this Sixth Amendment to be in full force and effect.

(b) As a material inducement to Tenant to enter into this Sixth Amendment, Landlord represents and warrants to Tenant that, as of the date of this Sixth Amendment:

(1) N/A

(2) Authority. Landlord is a duly formed and existing entity qualified to do business in the State of California; Landlord has full right and authority to execute and deliver this Sixth Amendment and each person signing on behalf of Landlord is authorized to do so and no consent of any party is required on behalf of Landlord for this Sixth Amendment to be in full force and effect, excluding the Existing Lender.

5. Interpretation of Amendment. This Sixth Amendment and Existing Lease shall be construed as a whole in order to effectuate the intent of the parties to amend the Existing Lease in the manner specified in this Sixth Amendment. All provisions of the Existing Lease affected by this Sixth Amendment shall be deemed amended regardless of whether so specified in this Sixth Amendment. Subject to the foregoing, if any provision of the Existing Lease conflicts with any provision of this Sixth Amendment, the provision of this Sixth Amendment shall control.

6. No Further Amendment. Except as amended by this Sixth Amendment, the Existing Lease shall continue in full force and effect and in accordance with its terms.

7. Governing Law. This Sixth Amendment shall be construed in accordance with and governed by the laws of the State of California.

8. Partial Invalidity. If any one or more of the provisions contained in this Sixth Amendment shall be invalid, illegal or unenforceable in any respect, the remaining provisions contained herein shall not be affected in any way thereby.

IN WITNESS WHEREOF, the parties have executed this Sixth Amendment as of the date first hereinabove set forth.

LANDLORD:
LANDMARK VENTURE HOLDINGS, LLC, a Delaware limited liability company
By:	American Assets, Inc., its agent

By:	/s/ James R. Durfey
	James R. Durfey – V.P., Office
	Leasing and Management

LANDMARK FIREHILL HOLDINGS, LLC, a Delaware limited liability company
By:	American Assets, Inc., its agent

By:	/s/ James R. Durfey
	James R. Durfey – V.P., Office
	Leasing and Management

TENANT:
SALESFORCE.COM, INC., a Delaware corporation
By:	/s/ David Schellhase
	David Schellhase
Its:	VP & General Counsel

EXHIBIT A

[graphic]

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Marc Benioff, certify that:

1. I have reviewed this report on Form 10-Q of salesforce.com, 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 officer 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)) 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) 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

c) 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 officer 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.

Date: August 19, 2005

/ s/ Marc Benioff

Marc Benioff

Chairman of the Board of Directors and Chief
Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Steve Cakebread, certify that:

1. I have reviewed this report on Form 10-Q of salesforce.com, 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 officer 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)) 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) 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

c) 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.

Date: August 19, 2005

/ s/ Steve Cakebread

Steve Cakebread

Chief Financial Officer

EX-32.1

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.com, inc. on Form 10-Q for the period ended July 31, 2005 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.com, inc.

/ s/ Marc Benioff

Marc Benioff

Chairman of the Board of Directors and Chief
Executive Officer

Based on my knowledge, I, Steve Cakebread, 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.com, inc. on Form 10-Q for the period ended July 31, 2005 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.com, inc.

/ s / Steve Cakebread

Steve Cakebread

Chief Financial Officer