Pandora 2012 Annual Report Download - page 96

Table of Contents
Pandora Media, Inc.
Notes to Consolidated Financial Statements - Continued
8. Stock-based Compensation Plans and Awards
Stock Compensation Plans
In February 2000, the board of directors of the Company adopted the 2000 Stock Incentive Plan, as amended (the "2000 Plan"). In March 2004, the
board of directors of the Company adopted the 2004 Stock Option Plan (the "2004 Plan"), which replaced the 2000 Plan and provided for the issuance of
incentive and non-statutory stock options to employees and other service providers of the Company.
In May 2011, the board of directors of the Company adopted the Pandora Media, Inc. 2011 Equity Incentive Plan (the "2011 Plan" and, together with
the 2000 Plan and the 2004 Plan, the "Plans"). The 2011 Plan was the successor to the 2004 Plan and was available for grants starting on June 14, 2011. The
2011 Plan provides for the issuance of stock options, restricted stock units and other stock-based awards. Shares of common stock reserved for issuance under
the 2011 Plan include (a) 12,000,000 shares of common stock reserved for issuance under the 2011 Plan as of June 14, 2011 plus (b) 1,506,424 shares of
common stock previously reserved but unissued under the 2004 Plan as of June 14, 2011 that are now available for issuance under the 2011 Plan. To the
extent awards outstanding as of June 14, 2011 under the 2004 Plan expire or terminate for any reason prior to exercise or would otherwise return to the share
reserve under the 2004 Plan, the shares of common stock subject to such awards will instead be available for future issuance under the 2011 Plan. Each fiscal
year, (beginning with the fiscal year that commenced February 1, 2012 and ending with the fiscal year commencing February 1, 2021), the number of shares
in the reserve under the Plan may be increased by the lesser of (x) 10,000,000 shares, (y) 4.0% of the outstanding shares of common stock on the last day of
the prior fiscal year or (z) another amount determined by the Company's board of directors. The 2011 Plan is scheduled to terminate in 2021, unless the board
of directors determines otherwise.
Plans are administered by the compensation committee of the board of directors (the "Plan Administrator") of the Company.
Under the 2011 Plan, the Plan Administrator determines various terms and conditions of awards including option expiration dates (no more than ten
years from the date of grant), vesting terms (generally over a four-year period), and payment terms. For stock option grants the exercise price is determined by
the Plan Administrator, but generally may not be less than 100% of the fair market value of the common stock subject to the option on the date of grant.
Given the absence of a public trading market prior to the IPO, the Company's board of directors considered numerous objective and subjective factors
to determine the fair market value of its common stock at each meeting at which stock option grants were approved. These factors included, but were not
limited to; (i) contemporaneous valuations of common stock; (ii) the rights and preferences of redeemable convertible preferred stock relative to common
stock; (iii) the lack of marketability of common stock; (iv) developments in the business; (v) recent issuances of redeemable convertible preferred stock;
(vi) the likelihood of achieving a liquidity event, such as an initial public offering, or sale of the Company, given prevailing market conditions and
(vii) secondary transactions in the Company's common and preferred stock. These determinations of fair market value were used for purposes of determining
the Black-Scholes fair value of the Company's stock option awards and related stock-based compensation expenses.
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