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 provides for the issuance of incentive and non-statutory options to employees and nonemployees of the Company.

In May 2011, the Company adopted the Pandora Media, Inc. 2011 Equity Incentive Plan (the "2011 Plan"), which became effective concurrently with the effectiveness of the Company's registration statement on Form S-1 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 initially reserved for issuance under the 2011 Plan 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. On the first day of each fiscal year, starting with February 1, 2012, the number of shares in the reserve will increase 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 and (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.

The 2004 Plan and 2011 Plan are administered by the compensation committee of the board of directors of the Company.

Valuation of Awards

The per-share fair value of each stock option was determined on the date of grant using the Black-Scholes option pricing model using the following assumptions:

Stock Options. A summary of stock option activity for the nine months ended October 31, 2011 is as follows:

Restricted Stock

During the three and nine months ended October 31, 2011, Pandora granted approximately 548,600 and 553,150 restricted stock units, respectively, under the 2011 Plan at a weighted average value of $11.77 and $11.82, respectively. The fair value of the restricted stock units is expensed ratably over the vesting period. The Company recorded stock-based compensation expense related to restricted stock units of approximately $155,000 and $158,000 during the three and nine months ended October 31, 2011, respectively. As of October 31, 2011, total compensation cost not yet recognized of approximately $6,378,000 related to non-vested restricted stock units, is expected to be recognized over a weighted average period of 3.85 years.

Stock-based Compensation Expenses

The weighted-average fair value of stock option grants made during the three and nine months ended October 31, 2010 and 2011 was $1.69, $0.98, $6.02 and $4.55, respectively. As of October 31, 2011, total compensation cost related to stock options granted, but not yet recognized, was $36.8 million which the Company expects to recognize over a weighted-average period of approximately 2.38 years.

The total grant date fair value of stock options vested during the three and nine months ended October 31, 2010 and 2011 was $0.3 million, $0.6 million, $1.3 million and $3.1 million, respectively. The aggregate intrinsic value of all options and warrants exercised during the three and nine months ended October 31, 2010 and 2011 was $4.2 million, $4.7 million, $3.0 million and $34.3 million, respectively.

Stock-based compensation expenses related to all employee and non-employee stock-based awards was as follows (in thousands):