Note 10. Equity Based Awards

On July 13, 2021, the Company’s stockholders approved the Markforged Holding Corporation 2021 Stock Option and Incentive Plan (“2021 Plan”) and the Markforged Holding Corporation 2021 Employee Stock Purchase Plan (“2021 ESPP”). As of September 30, 2021, 22,088,566 and 4,700,000 shares of common stock were available for issuance under the 2021 Plan and 2021 ESPP, respectively.

Under the 2021 Plan, the Company can grant stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), unrestricted stock awards, cash-based awards, and dividend equivalent rights. The 2021 Plan provides that an additional number of shares of common stock will automatically be added to the shares of common stock authorized for issuance under the 2021 Plan on January 1 of each year. The number of shares of common stock added each year will be equal to (i) 5% of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or (ii) such lesser amount as determined by the Company’s Board of Directors.

The 2021 ESPP allows eligible employees to authorize payroll deductions between 1% and 15% of the base salary or wages, up to $25,000 annually, to be applied toward the purchase of shares of the Company’s common stock occurring at offering periods determined by the Company. At each offering period, the eligible employee will have the option to acquire common stock at a discount of up to 15% of the lesser of the Company’s common stock on (i) the first trading day of the offering period or (ii) the last day of the offering period. The offering periods under the 2021 ESPP are not to exceed 27 months between periods. On January 1 of each subsequent year under the plan, the number of shares available for issuance under the plan will be increased by the lesser of (i) 4,700,000 shares of common stock, (ii) one percent of the number of shares of common stock issued and outstanding as of December 31 of the immediately preceding year, or (iii) number of shares of common stock determined by the Company. During the three and nine months ended September 30, 2021 the Company did not recognize stock compensation expense related to the 2021 ESPP as there were no grants under the 2021 ESPP.

Legacy Markforged's 2013 Stock Plan (the “2013 Plan”) was terminated at the Closing and no further awards will be granted thereunder. The 2013 Plan was terminated at Closing and all outstanding awards became outstanding under the 2021 Plan. Option activity under the plan for the year to date period ending September 30, 2021 is as follows:

The aggregate intrinsic value of stock options outstanding at September 30, 2021 was $132.2 million. As of September 30, 2021, the Company had 15,950,824 options vested and expected to vest.

In the nine months ended September 30, 2021, the Company did not grant any options to purchase shares of Common Stock. In the nine months ended September 30, 2020, the Company granted options to purchase 1,085,300 shares of Legacy Markforged common stock with aggregate fair values of $1.2 million, calculated via the Black-Scholes option pricing model (see Note 3) using the following assumptions:

Restricted Stock Units

During the nine months ended September 30, 2021, the Company awarded RSUs to newly hired employees and continuing employees. The fair value per share of these awards was determined based on the fair market value of our stock on the date of the grant and is being recognized as stock-based compensation expense over the requisite service period. The following table summarizes the RSU activity for the nine months ended September 30, 2021:

Stock-Based Compensation Expense

During the three and nine months ended September 30, 2021 and 2020, the Company recognized the following stock-based compensation expense, excluding compensation related to the Earnout discussed below, in the following captions within the condensed consolidated statements of operations and comprehensive income (loss):

Total unrecognized stock-based compensation expense for all stock-based awards outstanding was $21.8 million at September 30, 2021, which is expected to be recognized over a weighted-average period of 1.25 years.

Earnout

Markforged Earnout Shares issuable to holders of Legacy Markforged equity interests as of the Merger closing date ("Eligible Markforged Equityholders") with respect to a Legacy Markforged equity award are accounted for as equity classified stock compensation. Markforged Earnout Shares issuable with respect to a vested Legacy Markforged equity award do not have a requisite service period. To the extent that an Eligible Markforged Equityholder is entitled to receive Markforged Earnout RSUs with respect to an unvested Legacy Markforged equity award, the Earnout RSUs are subject to a service-based vesting condition with a vesting period equivalent to the remaining service period of the holder’s Legacy Markforged equity award as of Closing.

During the three and nine months ended September 30, 2021, the Company recognized stock-based compensation expense related to the Earnout of $5.6 million which is excluded from the above stock-based compensation expense table.