Annual report pursuant to Section 13 and 15(d)

Incentive Plans

v3.22.1
Incentive Plans
12 Months Ended
Dec. 31, 2021
Share-based Payment Arrangement [Abstract]  
Incentive Plans Incentive Plans
2021 Omnibus Incentive Plan
The Clear Secure, Inc 2021 Omnibus Incentive Plan (“2021 Omnibus Incentive Plan”) became effective on June 29, 2021 to provide grants of equity-based awards to the employees, consultants, and directors of the Company and its affiliates.
The 2021 Omnibus Incentive Plan authorized the issuance of up to 20,000,000 shares of Class A Common Stock as of the date of the Reorganization. The 2021 Omnibus Incentive Plan authorized the issuance of shares pursuant to the grant, settlement or exercise of restricted stock units (“RSUs”), restricted stock (“RSAs”), stock options and other share-based awards. Beginning with the first business day of each calendar year beginning in 2022 through 2031, the number of shares available will increase in an amount up to 5% of the total number of common shares outstanding (assuming exchange and/or conversion of all classes of common shares into Class A Common Stock) as of the last day of the immediately preceding year or a lesser amount approved by our board of directors or its compensation committee, so long as the total share reserve available for future awards at the time is not more than 12% of common shares outstanding (assuming exchange and/or conversion of all classes of common shares into Class A Common Stock).

Alclear Holdings, LLC Equity Incentive Plan
Prior to the Reorganization, Alclear granted profit unit awards and RSUs to various employees of the Company. In connection with the Company’s Reorganization described in Note 1, these awards were substituted as follows:

The Company substituted Alclear’s RSUs with RSUs under the 2021 Omnibus Incentive Plan.
The Company substituted Alclear’s performance vesting profit units with performance vesting RSUs under the 2021 Omnibus Incentive Plan.
The Company substituted Alclear’s other profit units with only a service vesting condition to RSAs under the 2021 Omnibus Incentive Plan.
In all cases of the respective substitutions, the new awards retained the same terms and conditions (including applicable vesting requirements). Each award was converted to reflect the $31.00 share price contemplated in the Company’s IPO while retaining the same fair value. The RSUs originally granted by Alclear were subject to both service and liquidity event vesting conditions. The Company concluded that the Reorganization represented a qualifying liquidity event that would cause the RSUs’ liquidity event vesting conditions to be met.
The following table summarizes information about the unvested profit units and RSUs in Alclear that were reclassified to RSAs or RSUs in the Company:
Alclear RSU’s Weighted-
Average
Grant-Date
Fair Value
Profit Units Weighted-
Average
Grant-Date
Fair Value
Unvested balance, January 1, 2021
453,350  $ 14.51  9,085,704  $ 1.12 
Granted 860,357  15.33  —  0.64 
Vested —  —  (345,703) (0.40)
Forfeited (25,479) (15.36) (881,227) (0.90)
Effect of reorganization (1,288,228) (15.04) (7,858,774) 1.17 
Unvested balance, December 31, 2021
       

Restricted Stock Awards

In accordance with the Reorganization Agreement, the Company substituted Alclear Holdings’ profit units with service vesting conditions with RSAs, which are subject to the same vesting terms as applied to Alclear’s profit units; each also maintained the same fair value immediately before and after the exchange of the award. As such, there was no additional compensation expense that was recorded as a result of the substitution of the awards.

The RSAs are subject to service-based vesting conditions and will vest on a specified date, provided the applicable service period, generally three years, has been satisfied.

The Company determines the fair value of each RSA based on the grant date and records the expense over the vesting period or requisite service period.
The following is a summary of activity related to the RSAs associated with compensation arrangements during years ended December 31, 2021.

RSA - Class A Common Stock Weighted-
Average
Grant-Date
Fair Value
RSA - Alclear Units Weighted-
Average
Grant-Date
Fair Value
Balance upon effect of reorganization* 1,878,986  $ 1.03  2,144,361  $ 1.29 
Granted —  —  —  — 
Vested (226,034) (1.10) (1,953,803) (1.29)
Forfeited (223,069) (0.95) —  — 
Unvested balance, December 31, 2021
1,429,883  $ 1.04  190,558  $ 1.29 
*The amounts above reflect the Reorganization and maintain the fair value for the substitution of profit units to RSAs.

Below is the compensation expense (credit) related to the RSAs:
For the years ended
December 31, 2021 December 31, 2020 December 31, 2019
Cost of direct salaries and benefits $ (5) $ 51  $ — 
General and administrative 1,078  1,056  1,236 
Research and development 230  317  193 
Sales and marketing (33) 34  11 
Total $ 1,270  $ 1,458  $ 1,440 

As of December 31, 2021, estimated unrecognized expense for RSAs was $458 with such expense to be recognized over a weighted-average period of approximately 0.5 years subsequent to December 31, 2021.
Restricted Stock Units

The RSUs granted under the 2021 Omnibus Incentive Plan in substitution of Alclear awards were subject to the same vesting terms as applied to the Alclear awards and maintained the same fair value immediately before and after the exchange of the award. The RSUs are subject to both service-based and, in some cases, business performance-based vesting conditions. RSUs will vest on a specified date, provided the applicable service (generally three years) and, if applicable, business performance condition, have been satisfied. The RSUs with performance conditions issued are also subject to long-term revenue and cash-basis earnings performance hurdles (the “Financial Targets”). The Company determines the fair value of each RSU based on the grant date and records the expense over the vesting period or requisite service period and if the performance conditions are probable of being met.
The following is a summary of activity related to the RSUs associated with compensation arrangements during years ended December 31, 2021:

RSU’s Weighted-
Average
Grant-Date
Fair Value
RSU-Class A Common Stock Weighted-
Average
Grant-Date
Fair Value
Balance upon effect of Reorganization* 3,009,982  $ 7.23  2,113,672  $ 2.29 
Granted 1,880,506  34.77  —  — 
Vested (36,150) (14.51) (159,869) (15)
Forfeited (1,436,213) (3.71) (1,953,803) (1.29)
Unvested balance, December 31, 2021
3,418,125  $ 23.56    $  

*The amounts above reflect the Reorganization and maintain the fair value for the substitution of Alclear RSUs to RSUs.

Below is the compensation expense recognized related to the RSUs:
For the years ended
December 31, 2021 December 31, 2020 December 31, 2019
Cost of direct salaries and benefits $ 321  $ —  $ — 
General and administrative 9,978  —  — 
Research and development 6,488  —  — 
Sales and marketing 237  —  — 
Total $ 17,024  $   $  
As of December 31, 2021, estimated unrecognized compensation expense for RSUs that are probable of vesting was $66,338 with such expense expected to be recognized over a weighted-average period of approximately 1.2 years.

Although permitted by the Company’s 2021 Omnibus Plan, the Company did not withhold any taxes in connection with the delivery of RSUs during 2021.

During the year ended December 31,2021, certain RSUs, which were originally issued as profit units prior to the IPO and converted to RSUs in connection with the Reorganization, were forfeited. Such RSUs were subject to long-term revenue and cash-basis earnings performance hurdles that were not probable of being achieved as of the grant date. As a result, these awards were not vested at the time of forfeiture.
Founder PSUs
During June 2021, the Company established a long-term incentive compensation plan for the co-founders, which consists of performance restricted stock-unit awards (the “Founder PSUs”), that will be settled in shares of Class A Common Stock pursuant to the 2021 Omnibus Incentive Plan, subject to the satisfaction of both service and market based vesting conditions.
The grant date fair value for the Founder PSUs was determined by a Monte Carlo simulation and discounted by the risk-free rate on the grant date and an expected volatility of 45%. The Founder PSUs are estimated to vest over a five year period, based on the achievement of specified price hurdles of the Company’s Class A Common Stock. The specified price hurdles of the Company’s Class A Common Stock will be measured on the volume-weighted average price per share for the trailing days during any 180 day period that ends within the applicable measurement period. In June 2021, the Company granted 4,208,617 Founder PSUs at a weighted average grant date fair value of $16.54. The Company recorded
the compensation expense related to these awards within general and administrative in the consolidated statements of operations.
As of December 31, 2021, estimated unrecognized expense for Founder PSUs was $56,216 with such expense expected to be recognized over a weighted-average period of approximately 1.23 years.
Below is a summary of total compensation expense recorded in relation to the Company’s incentive plans, excluding additional expense related to repurchases:
For the years ended
December 31, 2021 December 31, 2020 December 31, 2019
RSAs $ 1,270  $ 1,458  $ 1,440 
RSUs 17,024  —  — 
Founder PSUs 13,403  —  — 
Total $ 31,697  $ 1,458  $ 1,440 

For the years ended
December 31, 2021 December 31, 2020 December 31, 2019
Cost of direct salaries and benefits $ 317  $ 51  $ — 
General and administrative $ 24,459  $ 1,056  $ 1,236 
Research and development 6,718  317  193 
Sales and marketing 203  34  11 
Total $ 31,697  $ 1,458  $ 1,440