CHARTER OF THE COMPENSATION COMMITTEE

Purpose:

The purpose of the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of NIC Inc. (the "Company") is to: (a) discharge the responsibilities of the Board relating to compensation of the Company's executive officers, (b) review and approve such reports and discussions on executive compensation by management or the Committee as are required by law or deemed appropriate by the Committee, including reports and discussions for filing with the SEC, (c) prepare an annual Committee report for inclusion in the Company's proxy statement and Annual Report on Form 10-K, (d) oversee the evaluation of the Company's executive officers, (e) establish and periodically review and revise the Company's executive compensation policy to align it with the Company's objectives, and (f) establish and periodically review and revise the Company's succession management plan.

Committee Membership:

The Committee shall consist of at least three members, each of whom shall be independent directors. The term "independent directors" describes directors (a) who qualify as independent directors pursuant to the applicable provisions or the Securities Exchange Act of 1934, the rules promulgated thereunder and the rules and regulations of the NASDAQ Stock Market, Inc., and (b) who, in the Board's judgment, do not have a material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company).

Members of the Committee shall be appointed by the Board. The Board shall appoint one member of the Committee to act as its Chair. The Board may remove members of the Committee, with or without cause.

Compensation Philosophy and Strategy:

The Committee shall develop compensation policies which promote the long-term interests of the Company's shareholders and which are designed to attract and retain those directors, officers and employees necessary to support the Company's growth and success. In order to attain this goal, the Committee shall establish full and fair compensation for each individual employed by the Company, consistent with levels of compensation of comparable companies, general economic conditions and the Company's performance and goals. The Committee shall review at least annually the Company's overall compensation strategy, including base salaries, bonus and incentive compensation and equity grants, to assure that it (a) appropriately awards employees for their contributions to the Company's growth and profitability, (b) provides appropriate incentives for the Company's management and employees, (c) promotes the long-term interests of the Company's shareholders and (d) supports the Company's strategic objectives.

Responsibilities and Duties:

1. Executive Officer Compensation. The Committee shall establish on an annual basis the compensation levels of the Company's Chief Executive Officer (the "CEO") and the Company's other executive officers, including base salary, bonus and incentive compensation levels, deferred compensation, perquisites, equity compensation and other forms of executive officer compensation. The Committee shall approve any severance arrangements and change-in-control benefits payable to the Company's executive officers.
2. Director Compensation. The Committee shall periodically review and make recommendations to the Board regarding the level and form of the Company's director compensation, including how such compensation compares to director compensation of companies of comparable size, industry and complexity. Such review will include a review of both direct and indirect forms of compensation to the directors, including any charitable contributions to organizations with which a director is affiliated and consulting or other similar arrangements between the Company and a director.
3. Incentive Plan Review and Approval. The Committee shall periodically review and make recommendations to the Board regarding the Company's incentive compensation and equity-based plans. The Committee shall review and approve all new equity compensation plans and all amendments to existing equity compensation plans (subject to shareholder approval when required).
4. Incentive Plan Administration. The Committee shall administer all of the Company's equity-based plans, including its stock option and restricted stock plans and employee stock purchase plan. Such administration shall include granting stock options and making restricted stock awards in accordance with such plans. The Committee may delegate day-to-day administration of such plans to appropriate Company personnel.
5. Employee Benefit Plans. The Committee shall oversee and periodically review the operation of the Company's employee benefit plans, including its Section 401(k) plan. Responsibility for the day-to-day administration of such plans, including the preparation and filing of all government reports and the preparation and delivery of all required employee material and communications, will be performed by appropriate Company personnel.
6. Report. The Committee shall produce an annual Committee report for inclusion in the Company's proxy statement and Annual Report on Form 10-K, in accordance with all applicable laws, rules and regulations, and shall review such reports and discussions on executive compensation by management or the Committee as are required by law or deemed appropriate by the Committee, including reports and discussions for filing with the SEC.
7. Charter. The Committee shall periodically review and reassess the adequacy of this Charter and recommend any proposed changes to the Board for approval.

Powers:

1. Consulting Firms. The Committee shall have the sole authority to retain and terminate any compensation consultant used to assist in the evaluation of executive officer compensation. The Committee shall have the sole authority to approve the terms of any such engagement, including fees. The Committee is empowered to cause the Company to pay the compensation of any such consultant engaged by the Committee. The Committee may direct any compensation consultant to provide information to, or receive information from, appropriate Company personnel.
2. Independent Advisors. The Committee shall have the authority to retain independent advisors (including legal and accounting advisors) to assist in carrying out its responsibilities and duties. The Committee shall have the sole authority to approve the terms of any such engagement, including fees. The Committee is empowered to cause the Company to pay the compensation of any such advisors engaged by the Committee.
3. Subcommittees. The Committee shall have the authority to delegate any of its responsibilities to subcommittees, as the Committee deems appropriate in its sole discretion.
4. Access to Officers. The Committee shall have full and free access to the executive officers of the Company in order to fulfill its responsibilities and duties. Upon request of the Committee, the President shall provide information to the Committee regarding the Company and its management and shall serve as a liaison between the Committee and the Company's other executive officers.

Procedures and Administration:

1. Meetings. The Committee shall meet at such times as it deems necessary or appropriate, but not less than semiannually.
2. Minutes. The Committee shall maintain written minutes of each Committee meeting. Such minutes shall be distributed to each member of the Committee and to the other members of the Board.
3. Reports. The Committee shall report to the Board concerning each meeting of the Committee and as otherwise requested by the Chairman of the Board.
4. Self-Evaluation. The Committee shall evaluate its own performance at least annually.