CODE OF BUSINESS CONDUCT AND ETHICS

For purposes of this Code of Business Conduct and Ethics (the "Code"), the company NIC Inc. ("NIC" or the "Company") refers to NIC Inc. and its subsidiaries. This Code applies to all directors, executive officers and other employees of NIC.

INTRODUCTORY OVERVIEW

Personal integrity is an essential ingredient of each employee's job. NIC directors, executive officers and other employees have to maintain a reputation for honesty and integrity in order to keep the trust and confidence of the public and the customers NIC serves. The only way to do this is through the actions of individual directors, executive officers and other employees - people who, over time, have built NIC's reputation for honesty and integrity. To sustain this reputation, all directors, executive officers and other employees must conduct themselves according to the highest ethical standards of honesty and integrity.

The overriding principles that you must adhere to are:

• Don't participate in any dishonest, destructive or illegal acts of any kind, including those against NIC's services, property, or property entrusted to NIC, revenues, customers or other employees.
• Don't use employment with NIC or NIC's name to further personal interests.
• Don't attempt to justify an illegal or dishonest act by claiming it was directed by a superior, and don't direct fellow NIC employees to commit such acts in performing their duties.
• Observe all laws and regulations that apply to NIC's business.
• Adhere to Company policies, rules or procedures, even if deviating from them appears to be to NIC's advantage.
• Promptly alert your General Manager whenever any dishonest, destructive or illegal act is observed, learned or even suspected.

The policies and principles in this Code will be strictly enforced. Violations of this Code or committing dishonest or illegal activities on NIC premises while conducting NIC business may result in disciplinary action up to and including dismissal - even for a first offense in appropriate circumstances - and civil or criminal prosecution by the Company. The fact that an illegal or dishonest act or prohibited act may be considered minor in nature will not be justification for the mitigation of any disciplinary or legal action taken by the Company.

NONDISCRIMINATION

NIC's policy is to provide equal opportunity to all employees. Employees are not permitted to discriminate in recruiting, hiring, terminating, promotions, salary treatment or any other condition of employment or career development, or to harass employees or individuals with whom the Company does business, on the basis of race, color, religion, national origin, sex, age, "handicap", sexual preference or orientation, marital status, or status as a special disabled veteran or veteran of the Vietnam Era.

If you have a complaint of discrimination or harassment, including sexual harassment, report it to your General Manager. Where investigation confirms the allegations, the Company will take prompt corrective action.

PERSONAL CONDUCT

One of the most essential ingredients in proper personal conduct is integrity. It is a matter of being honest with the Company's time and property. Among other things, it means:

• Reporting to work as scheduled.
• Doing a full day's work every day. Employees should not waste Company's time or abuse it to handle personal activities.
• Keeping absences to a minimum and, when an absence is unavoidable, promptly notifying the proper supervisor and accurately reporting the reason.
• Handling all customer contacts with the highest standards of professionalism and courtesy.

A few examples of forbidden personal conduct include:

• Illegal use, possession, distribution, transportation, sale, purchase or transfer of controlled substances or drugs.
• Selling, purchasing, handling, or using illegal drugs at the workplace or while conducting company business away from the workplace.
• Purchasing or using alcohol at the workplace or while conducting company business away from the workplace, with the sole exception of entertaining a client or customer, and even then, alcohol may not be used to excess so as to impair judgment, speech or motor skills.
• Reporting to work smelling of alcohol or reporting to work under the influence of drugs or alcohol such that your ability to perform your job functions is impaired.
• Fighting on the job or on Company premises.
• Possessing firearms, weapons or explosives on Company premises.
• Using rude, abusive or obscene language with a customer; disconnecting a customer call without providing appropriate service; refusing to serve a customer.

PRIVACY OF COMMUNICATIONS

Privacy of communications is basic to NIC's business, not only because it is required by law, but because the public has placed its trust in the integrity of NIC's people and its service. NIC customers expect, for example, that their conversations will be kept private.

In recent years, with the ever-increasing volume of data transmission over the Internet, that trust has taken on special significance. Today it is the responsibility of every NIC employee to protect not only the privacy of conversations on the network, but also the flow of information in data form that in the wrong hands could have serious economic or legal consequences for the parties involved.

Violating any one of the basic rules for privacy could tarnish the reputation of NIC. The basic rules are:

• Don't tamper with or intrude upon any transmission, whether by voice, non-voice or data.
• Don't listen to or repeat anyone else's conversation or communication, or permit them to be monitored or recorded except as required in the proper management of the business.
• Don't allow an unauthorized person to have access to any communication transmitted over NIC facilities. This includes divulging information about who was speaking or what was spoken about, except as authorized by the customer or required in the proper management of the business.
• Don't install or permit installation of any device that will enable someone to listen to, observe, or realize that a communication has occurred, except as authorized by an official service or installation order issued in accordance with Company practices.
• Don't use information from any communication, or even the fact that a communication has occurred, for your personal benefit or for the benefit of others.
• Don't disclose information about customer billing arrangements, or the location of equipment, circuits, trunks, and cables to any unauthorized person.

Contact your General Manager if you believe that the privacy of any communication has been compromised, or if you receive a subpoena, court order, or any other type of request information from anyone (including law enforcement and other government agencies) concerning any NIC service.

SAFEGUARDING COMMUNICATIONS SERVICES

Making personal calls or establishing connections for non-official business from switchboards, test positions or equivalent workstations is prohibited. In addition, employees may not make personal or non-official calls except from telephones for which an accounting record is created and then only when authorized by the proper supervisor. Third number charges to official numbers are prohibited. Credit card calls must be properly charged to the number under which the credit card is issued.

Establishing unauthorized voice or data communications services is prohibited. Establishing a circuit connection or using other means to enable anyone to get free service is prohibited by Company instructions and is a criminal offense under state and federal statutes.

The use of any device or technique that manipulates or avoids billing arrangements to defraud the Company is prohibited, and is a criminal offense in most states.

CONFLICTS OF INTEREST

The fundamental rule is that the employees in their business dealings must never be influenced - or even appear to be influenced - by personal interests.

Employees are expected, both on and off the job, to support the Company's efforts to succeed in the marketplace. Employees are not permitted to compete with the Company; they may not assist others to compete with the Company, and they may not use their position with the Company, its proprietary information or its relationship with customers for personal gain or benefit.

NIC's policy concerning suppliers is to award business solely on merit, at the lowest reasonable price, and wherever practicable, on a competitive basis.

Basic points to keep in mind are:

• Have no relationship, financial or otherwise, with any supplier or competitor that might be construed as a conflict of interest, or that might even appear to impair your judgment on behalf of the Company.
• Never accept or solicit, even indirectly, gifts, loans, "kick-backs", special privileges, services, benefits or unusual hospitality. This does not apply to unsolicited promotional materials of nominal monetary value of a general advertising nature, such as imprinted pencils, memo pads, and calendars. Determining when hospitality is "unusual" is a matter of degree. Acceptance of a meal or entertainment in the normal course of business relations is permitted as a matter of courtesy and should be, when practical, on a reciprocal basis. Generally, any extensive hospitality beyond this would be considered unusual.

Exceptions to this rule may be appropriate for special events, such as sporting events, or trade shows, where Company business may be conducted. You should report invitations to any such events to your supervisor for concurrence in your acceptance of the invitation.

• Report gifts other than promotional materials of nominal value promptly to your supervisor and then return them to the donor, if possible, or dispose of them in another manner.
• Do not give inappropriate gifts or provide unusual hospitality to customers or potential customers or their employees that will unfairly influence their purchasing decision. For example, do not give expensive gifts that could be construed as a bribe or a reward for purchasing from NIC.
• Comply with local, state and federal laws and regulations governing relations between government customers and suppliers. These laws and regulations may prohibit or modify marketing activities used with other customers that are heavily regulated by the government, e.g., banks, because they may be subject to similar restraints.
• Do not in any way assist competitors. Specifically, do not assist anyone outside the business in the planning, design, manufacture, sale, purchase, installation, or maintenance of any competitors' equipment or services. Do not become involved in activities or businesses that compete with NIC activities or business. This policy, of course, does not apply to NIC partners in joint ventures, or to our competitors when performed under approved Company programs.
• Avoid any outside activity that could adversely affect the independence and objectivity of your judgment, interfere with the timely and effective performance of your duties and responsibilities, or that could discredit the Company or conflict, or appear to conflict, with the Company's best interests. Since each employee's primary obligation is to the Company, any outside activity, such as a second job or self-employment, must be kept totally separate from employment with the Company. Unless expressly authorized by the Company - for example, Junior Achievement - no outside activity should involve the use of Company time, its name or its influence, assets, funds, materials, facilities, or the services of other employees.
• Don't undertake any activity that is aimed at, or that could reasonably have the effect of, retarding the success of the Company in the marketplace. Avoid any actions inconsistent with this commitment to help the Company succeed, such as suggesting that customers or potential customers refrain from dealing with the Company, or deal with a competitor instead of with the Company.

Conflicts of interest may not always be clear-cut, so if you have a question, you should consult with higher levels of management or the Company's Legal Department. If an actual - or even potential - conflict of interest develops, it must be reported promptly to the proper supervisor. Specifically, please report any actual or potential conflict of interest to your General Manager. If your immediate supervisor(s) are involved in the conflict, you are authorized to report to the next higher level of management. This would include attempts by outside parties to improperly influence you and your decision-making.

Members of the Board of Directors of NIC (the "Board") have a special responsibility because our directors are prominent individuals with substantial other responsibilities. To avoid conflicts of interest, directors are expected to disclose to their fellow directors any personal interest they may have in a transaction in which the Board is involved and to recuse themselves from participation in any decision in which there is a conflict between their personal interests and the interests of NIC. This paragraph shall also apply to executive officers of NIC.

CORPORATE OPPORTUNITIES

Directors, executive officers and other employees owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises. If you learn of a business or investment opportunity through the use of corporate property or information, or your position at NIC, such as from a competitor, customer, supplier or business associate of NIC, you may not participate in the opportunity or make the investment without prior written approval of the Legal Department. Such an opportunity should be considered an investment opportunity for NIC in the first instance. Directors' duties to present corporate opportunities or related-party transactions to the Company are more extensive and include a requirement that they obtain the prior written approval of the independent members of the Board or Audit Committee of the Board.

COMPETITION AND FAIR DEALING

We seek to outperform our competition fairly and honestly. We seek competitive advantages through superior performance to our government partners, not through unethical or illegal business practices. Stealing proprietary information, processing trade secret information that was obtained without the owner's consent, or inducing such disclosures by past or present employees of other companies is prohibited. Each employee should endeavor to respect the rights of, and deal fairly with, the Company's government partners, customers, suppliers, competitors and employees. No employee should take advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other intentional unfair-dealing practice.

PROPRIETARY INFORMATION

In today's competitive environment, protecting NIC's intellectual property and proprietary information is more important than ever before.

Proprietary information is any information or knowledge created, acquired or controlled by the Company that the Company has determined should not be published or released to others. It includes, but is not limited to, financial and billing records, unannounced products and services, technical information, sales and marketing data and employee records.

What is key about this information is that its unauthorized release or disclosure could cause NIC the loss of critical competitive advantage, could hurt relationships with customers or could embarrass or harm fellow employees.

Each employee (as an originator, custodian, user or recipient of proprietary information) must insure that Company information under his or her direction and/or control is properly identified and/or safeguarded according to its proprietary nature in accordance with Company policies and instructions.

NIC also regards as proprietary the information of others that it is obligated to maintain in confidence. NIC may properly come into possession of such information in a number of ways - most often as a result of an agreement with the owner of the information which restricts the way in which the information may be used. The terms and conditions of any such agreement must be strictly followed. In addition, employees must be especially careful of the circumstances under which they are offered, or receive, such information. They should consider, among other factors, how and from whom they are going to acquire the information; whether it is being offered to them with restrictions on its use; and how they plan to use it. Before agreeing to accept the proprietary information of others with any restrictions, they should contact the General Manager to review the terms under which it is being offered. They should also contact the General Manager immediately if they believe there is a chance that they might be receiving the information as a result of a breach of confidence, or an improper or illegal act, or under any other circumstances that might call into question the propriety of their actions in the matter.

Access to proprietary information is limited to authorized persons with a "need to know". Disclosure to others and the receipt of the proprietary information of others should only be made where there is a valid business need and then only as specified in Company policies and instructions. Of course, Company information should not be used for personal benefit or other non-Company purposes.

When employees leave the Company, all documents and records containing proprietary information must be turned in to the Company. Even after employment ends, former employees have a continuing obligation to safeguard this information.

Questions on whether information is proprietary, and the conditions under which it can be released should be directed to your General Manager. Questions on appropriate security safeguards to protect proprietary information should be directed to your General Manager.

Any compromise or even suspected compromise, of any such information should be immediately reported to your General Manager.

COPYRIGHTED WORKS

NIC's policy is to honor NIC's copyrights as well as the copyrights of others. This means that employees may not copy any copyrighted work without the permission of the copyrighted owner or its authorized agent. This includes articles from newspapers, trade journals, magazines and other publications.

Similarly, most purchased computer software is copyrighted. Under copyright law, such software may not be copied except to make an archival copy or as an essential step in its utilization. NIC does not support in any way the use of unlicensed software.

COMPUTER SYSTEMS

Computer systems and the information they contain, control, transmit or process are essential for NIC's daily operations. They help provide products and services to customers, maintain vital records, collect revenues, and process information necessary for internal operations and development.

Employees are responsible for ensuring that computer systems and the information they contain are adequately safeguarded against damage, alteration, theft, fraudulent manipulation, and unauthorized access or disclosure. Though the data processed and stored in a computer may appear to be intangible, it still must be protected as a Company asset, and properly identified and safeguarded according to its proprietary and/or critical nature. Passwords or other procedures used to access or transmit computerized data must be selected, controlled and safeguarded to ensure that company data is adequately protected. Ultimately, each employee is responsible for the security of information accessed or modified under his or her password or access procedure. Also, as a user or manager of corporate data or computer resources, each employee must strictly adhere to the specific security measures and controls that have been established.

Along with the responsibility for safeguarding the information in Company databases, employees are responsible for:

• Obeying U.S. copyright laws and Company policy regarding the reproduction of copyrighted software.
• Using licensed computer software only as permitted by the specific license.

Any personal or other non-business use of a Company data communication system or computer system (mainframe, micro, mini or personal computer) that is not expressly sanctioned by supervision is forbidden.

Violations or suspected violations of computer security controls should be reported to your General Manager or Director of Development.

ESPIONAGE AND SABOTAGE

The importance of safeguarding Company information that could be of value to saboteurs and espionage agents, including those engaged in industrial espionage, cannot be overstated.

Such information includes proprietary information, security procedures, marketing plans and strategies, product development information, location of facilities, circuit layout information, emergency rerouting and service restoration procedures, private line services, traffic operating procedures and classified National Security information. As mentioned in the section on Federal Government Business and Classified Information, access to classified United States Government National Security Information is restricted to those having proper government clearance and a "need to know".

Every employee must be careful to prevent disclosure of the types of sensitive information described above. Any attempt by an unauthorized person to obtain proprietary or classified National Security information or gain access to secured Company locations must be reported to your General Manager.

COMPANY RECORDS

Company records are critical in meeting NIC's financial, legal and management obligations and must always be prepared accurately.

Such records include reports, vouchers, bills, time reports, payroll and service records, toll tickets, mechanized billing system records, measurement, performance and production records, and other essential data. Employees who prepare records should be sure to:

• Provide accurate and complete information in making all entries, including those for records or reports for governmental agencies (including the Securities and Exchange Commission) and those related to accounting classifications and benefits received under benefit plans.
• Correctly report items used under any measurement or index plan. A false or misleading report of measurement data is considered just as serious as falsifying vouchers, financial data, or records pertaining to Company funds or property.
• Account accurately for all time worked, work items, expenses, material, tools, vehicles and other Company property, whether the property is new, used or deemed worthless.
• Immediately report any irregularity or discrepancies to the proper supervisor or your General Manager.

Customer and employee records are to be held in confidence and treated as Company assets. As such, they are to be carefully safeguarded and kept current and accurate. They should be disclosed only upon proper authorization, or as directed in NIC's privacy rules or pursuant to lawful process. In addition, customer billing records are protected from disclosure by Federal law and can be released to Government Agencies only pursuant to legal process at the direction of NIC Corporate Security. Any questions with regard to release of customer billing records to Government Agencies or other third parties should be directed to the General Manager. Should you have any questions about disclosure, consult with your supervisor or General Manager, as appropriate, before providing any information.

Certain Company records are maintained according to rules of the Securities and Exchange Commission, Federal Communications Commission or other Government agencies. The FCC and these agencies require that certain records be retained in connection with court and regulatory proceedings, or for other specific business purposes. Records should therefore be destroyed only in accordance with these requirements and with proper Company authorization.

COMPANY PROPERTY

Preventing the loss, damage, misuse, or theft, of Company property is part of every employee's job. It directly affects operating costs and corporate earnings. Some examples of what you are expected to do:

• Locking desks, offices, and unattended vehicles or facilities.
• Restricting non-employees' access to Company premises unless they are on official business.
• Disposing of surplus, obsolete or junked property only when authorized or directed by Company instructions.
• Observing rules regarding identification, package inspection and personal property registration.
• Avoiding waste and spoilage when using supplies.

You should never use Company property for personal benefit. Only with proper authorization may you borrow, take, use, sell, loan, or give away Company property.

Only authorized property should be used for Company business. For example, employee owned or leased motor vehicles or aircraft must not be used for Company purposes except as authorized in Company instructions. The Company assumes no responsibility for personal property employees use in the course of their employment.

Employees should promptly report any actual or suspected loss, damage, misuse, theft or destruction of Company property to your General Manager.

COMPANY FUNDS

Company funds, including revenues, take many forms, for example, checks, drafts, money orders, petty cash, or customer payments. Other items that represent the expenditure of Company funds, such as airplane tickets or corporate charge cards, are also included. All must be protected carefully.

When spending Company money or your own for reimbursement later, or when requesting services on NIC's behalf, make sure that the Company receives proper value in return and that the expenditure is for a legitimate business purpose. Anyone approving or certifying any voucher or bill must have reasonable knowledge that the services or expenses are proper.

Every employee who has control over Company funds is personally accountable for them.

Some examples of how employees are expected to safeguard Company funds follow:

• Keep an accurate record of funds spent.
• Only use corporate charge cards for business purposes and according to company instructions. Voucher all line items by each month end. Surrender any corporate charge card to supervision when you leave the company or upon request.
• Use company funds solely for the payment of company expenses.

This entire subject is covered in detail Company instructions. They should be followed strictly.

Questions on the appropriate use of Company funds, or personal funds for Company business, should be discussed with your supervisor or your General Manager.

INSIDER TRADING

All directors, executive officers and other employees shall carefully review and abide by the Company's Insider Trading Policy, which is not included in this Code of Business Conduct and Ethics.

It is NIC's policy to comply fully and to assist its directors, executive officers and other employees in complying fully with securities laws applicable to transactions in NIC's common stock. In this regard, NIC depends upon the conduct and diligence of the directors, executive officers and other employees of NIC, in both their professional and personal capacities, to ensure full compliance with this policy. Each such person has a personal obligation and responsibility to act in a manner consistent with NIC's policy regarding compliance with the insider trading provisions of the federal securities laws.

In light of the foregoing, it is NIC's policy that:

• No director, executive officer or other employee of NIC may buy or sell any security issued by NIC, or any option or similar right to buy or sell such a security, on the basis of material nonpublic information regarding NIC.
• Every director, executive officer and other employee of NIC shall maintain the confidentiality of material nonpublic information regarding NIC that he or she may possess and shall not give advice or make recommendations regarding investments in NIC.
• No director, executive officer, or other employee of NIC shall knowingly permit persons under his or her supervision to act inconsistently with this policy.

No director, executive officer or other employee, nor any affiliate of any such person, may, on the basis of material nonpublic information about another company that such person received in the course of performing his or her duties on behalf of NIC, trade in the securities of such other company or disclose such information to any other person.

CODE OF ETHICS FOR CEO AND SENIOR FINANCIAL OFFICERS

In addition to the other sections of this Code, NIC's Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and such other financial officers as NIC's Chief Financial Officer shall designate (collectively, "financial professionals"), are subject to the following rules regarding their conduct and ethics:

Financial professionals shall uphold, as applicable, all standards and ethics of institutions that professionally certify their achievements, including the AICPA, NAA, IMA, IIA, and any others that may apply. In addition, all NIC financial professionals are to adhere to the following standards of conduct:

1. Act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships. Avoidance of conflicts of interest includes disclosure to the Audit Committee of NIC's Board of any material transaction or relationship that reasonably could be expected to give rise to an actual or apparent conflict.
2. Do his or her part to ensure full, fair, accurate, timely and understandable disclosure in reports and documents submitted to the Securities and Exchange Commission and in all other public communications.
3. Comply with all applicable laws, rules and regulations of federal, state, provincial and local governments, and other appropriate private and public regulatory agencies.
4. Act in good faith, responsibly, with due care, competence and diligence, without misrepresenting facts or allowing independent judgment to be subordinated.
5. Protect the confidentiality of information acquired in the course of work except when disclosure is duly authorized by the Board or an executive officer of NIC, as appropriate, or as otherwise legally obligated to disclose the information. Confidential information acquired in the course of work is not to be used for personal advantage, or in any manner contrary to law or to the detriment of NIC.
6. Proactively promote ethical behavior as a responsible person among peers, superiors and subordinates in the work environment.
7. Achieve responsible use of and control over all assets and resources employed or entrusted to the financial professional or those within his or her purview.
8. Share knowledge, maintain skills and improve proficiency in areas important to quality of service and relevant to constituents' needs.
9. Accept personal accountability for adherence to this Code of Ethics for CEO and Senior Financial Officers, and report any violations of the same to the Audit Committee of the NIC Board of Directors.
   1. As applicable, carefully review drafts of reports and documents NIC is required to file with the SEC before they are filed and NIC press releases or other public communications before they are released to the public, with particular focus on disclosures each such officer does not understand or agree with and on information known to the senior officer that is not reflected in the report, document, press release or public communication.
   2. Meet with the Disclosure Committee, other members of senior management, accounting staff and others involved in the disclosure process to discuss their comments on the draft report, document, press release or public communication.
   3. Establish and maintain disclosure controls and procedures that ensure that material information is included in each report, document, press release or public communication in a timely fashion.
   4. Consult with the Audit Committee on a regular basis to determine whether they have identified any weaknesses or concerns with respect to internal controls.
   5. When relevant, confirm that NIC's independent public accountants are aware of any material misstatements or omissions in the draft report or document, or have any concerns about the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of a report or document.
   6. Bring to the attention of the Audit Committee matters that you feel could compromise the integrity of NIC's financial reports, disagreements on accounting matters and violations of any part of this Code.

Violations of the Code of Ethics for CEO and Senior Financial Officers will result in immediate disciplinary action up to and including immediate discharge from employment the first time they occur. The Code of Conduct for CEO and Senior Financial Officers shall be published annually in NIC's Annual Report to Shareholders.

LOANS

Directors and executive officers shall not receive any loan or extension of credit in the form of a personal loan from NIC. If any director or executive officer has a personal loan from NIC, such director or executive officer shall promptly repay the loan. Loans, or advances of payroll, will not be made to any non-officer employee of NIC without the prior approval of his or her supervisor and the Operations and Administration Department.

These policies do not prohibit good-faith advances of corporate expenses, such as travel expenses. However, any director or officer who receives such an advance must repay or properly account for it promptly, and in any case within 30 days. Likewise, these policies do not prohibit the cashless exercise of stock options in accordance with procedures approved by the Board.

WAIVERS FOR DIRECTORS OR EXECUTIVE OFFICERS

No provision of this Code of Business Conduct and Ethics may be waived for any director or executive officer of NIC unless the waiver is granted by NIC's Board and promptly disclosed to NIC's shareholders as may be required by applicable law, regulation or rules of the Nasdaq Stock Market.

REPORTING MISCONDUCT

If you become aware or suspect that the Company or any employee, officer or director of the Company is violating any law or this Code, you have a duty to report such violation. Such violations may be reported to your supervisor, or, if you are uncomfortable making the report to your supervisor, reports may be made directly to the Legal Department. All reports will be dealt with confidentially. Neither the Company nor any of its employees shall take retaliatory action against an employee for making a good faith report.

DISCLAIMER

The Code of Business Conduct and Ethics does not constitute a contract of employment and employees will continue to be employed at the will of the employer.
Skip to Quick Links section.