Corporate Governance

IRONCLAD ENCRYPTION CORPORATION COMPENSATION, NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER

Adopted to be Effective October 16, 2017

This charter (“Charter”) governs the operations of the Compensation, Nominating and Corporate Governance Committee (the “Committee”) of the Board of Directors (the “Board”) of IronClad Encryption Corporation (“IronClad” or the “Company”). This Charter sets forth the responsibilities of the Committee with respect to nominating and corporate governance matters, and the Committee’s authority and responsibility for approving and evaluating executive officer compensation arrangements.

PURPOSE AND AUTHORITY

The Committee shall provide assistance to the Board by:

  • Identifying individuals qualified to become directors and selecting, or recommending that the Board select, the candidates for all directorships to be filled by the Board or by the stockholders;
  • Developing and recommending to the Board a set of corporate governance principles applicable to the Company;
  • Overseeing the evaluation of the Board and management; and
  • Discharging the Board’s responsibilities with respect to all forms of compensation of the Company’s executive officers and producing a report on executive compensation for inclusion in the Company’s proxy statement and annual report on the U.S. Securities and Exchange Commission’s (“SEC”) Form 10-K or as otherwise required by SEC rules.

INDEPENDENCE, COMPOSITION AND QUALIFICATIONS

Composition. The Committee shall consist of not less than two independent directors. The number of directors constituting the Committee, and those serving on the Committee (its “Members”), shall be determined annually by the Board. Members shall serve during their respective terms as directors, subject to earlier removal by the Board.

Independence. Each Member of the Committee must be:

  • an “independent director,” as defined under applicable listing standards and SEC rules;
  • a “non-employee director,” as defined in Rule 16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and
  • an “outside director,” as defined under Section 1.162-27 promulgated under Section 162(m) of the Internal Revenue Code of 1986, as amended.

Appointment. The Members of the Committee shall be appointed by the Board and shall serve until such Member’s successor is duly elected and qualified or until such Member’s earlier resignation or removal. The Members of the Committee may be removed, with or without cause, by a majority vote of the Board.

Chairman. Unless a Chairman is elected by the full Board, the Members of the Committee shall designate a Chairman by majority vote of the full Committee membership. The Chairman shall be entitled to cast a vote to resolve any ties. The Chairman will chair all regular sessions of the Committee and set the agendas for Committee meetings.

Delegation to Subcommittees. In fulfilling its responsibilities, the Committee shall be entitled to delegate any or all of its responsibilities to a subcommittee of the Committee.

MEETINGS

Timing and Manner. The Committee shall meet at least once annually, or more frequently as circumstances dictate, and may call special meetings when necessary. The Chairman of the Board or any Member of the Committee may call meetings of the Committee. All meetings of the Committee may be held telephonically. Meetings may be conducted on providing notice to the Committee Members as outlined in the Bylaws, at a mutually agreed location or by telephone conference call, as deemed appropriate by the Committee Chairman. Attendance by a majority of Members shall constitute a quorum for the transaction of business at any meeting. The Committee shall maintain written minutes of its meetings; the Committee also may act by unanimous written consent in lieu of a meeting.

Attendance of Non-Committee Members. All non-management directors that are not Members of the Committee may attend meetings of the Committee but may not vote. Additionally, the Committee may invite to its meetings any director, management of the Company, independent auditors and corporate counsel and other consultants and advisors, and such other persons as it deems appropriate in order to carry out its responsibilities. The Committee may also exclude from its meetings any persons it deems appropriate in order to carry out its responsibilities.

In any deliberations or voting to determine the compensation of the Chief Executive Officer (“CEO”), the CEO may not be present; however, in any deliberations regarding the compensation of other executive officers, the Committee may elect to invite the CEO to be present.

RESPONSIBILITIES AND AUTHORITY

Committee Functions. The following functions shall be the principal responsibilities and authority of the Committee. These functions should serve as a guide with the understanding that the Committee may carry out additional functions and adopt additional policies and procedures as may be appropriate in light of changing business, legislative, regulatory, legal or other conditions. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board from time to time related to the purposes of the Committee outlined in this Charter.

Committee Access and Information. The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern that the Committee deems appropriate and shall have the sole authority to retain and terminate outside counsel or other experts for this purpose, including the authority to approve the fees payable to such counsel or experts and any other terms of retention. The Committee also shall have sole authority to retain and to terminate any search firm to be used to assist it in identifying candidates to serve as directors of the Company, including sole authority to approve the fees payable to such search firm and any other terms of retention.

The Company shall issue payments as directed by the Committee to the outside legal, accounting and other advisors retained by the Committee in its discretion pursuant to this Charter.

Reliance on Others. Nothing in this Charter is intended to preclude or impair the protection provided in Section 141(e) of the Delaware General Corporation Law for good faith reliance by members of the Committee on reports or other information provided by others.

Board Selection, Composition and Evaluation

Qualifications of Directors. The Committee shall identify individuals believed to be qualified as candidates to serve on the Board consistent with criteria established by the Board, and select, or recommend that the Board select, the candidates for all directorships to be filled by the Board or by the stockholders at an annual or special meeting.

In identifying candidates for membership on the Board, the Committee shall take into account all factors it considers appropriate, which may include ethics; business or professional activities; experience, qualifications and skills; time; diversity and conflicts of interest, as detailed in the Corporate Governance Guidelines. The Committee also may consider the extent to which the candidate would fill a present need on the Board. The Committee shall review and make recommendations to the full Board, or determine whether members of the Board should stand for re-election. The Committee shall consider matters relating to the retirement of members of the Board, including term limits or age limits.

Director Nominees. The Committee shall evaluate candidates for nomination to the Board, including those recommended by stockholders.

Independence of Candidates. The Committee shall consider questions of independence and possible conflicts of interest of members of the Board and executive officers, and whether a candidate has special interests or a specific agenda that would impair his or her ability to effectively represent the interests of all stockholders.

Composition and Size of Board. The Committee shall review and make recommendations, as the Committee deems appropriate, regarding the composition and size of the Board in order to ensure the Board has the requisite expertise and its membership consists of persons with sufficiently diverse and independent backgrounds.

Evaluation. The Committee shall oversee evaluation of the Board and management.

Committee Selection and Composition

Selection of Committee Members. The Committee shall recommend members of the Board to serve on the committees of the Board, giving consideration to the criteria for service on each committee as set forth in the charter for such committee, as well as to any other factors the Committee deems relevant, and where appropriate, make recommendations regarding the removal of any member of any committee.

Selection of Chairmen. The Committee shall recommend members of the Board to serve as the chairmen of the committees of the Board.

Review of Committees. The Committee shall establish, monitor and recommend the purpose, structure and operations of the various committees of the Board, the qualifications and criteria for membership on each committee of the Board and, as circumstances dictate, make any recommendations regarding periodic rotation of directors among the committees and impose any term limitations of service on any committee of the Board.

The Committee shall periodically review the charter and composition of each committee of the Board and make recommendations to the Board for the creation of additional committees or the elimination of committees of the Board.

Corporate Governance

Review of Certificate of Incorporation and Bylaws. The Committee shall review the adequacy of the Certificate of Incorporation and Bylaws of the Company and recommend to the Board, as conditions dictate, that it propose amendments to the Certificate of Incorporation and Bylaws for consideration by the stockholders.

Review of Corporate Governance Principles. The Committee shall develop and recommend to the Board a set of corporate governance principles and keep abreast of developments with regard to corporate governance to enable the Committee to make recommendations to the Board in light of such developments as may be appropriate.

Compensation

Officer Compensation. The Committee shall have the authority to determine the form and amount of compensation to be paid or awarded to each executive officer of the Company.

Director Compensation. The Committee shall recommend to the Board the compensation and benefits of the non-employee directors, based on criteria set forth in the Company’s Corporate Governance Guidelines and such other considerations as the Committee deems appropriate. In addition, the Committee, in its sole discretion, may award additional compensation and benefits to its Chairman and to the chairmen of other committees of the Board, in view of the additional time and effort the chairmen are required to expend in performing their additional duties as chairmen.

Committee Advisors and Funding. The Committee shall have the sole authority and right to retain and terminate compensation consultants, legal counsel and other advisors of its choosing to assist the Committee in connection with its functions. The Committee shall have the sole authority to approve the fees and other retention terms of such advisors at the expense of the Company and not at the expense of the Members of the Committee.

Advisor Independence Evaluation. The Committee may select its advisors only after taking into consideration all factors relevant to that person’s independence from management, including the following:

  • the provision of other services to the company by the person that employs the compensation consultant, legal counsel or other advisor;
  • the amount of fees received from the company by the person that employs the compensation consultant, legal counsel or other advisor, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other advisor;
  • the policies and procedures of the person that employs the compensation consultant, legal counsel or other advisor that are designed to prevent conflicts of interest;
  • any business or personal relationship of the compensation consultant, legal counsel or other advisor with a member of the Committee;
  • any stock of the company owned by the compensation consultant, legal counsel or other advisor; and
  • any business or personal relationship of the compensation consultant, legal counsel, other advisor or the person employing the advisor with an executive officer of the company as well as any other factors required by applicable exchanges and/or the Exchange Act and corresponding rules that may be amended from time to time.

Chief Executive Officer Evaluation and Compensation. The Committee shall annually review and approve the corporate goals and objectives relevant to the compensation of the CEO and evaluate the CEO performance in light of these goals and objectives. Based on this evaluation, the Committee will make and annually review decisions respecting:

  • salary paid to the CEO,
  • all cash-based bonuses and equity compensation paid to the CEO,
  • entering into, amending or extending any employment contract or similar arrangement with the CEO,
  • any CEO severance or change in control arrangement, and
  • any other CEO compensation matters as from time to time directed by the Committee or the Board.

In determining the long-term incentive component of the CEO’s compensation, the Committee will consider the Company’s performance and relative stockholder return, the value of similar incentive awards to chief executive officers at companies that the Committee determines comparable based on factors it selects, and the incentive awards given to the Company’s CEO in prior years.

Executive Officer Evaluation and Compensation. The Committee shall annually review and approve the corporate goals and objectives relevant to the compensation of other executive officers. In light of these goals and objectives, the Committee will make and annually review decisions respecting:

  • salary paid to the executive officers,
  • all cash-based bonuses and equity compensation paid to the executive officers,
  • entering into, amending or extending any employment contract or similar arrangement with one or more executive officers,
  • executive officers’ severance or change in control arrangements, and
  • any other executive officer compensation matters as from time to time directed by the Committee or the Board.

In determining the long-term incentive component of the executive officers’ compensation, the Committee will consider the Company’s performance and relative stockholder return, the value of similar incentive awards to executive officers at similar companies.

Management Succession. The Committee shall oversee the management continuity planning process. In the event of a vacancy in the position of CEO, the Committee shall be responsible for leading the search for individuals qualified to serve as CEO and recommending candidates to the Board.

Director Compensation. The Committee will review director compensation so that it is reasonable and competitive with companies that are similarly situated and make its recommendations to the Board. Board and committee compensation should reflect the considerable time and effort that directors must devote in carrying out their responsibilities. Management directors shall receive no additional compensation for Board service.

Incentive Compensation Programs. The Committee shall meet with the CEO at least once in each fiscal year to discuss the incentive compensation programs to be in effect for the Company’s executive officers for such fiscal year and the corporate goals and objectives relevant to those programs.

Equity Plan Awards. The Committee will award stock options, restricted stock and other discretionary awards under the company’s stock option and other equity incentive plans, and otherwise exercise the authority of the Board with respect to oversight and administration of the Company’s stock-based and other incentive compensation plans.

Risk Oversight. At least annually, the Committee shall review incentive compensation arrangements to confirm that incentive pay arrangements do not create or encourage unnecessary risk-taking and report the results thereof to the full board.

Preparation of Annual Reports. The Committee shall prepare an annual report to the stockholders, for inclusion in the Company’s annual proxy statement and annual report on Form 10-K, in accordance with the rules and regulations of the SEC.

Compensation Committee Report. The Committee shall prepare the Compensation Committee Report required by the SEC’s Item 407(e)(5) of Regulation S-K.

Oversight of Stockholder Advisory Votes. The Committee shall oversee the Company’s compliance with SEC rules and regulations, as applicable, regarding stockholder advisory votes with respect to certain executive compensation matters, including non-binding advisory votes on executive compensation, the frequency of such votes and on “golden parachute” payments and clawback policies.

Compensation Discussion and Analysis. The Committee shall review and discuss with management the company’s Compensation Discussion and Analysis (“CD&A”) prepared in accordance with SEC regulations and determine whether to recommend to the Board that the CD&A be included in the company’s proxy statement and annual report on Form 10-K.

Reports

Reports to the Board. The Committee shall report regularly to the Board (i) following meetings of the Committee, (ii) with respect to such other matters as are relevant to the Committee’s discharge of its responsibilities and (iii) with respect to such recommendations as the Committee may deem appropriate. The report to the Board may take the form of an oral report by the Chairman or any other Member of the Committee designated by the Committee to make such report.

Review of Charter. The Committee shall review this Charter annually and recommend to the Board any changes it deems appropriate.

Self-Evaluation. At least annually, the Committee shall review and assess its performance and submit a report on its performance to the Board.

Minutes and Records. The Committee shall maintain minutes or other records of meetings and activities of the Committee.

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