2006 Stock Option Grant Agreement


    Exhibit
      4.2

    NIC
      INC. 2006 AMENDED AND RESTATED 

    STOCK
      OPTION AND INCENTIVE PLAN

    


    


    Stock
      Option Agreement

     

    1. Grant
      of Option.
      NIC Inc., a Colorado corporation (the “Company”), hereby grants to the Optionee
      named in the Certificate of Stock Option Grant (the “Certificate”), an option to
      purchase (the “Option”) the total number of shares subject to the Option (the
“Shares”) set forth in the Certificate at the Grant Price per share set forth in
      the Certificate subject to the terms and provisions of this Stock Option
      Agreement (the “Agreement”) and of the Certificate and the NIC Inc. 2006 Amended
      and Restated Stock Option and Incentive Plan (the “Plan”), which are
      incorporated herein by reference. Unless otherwise defined herein, the terms
      defined in the Plan shall have the same defined meanings in this
      Agreement.  By accepting the Option, the Optionee (and any person to whom
      the Option is transferred) acknowledges that the Plan has been made available
      to
      him or her.

     

    If
      designated in the Certificate as an Incentive Stock Option, the Option is
      intended to qualify as an Incentive Stock Option as defined in Code Section
      422.
      Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section
      422(d), the Option shall be treated as a Non-Qualified Stock Option.  If
      designated in the Certificate as a Non-Qualified Stock Option, the Option is
      not
      intended to qualify as an Incentive Stock Option under Code Section
      422.

     

    The
      Company seeks to provide a means by which the Company, through the grant of
      the
      Option to the Optionee may retain the Optionee’s services and motivate the
      Optionee to exert his or her best efforts on behalf of the Company and any
      Affiliate.

     

    2. Terms
      and Conditions. 

     

    (a) Grant
      Expiration Date. 
      The Option shall expire on the Grant Expiration Date provided in the
      Certificate.  The Optionee is responsible for taking any and all actions as
      may be required to exercise the Option in a timely manner, and for properly
      executing any documents as may be required for the exercise of the Option in
      accordance with such rules and procedures established from time to time under
      the Plan.  The Company has no duty to notify the Optionee (or any person to
      whom the Option is transferred) of the expiration of the Option.  By
      accepting the Option, the Optionee (and any person to whom the Option is
      transferred) acknowledges that the information regarding the procedures and
      requirements for the exercise of the Option has been made available to him
      or
      her.

     

    (b) Exercise
      of Option During Continuous Employment.
      Subject to the provisions of this Agreement, the Option may be exercised by
      the
      Optionee in installments as provided in the Certificate, rounded to the next
      lowest integer in the case of any fractional share.

     

    To
      the extent not exercised, an installment shall accumulate and be exercisable,
      in
      whole or in part, in any subsequent period but not later than the Grant
      Expiration Date provided in Section 2(a) of this Agreement.  When the
      right to exercise any installment accrues, the Shares included in that
      installment may be purchased at that time or from

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    time
      thereafter during the Option period ending on the Grant Expiration Date provided
      in Section 2(a) of this Agreement.

     

    An
      exercise of any part of the Option shall be accompanied by a written notice
      to
      the Company as provided in Section 5 of this Agreement and specifying the number
      of Shares as to which the Option is being exercised. 

     

    (c) Exercise
      Upon Termination of Employment or Relationship as a Director or
      Consultant. 

     

    Death. 
      In the event that the Optionee’s Continuous Status as an Employee, Director or
      Consultant terminates due to his or her death, the Option may be exercised
      by
      the Optionee’s estate or by any other person who acquired the Option by reason
      of the death of the Optionee within the 12 months immediately following his
      or
      her death and to the extent that the Optionee was entitled to exercise the
      Option at the date of his or her death; provided, however, that the Option
      may
      not be exercised after the Grant Expiration Date provided in Section 2(a) of
      this Agreement.

     

    Disability. 
      If the Optionee’s Continuous Status as an Employee, Director or Consultant
      terminates due to his or her disability (as defined in Code Section 22(e)(3)),
      the Option may be exercised by the Optionee within the 12 months immediately
      following such termination and to the extent that the Optionee was entitled
      to
      exercise the Option at the date of his or her termination due to his or her
      disability; provided, however, that the Option may not be exercised after the
      Grant Expiration Date provided in Section 2(a) of this
      Agreement.

     

    Other
      Termination of Relationship. 
      If the Optionee’s Continuous Status as an Employee, Director or Consultant
      terminates other than by death or due to disability and other than involuntarily
      for cause or voluntarily by the Optionee, the Optionee’s right to exercise the
      Option may be exercised within the 30 days immediately
      following such termination and to the extent that the Optionee was entitled
      to
      exercise the Option at the date his or her termination; provided, however,
      that
      the Option may not be exercised after the Grant Expiration Date provided in
      Section 2(a) of this Agreement.

     

    If
      the Optionee’s Continuous Status as an Employee, Director or Consultant is
      voluntarily terminated by the Optionee or involuntarily terminated for cause,
      the Optionee’s right to exercise the Option shall immediately terminate and any
      then unexercised portion of the Option shall be immediately
      canceled.

     

    For
      purposes of this Agreement, the term “cause” shall mean, with respect to any
      Optionee, (a) cause as defined in the employment agreement with the Company
      or any subsidiary thereof to which the Optionee is a party or, if none, (b)
      the
      occurrence of any of the following events:

     

    (i) the
      willful and continued failure by the Optionee to substantially perform his
      or
      her duties with the Company or any subsidiary thereof on a full-time basis
      (other than any such failure resulting from total or partial incapacity due
      to
      physical or mental illness) after a written demand for substantial

     


    
      
        
        

      

      
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    performance
      is delivered to the Optionee by the Board, which demand identifies the manner
      in
      which the Board believes that he or she has not substantially performed such
      duties;

     

    (ii) the
      willful engaging by the Optionee in conduct which is significantly injurious
      to
      the Company or to any subsidiary of the Company, monetarily or otherwise, after
      a written demand for cessation of such conduct is delivered to the Optionee
      by
      the Board, which demand specifically identifies the manner in which the Board
      believes that the Optionee has engaged in such conduct and the injury to the
      Company or to a subsidiary of the Company resulting therefrom;

     

    (iii) the
      commission by the Optionee of an act or acts constituting a crime involving
      moral turpitude;

     

    (iv) the
      breach by the Optionee of one or more covenants, if any, in an agreement to
      which the Optionee and the Company are parties;

     

    (v) violation
      by the Optionee of Company policy; or

     

    (vi) the
      commission by the Optionee of a significant act of dishonesty, deceit or breach
      of fiduciary duty in the performance of the Optionee’s duties with the Company
      or with any subsidiary of the Company.

     

    For
      purposes of clauses (i) and (ii) of this definition, no act, or failure to
      act,
      on the part of an Optionee shall be deemed to be willful unless knowingly done,
      or omitted to be done, by the Optionee not in good faith and without a
      reasonable belief that such action or omission was in the best interests of
      the
      Company or of a subsidiary of the Company.

     

    (d) Payment
      of Grant Price Upon Exercise. 
      At the time of any purchase of Shares under the Option, the Grant Price for
      such
      Shares as set forth in the Certificate shall be paid by the Optionee in full
      to
      the Company.  The Optionee may pay the Grant Price in whole or in part in
      cash or by check made payable to the Company and the Optionee may authorize
      a
      third party to sell a sufficient portion of the Shares acquired upon the
      exercise of the Option and remit to the Company the portion of the sale proceeds
      sufficient to pay the Grant Price and any tax withholding resulting from such
      exercise that is not paid by the Optionee in cash or by check.

     

    (e) Nontransferability. 
      The Option shall not be transferable other than by a will of the Optionee or
      by
      the laws of descent and distribution, and shall be exercisable during the
      lifetime of the Optionee only by the Optionee or his attorney-in-fact or
      conservator, unless the Option is an Incentive Stock Option and such exercise
      by
      the attorney-in-fact or the conservator of the Optionee would disqualify the
      Option as such under Code Section 422. 

     

    (f) Adjustments
      in Event of Change in Common Stock. 
      If any change is made in the Shares subject to the Option, without the receipt
      of consideration by the Company (through merger, consolidation, reorganization,
      recapitalization,

     


    
      
        
        

      

      
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    reincorporation,
      stock dividend, dividend in property other than cash, stock split, liquidating
      dividend, combination of shares, exchange of shares, change in corporate
      structure or other transaction not involving the receipt of consideration by
      the
      Company), the Option will be appropriately adjusted in the class(es) and number
      of shares and price per share of stock of those subject Shares in such manner
      as
      the Board may deem equitable to prevent substantial dilution or enlargement
      of
      the rights granted to the Optionee; provided, however, that no such adjustment
      shall cause the Company to issue a fractional share under the Option.  Such
      adjustments shall be final, binding and conclusive.  (The conversion of any
      convertible securities of the Company shall not be treated as a transaction
      not
      involving the receipt of consideration by the Company.) 

     

    (g) No
      Rights as a Shareholder. 
      The Optionee shall have no rights as a shareholder with respect to any Shares
      subject to the Option prior to the date of issuance to him or her of a
      certificate or certificates for such Shares.

     

    (h) No
      Rights to Continued Relationship. 
      The Option shall not confer upon the Optionee any right with respect to
      continuance of employment by the Company or by an Affiliate, nor shall it
      interfere in any way with the right of his or her employer to terminate his
      or
      her employment at any time.

     

    The
      Option shall not confer upon the Optionee any right with respect to continuance
      of a directorship of the Company or of an Affiliate, nor shall it interfere
      in
      any way with the right of the shareholders to remove him or her as a director
      at
      any time.

     

    The
      Option shall not confer upon the Optionee any right with respect to continuance
      of any consulting arrangement with the Company or any Affiliate, nor shall
      it
      interfere in any way with the right of the Company or an Affiliate, as the
      case
      may be, to terminate any such arrangement.

     

    (i) Sale
      of the Company. 
      In the event of a dissolution, liquidation or sale of all or substantially
      all
      of the assets of the Company, or that the Company is not the surviving
      corporation in any merger, consolidation, or reorganization, then the Option
      shall be canceled as of the effective date of such transaction; provided,
      however, the Board shall give at least 30 days’ written notice of the
      transaction to the Optionee and during the period beginning the Optionee
      receives the notice and ending on the date of the transaction, the Optionee
      shall have the right to exercise all or any part of the unexercised portion
      of
      the Option (without regard to employment requirements or any installment
      exercise limitations) (the “Accelerated Amount”); provided further that no part
      of the Option may be exercised after the Grant Expiration Date provided in
      Section 2(a) of this Agreement.  If the Option is an Incentive Stock
      Option, the Accelerated Amount under this Section shall remain exercisable
      as an Incentive Stock Option under Code Section 422 only to the extent that
      the
      $100,000 dollar limitation of Code Section 422(d) is not exceeded.  To the
      extent that such dollar limitation is exceeded, the Accelerated Amount shall
      be
      exercisable as a Non-Qualified Stock Option.

     

    (j) Compliance
      with Other Laws and Regulations. 
      The Option and the obligation of the Company to sell and deliver Shares
      hereunder, shall be subject to all applicable federal and state laws, rules,
      and
      regulations, and to such approvals by any

     


    
      
        
        

      

      
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    government
      or regulatory agency as may be required.  The Company shall not be required
      to issue or deliver any certificates for Shares prior to the completion of
      any
      registration or qualification of such Shares under any federal or state law,
      or
      any rule or regulation of any governmental body which the Company shall, in
      its
      sole discretion, determine to be necessary or advisable.

     

    To
      the extent applicable, it is intended that this Agreement and the Plan comply
      with the provisions of Section 409A of the Code. This Agreement and the Plan
      shall be administered in a manner consistent with this intent, and any provision
      that would cause this Agreement or the Plan to fail to satisfy Section 409A
      of
      the Code shall have no force or effect until amended to comply with Section
      409A
      of the Code (which amendment may be retroactive to the extent permitted by
      Section 409A of the Code and may be made by the Company without the consent
      of
      the Optionee).

     

    (k) Withholding
      Taxes. 
      The Optionee agrees to make appropriate arrangements with the Company or
      Affiliate, as the case may be, for the satisfaction of all federal, state and
      local income and employment tax withholding requirements applicable to the
      exercise of the Option.  No Shares will be delivered pursuant to the
      exercise of the Option until the Optionee, or any other person to whom the
      Option is transferred, has made acceptable arrangements for these withholding
      requirements.

     

    3. Investment
      Representation. 
      The Company may require that the Optionee furnish to the Company, as a condition
      of exercising or acquiring stock underlying the Option, (a) written
      assurances satisfactory to the Company, or counsel for the Company, as to the
      Optionee’s knowledge and experience in financial and business matters and/or to
      employ a purchaser representative reasonably satisfactory to the Company, or
      counsel for the Company, who is knowledgeable and experienced in financial
      and
      business matters, and that he or she is capable of evaluating, alone or together
      with the purchaser representative, the merits and risks of exercising the
      Option; and (b) written assurances satisfactory to the Company, or counsel
      for the Company, stating that the Optionee is acquiring the stock subject to
      the
      Option for the Optionee’s own account and not with any present intention of
      selling or otherwise distributing the stock underlying the Option.  The
      Company may (a) restrict the transferability of the stock underlying the
      Option and require a legend to be endorsed on the certificates representing
      such
      stock, as appropriate to reflect resale restrictions, if any, imposed by the
      Board pursuant to the Option when granted, or as appropriate to comply with
      any
      applicable state or federal securities laws, rules or regulations; and
      (b) condition the exercise of the Option or the issuance and delivery of
      stock underlying the Option upon the listing, registration or qualification
      of
      such stock upon a securities exchange or quotation system or under applicable
      securities laws.  The foregoing requirements, and any assurances given
      pursuant to such requirements, shall be inoperative if (a) the issuance of
      stock upon the exercise of the Option has been registered under a then currently
      effective registration statement under the Securities Act, or (b) as to any
      particular requirement, a determination is made by counsel for the Company
      that
      such requirement need not be met in the circumstances under the then applicable
      securities laws.  The Company may, upon advice of counsel to the Company,
      place legends on stock certificates issued under the Option as such counsel
      deems necessary or appropriate in order to comply with applicable securities
      laws, including, but not limited to, legends restricting the transfer of the
      stock.

     


    
      
        
        

      

      
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    4. Optionee
      Bound by the Plan. 
      The Optionee agrees to be bound by all the terms and provisions of the
      Plan.  To the extent that the terms of this Agreement are inconsistent with
      the terms of the Plan, the terms of the Plan shall govern.  The captions
      used in the Certificate, this Agreement, and the Plan are inserted for
      convenience and shall not be deemed a part of the Option for construction or
      interpretation.

     

    This
      Agreement, the Certificate, and the Plan shall be construed in accordance with
      the laws of the State of Colorado, without regard to the conflict of laws
      principles. 

     

    5. Notices. 
      Any notice to the Company or the Board that is required to be made under the
      terms of the Agreement or under the terms of the Plan shall be addressed to
      the
      Company in care of its president at 12 Corporate Woods, 10975 Benson Street,
      Suite 390, Overland Park, Kansas 66210.  Any notice that is required to be
      made to the Optionee under the terms of the Agreement or under the terms of
      the
      Plan shall be addressed to him or her at the address indicated in the
      Certificate unless the Optionee notifies the Company of his or her address
      change in writing as provided in this Section 5 in which case the notice shall
      be addressed to the Optionee at his or her new address.  A notice under
      this Section 5 shall be deemed to have been given or delivered upon personal
      delivery or upon deposit in the United States mail, by registered or certified
      mail, postage prepaid and properly addressed as provided in this
      Section.

     

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