Adopted to be Effective October 16, 2017
The Board of Directors of IronClad Encryption Corporation (the “Board”) is responsible for oversight of the business and affairs of IronClad Encryption Corporation (“IronClad”). Acting on the recommendation of the Compensation, Nominating and Corporate Governance Committee, the Board of Directors has approved the following guidelines that, along with the charters of the Board committees, provide a general framework to assist the Board in carrying out its responsibility for the business and affairs of IronClad to be managed by or under the direction of the Board. The Board believes sound corporate governance policies and practices provide an essential foundation for the Board in fulfilling its oversight responsibilities.
Role of Board and Management
IronClad’s business is conducted by its employees, managers and officers, under the direction of the Chief Executive Officer (“CEO”) and the oversight of the Board, with the objective of enhancing the long-term value of IronClad for its stockholders. The Board is elected by the stockholders to oversee management and to assure that the interests of the stockholders are being served.
Board Composition, Qualifications and Independence
Number of Directors. The size of the Board should facilitate substantive discussions of the Board in which each director can participate meaningfully. The Board will periodically review the appropriate size of the Board based on recommendations from the Compensation, Nominating and Corporate Governance Committee. IronClad’s Bylaws currently provide that the authorized number of directors will not be less than one nor more than twelve.
Majority of Independent Directors. A majority of directors serving on the Board will meet the standards for independence set forth in the OTC QX, OTC QB, Nasdaq, NYSE or other stock exchange listing standards applicable to IronClad as the same may be amended from time to time (the “listing standards”), as well as other factors not inconsistent with the listing standards that the Board considers appropriate for effective oversight and decision-making by the Board. The Board will affirmatively determine annually and at other times required by the listing standards that the directors designated as independent have no material relationships to IronClad (either directly or with an organization in which the director is a partner, stockholder or officer or is financially interested) that may interfere with the exercise of their independence from management and IronClad. Directors serving on certain Board committees may be required to meet additional requirements as specified in the charter for that committee.
Functions of Board. Directors are expected to attend Board meetings and meetings of committees on which they serve, and to spend the time needed and to meet as frequently as necessary to properly discharge their responsibilities. Information and data that are important to the Board’s understanding of the business to be conducted at a Board or committee meeting should generally be distributed in writing to the directors before the meeting, and directors should review the materials in advance of the meeting.
Selection of the Chairman of the Board and Chief Executive Officer. The Board is free to select its Chairman and the Chief Executive Officer of IronClad in the manner it considers in the best interests of IronClad.
Nomination of Board Members. The Compensation, Nominating and Corporate Governance Committee of the Board is responsible for leading the search for individuals qualified to serve on the Board. The Compensation, Nominating and Corporate Governance Committee of the Board will evaluate candidates for nomination to the Board, including those recommended by stockholders, and will conduct appropriate inquiries into the backgrounds and qualifications of possible candidates. Based on these reviews, the Compensation, Nominating and Corporate Governance Committee of the Board will make recommendations to the Board of director nominees to be presented for approval at meetings of the stockholders or to be presented to the Board for election.
Director Qualifications. The Board's objective is to select individuals with the skills and characteristics that taken together will assure a strong and effective Board. In addition, the Board looks for recognized achievement and reputation, an ability to contribute to specific aspects of the corporation's activities and the willingness and ability to make the commitment of time and effort required, including attendance at all Board meetings and committee meetings of which he or she is a member.
Basic requirements for membership on the Board may include the following:
Ethics: Directors should be persons of good reputation and character who conduct themselves in accordance with high personal and professional ethical standards, including the policies set forth in IronClad’s Code of Ethics.
Business and Professional Activities: Directors should maintain a professional life active enough to keep them in contact with the markets, the business and technical environments and the communities in which the company is active. Because this exposure is a main factor in selecting and retaining directors, a significant position or title change will be seen as reason to review a director’s membership on the Board.
Experience, Qualifications and Skills: Directors should have experience, qualifications and skills relevant for effective management and oversight of IronClad’s senior executives, which could be acquired through education, training, experience, self-study or other means such as experience at senior executive levels in comparable companies, public service, professional service firms, educational institutions or other organizations.
Time: Directors should have the time and willingness to carry out their duties and responsibilities effectively, including time to study informational and background material and to prepare for meetings. Directors should attempt to arrange their schedules to allow them to attend all scheduled Board and committee meetings.
Diversity: The Board believes that diversity, including differences in backgrounds, qualifications, and personal characteristics, is important to the effectiveness of the Board’s oversight of the company.
Conflicts of Interest: Each director should not, by reason of any other position, activity or relationship, be subject to any conflict of interest that would impair the director’s ability to fulfill the
responsibilities of a member of the Board.
Director Orientation and Continuing Education. Newly elected Board members will be provided with a director orientation session and continuing directors will be provided with continuing education opportunities related to the service and obligations of directors and committee members.
Retirement of Directors and Term Limits. The Compensation, Nominating and Corporate Governance Committee shall consider matters relating to the retirement of members of the Board, including term limits or age limits.
Board Committees and Structure
Committees of the Board. The Board has established the following committees to assist it in discharging its responsibilities: the Compensation, Nominating and Corporate Governance Committee and the Audit Committee. The Compensation, Nominating and Corporate Governance Committee will periodically review the charters of the committees and recommend to the Board the creation of additional committees or the elimination of committees of the Board. All members of these committees shall be independent directors, as determined by the Board pursuant to these guidelines. Each of these committees must have a written charter and each committee chairman will give a periodic report of his or her committee’s activities to the Board.
Board Leadership. The Board is led by the Chairman who will chair all Board meetings and set the meeting agenda in consultation with the Chief Executive Officer and other directors. Committee chairman will chair their respective committee meetings and set the meeting agenda in consultation with the other committee members.
Evaluation and Compensation. The Compensation, Nominating and Corporate Governance Committee will review and evaluate annually the performance of the CEO, and it will discuss its findings and recommendations with the Board.
Management Succession. The Compensation, Nominating and Corporate Governance Committee will 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 Compensation, Nominating and Corporate Governance 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.
General Responsibilities. A director is expected to discharge his or her director duties, including duties as
a member of a committee on which the director serves, in good faith and in a manner the director reasonably believes to be in the best interests of the company.
Disclose Relationships. Each independent director is expected to disclose promptly to the Board any existing or proposed relationships with the company (other than service as a Board member or on Board committees) which could affect the independence of the director under applicable listing standards or any additional standards as may be established by the Board from time to time, including direct relationships between the company and the director and his or her family members, and indirect relationships between the company and any business, nonprofit or other organization in which the director is a general partner or manager, officer, or significant stockholder, or is materially financially interested.
Confidentiality. Directors have an obligation to protect and keep confidential all non-public information related to the company (the “confidential information”) unless and until the Board has authorized disclosure (or unless otherwise required by law or regulation). Confidential information includes all non-public information entrusted to or obtained by a director by reason of his or her position on the Board, such as information regarding the strategy, business, finances and operations of the company, minutes, reports and materials of the Board and its committees, and other documents identified as confidential by the company, including but not limited to non-public information concerning: (1) the company’s financial condition, prospects or plans, its marketing and sales programs and research and development information, as well as information relating to acquisitions, divestitures and actions relating to the company’s stock; (2) possible transactions with other companies or information about the company’s suppliers, licensors or joint venture partners, which the company is under an obligation to maintain as confidential; and (3) the proceedings and deliberations of the Board and its committees, and the discussions and decisions between and among employees, officers and directors.
Directors may not use confidential information for personal benefit or to benefit other persons or entities other than the company. Directors should refrain from disclosing confidential information without the authorization of the Board or the Chairman, unless otherwise required by law or regulation. The obligations described above continue even after service on the Board has ended.
Reporting and Compliance Systems. Based on information available to the director, each director should be satisfied that company management maintains an effective system for timely reporting to the Board or appropriate Board committees on the following: (1) the company’s financial and business plans, strategies and objectives; (2) the recent financial results and condition of the company and its business segments; (3) significant accounting, regulatory, competitive, litigation and other external issues affecting the company; and (4) systems of control which promote accurate and timely reporting of financial information to stockholders and compliance with laws and corporate policies. Each director is expected to have a basic understanding of the foregoing matters to the extent information is furnished by management or otherwise available to the Board.
Attendance. Board members are expected to devote sufficient time and attention to prepare for, attend and participate in Board meetings and meetings of committees on which they serve, including advance review of meeting materials that may be circulated prior to each meeting.
Access to Information. The company’s management will afford each Board member access to the company employees and the outside auditors, legal counsel and other professional advisers for any
purpose reasonably related to the Board’s responsibilities. Each director is entitled to inspect the company’s books and records and obtain such other data and information as the director may reasonably request; inspect facilities as reasonably appropriate for the performance of director duties; and to receive notice of all meetings in which a director is entitled to participate and copies of all Board and committee meeting minutes.
Independent Inquiries and Advisers. The Board is authorized to conduct investigations, and to retain, at the expense of the company, outside legal, accounting, investment banking, or other professional advisers for any matters relating to the responsibilities of the Board. Each of the Board’s standing committees has similar authority to retain outside advisers as each determines appropriate, as set forth in the respective committee’s charter.
Reliance on Information. In discharging responsibilities as a director, a director is entitled to rely in good faith on reports or other information provided by company management, independent auditors, and other persons as to matters the director reasonably believes to be within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the company.
Transactions Affecting Director Independence. Without the prior approval of a majority of disinterested members of the full Board, and, if required by the listing standards or the Audit Committee, the company will not make significant charitable contributions to organizations in which a director or a family member of the director is affiliated, enter into consulting contracts with (or otherwise provide indirect forms of compensation to) a director, or enter into any relationships or transactions (other than service as a director and Board committee member) between the company and the director (or any business or nonprofit entity or organization in which the director is a general partner, controlling stockholder, officer, manager, or trustee, or materially financially interested).
Notwithstanding the foregoing, to the extent required to comply with the U.S. Securites and Exchange Commission (“SEC”) rules, no member of the Audit Committee will be an affiliated person of the company or receive any direct or indirect compensation from the company other than for service as a director and on committees on which the individual serves, and each such member will otherwise meet the independence requirements set forth in the Audit Committee charter. Additionally, all members of the Compensation, Nominating and Corporate Governance Committee must meet the independence requirements for committee membership as determined by applicable SEC rules and listing standards and as set forth in the Compensation, Nominating and Corporate Governance Committee charter.
Annual Evaluation. The Board, in conjunction with the Compensation, Nominating and Corporate Governance Committee, will evaluate these corporate governance guidelines and whether the Board and its committees are functioning effectively at least annually.
Risk Oversight. The Board should understand the principal risks associated with the company's business on an on-going basis and it is the responsibility of management to assure that the Board and its committees are kept well informed of these changing risks on a timely basis. It is important that the Board oversee the key risk decisions of management, which includes comprehending the appropriate balance between risks and rewards.
Financial Reporting and Legal Compliance. The Board’s governance and oversight functions do not relieve the primary responsibilities of management to (1) make and keep books, records and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) devise and maintain an effective system of internal accounting controls; (3) devise and maintain effective disclosure controls and procedures and internal control over financial reporting; (4) prepare financial statements that are accurate and complete and fairly present the financial condition, results of operation and cash flows of the company; and (5) devise and maintain systems, procedures and corporate culture which promote compliance with legal and regulatory requirements and the ethical conduct of IronClad’s business.
Corporate Communications. Executive management has the primary responsibility to establish policies concerning IronClad’s communications with investors, the press, customers, suppliers and employees.
Communication of Corporate Governance Guidelines. As required by the listing standards, management will assure that the company’s website will include a copy of these guidelines, copies of the charters of the Compensation, Nominating and Corporate Governance Committee, the Audit Committee, and, if applicable, other key committees of the Board, and a copy of IronClad’s Code of Ethics. Management will also include in the company’s annual report to stockholders statements to the effect that this information is available on the company’s website and in print to any stockholder who requests it.