PRER14A 1 name-prer14a_20170602.htm PRER14A name-prer14a_20170602.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)

Filed by the Registrant  

Filed by a Party other than the Registrant  

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a‑6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a‑12

RIGHTSIDE GROUP, LTD.

 

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a‑6(i)(4) and 0‑11.

(1)

Title of each class of securities to which transaction applies:

 

(2)

Aggregate number of securities to which transaction applies:

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0‑11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

 

(4)

Proposed maximum aggregate value of transaction:

 

(5)

Total fee paid:

 

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0‑11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)

Amount Previously Paid:

 

(2)

Form, Schedule or Registration Statement No.:

 

(3)

Filing Party:

 

(4)

Date Filed:

 

 

 

 


PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION

Dear Stockholder:

You are invited to attend the annual meeting of stockholders of Rightside Group, Ltd. (“Rightside,” “we,” “us” or “our”) to be held on Friday, June 2, 2017, at 1:30 p.m. Pacific Time, at the Woodmark Hotel, located at 1200 Carillon Point, Kirkland, WA 98033.

Details regarding admission to the meeting and the business to be conducted are described in the Notice of Internet Availability of Proxy Materials you received in the mail and in the accompanying proxy statement. We have also made available a copy of our 2016 Annual Report to stockholders with this proxy statement. We encourage you to read our Annual Report. It includes our audited financial statements and provides information about our business. This year’s Annual Meeting is a particularly important one, and YOUR vote is extremely important. Tonga Partners, L.P. (“Tonga”), which is affiliated with Cannell Capital LLC (together with Tonga, “Cannell Capital”) has notified Rightside that it may propose its own slate of three director nominees to stand for election at the Annual Meeting (the “Cannell Nominees”). You may receive solicitation materials from Cannell Capital seeking your proxy to vote for the Cannell Capital nominees. At this time, we have no knowledge whether they will actually proceed with the solicitation for the election of these individuals at all. IN THE EVENT THAT THEY DO, THE BOARD URGES YOU NOT TO SUBMIT ANY PROXY CARD SENT TO YOU BY, OR ON BEHALF OF, CANNELL CAPITAL. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE BOARD’S NOMINEES ON THE ENCLOSED WHITE PROXY CARD. Our nominating and corporate governance committee has reviewed all director nominees, including the Cannell Nominees, in accordance with the director qualifications set forth in our corporate governance guidelines. If you already have submitted a proxy card sent to you by, or on behalf of, Cannell Capital, you can revoke that proxy by submitting another proxy over the Internet or by telephone, or by completing, dating, signing and returning your WHITE proxy card in the postage-paid envelope provided. Only your last-dated proxy will count, and any proxy may be revoked at any time prior to its exercise at the annual meeting as described in the accompanying proxy statement.

In addition to the business to be transacted as described in the proxy materials, management will respond to questions of general interest to stockholders, including questions related to the matters to be voted on at the meeting.

It is important that your shares be represented and voted whether or not you plan to attend the annual meeting in person. If you do not attend the annual meeting in person, you may vote on the internet or by telephone, or if you are receiving a paper copy of the proxy statement, by completing and mailing a proxy card. Voting over the internet, by telephone or by written proxy will ensure your shares are represented at the annual meeting.

Sincerely,

 

David E. Panos

Chairman of the Board

Taryn J. Naidu

Chief Executive Officer

 


PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION

 

NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON FRIDAY, JUNE 2, 2017

To the Stockholders of Rightside Group, Ltd.:

The 2017 annual meeting of stockholders (the “Annual Meeting”) of Rightside Group, Ltd., a Delaware corporation, will be held on Friday, June 2, 2017, at 1:30 p.m. Pacific Time, at the Woodmark Hotel, located at 1200 Carillon Point, Kirkland, WA 98033, for the following purposes:

 

1.

To elect three Class III directors to serve on the Board of Directors until the 2020 annual meeting of stockholders;

 

2.

To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017; and

 

3.

To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only stockholders of record at the close of business on April 12, 2017 are entitled to receive notice of and to vote at the meeting. Further information regarding voting rights and the matters to be voted upon is presented in our proxy statement.

We have elected to use the internet as our primary means of providing our proxy statement to stockholders. Consequently, stockholders will not receive paper copies of our proxy materials, unless they specifically request them. On or about [•], 2017, we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy statement for our Annual Meeting and our Annual Report to stockholders. This Notice provides instructions on how to vote online or by telephone and includes instructions on how to receive a paper copy of proxy materials by mail. This proxy statement and our 2016 Annual Report can be accessed directly if you log on to www.proxyvote.com and follow the instructions, using the control number shown in the Notice.

YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the Annual Meeting, we urge you to submit your vote via the internet, telephone or by completing and mailing a proxy card or the form forwarded by your bank, broker or other holder of record. Please review the instructions on the proxy card or the information forwarded by your bank, broker or other holder of record regarding each of these voting options.

This year’s Annual Meeting is a particularly important one, and YOUR vote is extremely important.

 

Tonga Partners, L.P. (“Tonga”), which is affiliated with Cannell Capital LLC (together with Tonga, “Cannell Capital”), a hedge fund with beneficial ownership of approximately 8.7% of Rightside’s outstanding common stock, has provided notice that it may propose its own slate of 3 nominees (the “Cannell Nominees”) to stand for election as directors. At this time, we have no knowledge of their intent to proceed with a solicitation for these nominees. If they do, however, you may receive solicitation materials from Cannell Capital seeking your proxy to vote for the Cannell Nominees. Our nominating and corporate governance committee has reviewed all director nominees, including the Cannell Nominees, in accordance with the director qualifications set forth in our corporate governance guidelines. Based on such review and the recommendation of our nominating and corporate governance committee, our Board of Directors unanimously recommends voting for the election of each of Diane M. Irvine, Robert J. Majteles and Taryn J. Naidu, whose names are set forth on the WHITE proxy card. 


THE BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD THAT MAY BE SENT TO YOU BY CANNELL CAPITAL. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE BOARD’S NOMINEES, WHOSE NAMES ARE SET FORTH ON THE ENCLOSED WHITE PROXY CARD. Even if you have already returned a proxy card sent to you by Cannell Capital, you have every right to change your vote. You may revoke that proxy and vote as recommended by the Board of Directors by signing, dating and returning the enclosed WHITE proxy card in the enclosed postage-paid envelope or by voting via the Internet or by telephone by following the instructions provided on the enclosed WHITE proxy card. Only your latest dated proxy will be counted. THE BOARD OF DIRECTORS URGES YOU NOT TO RETURN ANY PROXY CARD SENT TO YOU BY CANNELL CAPITAL, EVEN AS A PROTEST VOTE AGAINST CANNELL CAPITAL OR THE CANNELL NOMINEES BECAUSE IT WILL NEGATE ANY EARLIER CARD YOU MAY HAVE SUBMITTED IN SUPPORT OF YOUR BOARD’S NOMINEES.

Our Board recommends that you vote FOR the election of the director nominees named in Proposal No. 1 and FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm as described in Proposal No. 2 of the proxy statement.

We appreciate your support of Rightside Group, Ltd. and look forward to either greeting you personally at the meeting or receiving your proxy.

By Order of the Board of Directors,

Rick Danis

General Counsel and Corporate Secretary

Kirkland, Washington

[], 2017

 

 


PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION

FOR 2017 ANNUAL MEETING OF STOCKHOLDERS

Table of Contents

 

 

 

Page

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING 

 

1

 

 

 

PROPOSAL NO. 1 ELECTION OF DIRECTORS 

 

7

 

 

 

Director Nominees 

 

7

Board Recommendation 

 

8

 

 

 

PROPOSAL NO. 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

 

9

 

 

 

Principal Accounting Fees and Services 

 

9

Pre-Approval Policies and Procedures 

 

9

Auditor Independence 

 

9

Board Recommendation 

 

10

 

 

 

AUDIT COMMITTEE REPORT 

 

11

 

 

 

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE 

 

12

 

 

 

Information Regarding the Continuing Directors 

 

12

Corporate Governance 

 

13

Board Committees 

 

14

Compensation Committee Interlocks and Insider Participation 

 

17

Communication with the Board 

 

17

Code of Business Conduct and Ethics 

 

17

 

 

 

DIRECTOR COMPENSATION 

 

18

 

 

 

Director Compensation Table 

 

19

 

 

 

EXECUTIVE OFFICERS 

 

20

 

 

 

EXECUTIVE COMPENSATION 

 

21

 

 

 

Summary Compensation Table 

 

21

Narrative Disclosure to Summary Compensation Table 

 

22

Equity Compensation Plan Table 

 

24

Outstanding Equity Awards at 2016 Fiscal Year-End 

 

24

Executive Compensation Arrangements and Potential Payments Upon Termination or Change in Control 

 

27

Compensation Committee Report 

 

30

 

 

 

SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS 

 

31

 

 

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

33

 

 

 

ADDITIONAL INFORMATION

 

35

 

 

 

Householding of Proxy Materials

 

35

Section 16(a) Beneficial Ownership Reporting Compliance

 

35

Incorporation by Reference

 

35

Availability of Annual Report on Form 10-K

 

35

Other Matters

 

35

Certain Information Regarding Participation in the Solicitation of Proxies

 

36

 

 

 

INFORMATION ABOUT CONTACTS AND COMMUNICATIONS BETWEEN THE COMPANY AND REPRESENTATIVES OF CANNELL CAPITAL

 

A-1

 

 

 

INFORMATION CONCERNING PARTICIPANTS IN THE SOLICITATION OF PROXIES

 

B-1

 

 

 


 

RIGHTSIDE GROUP, LTD.

 

5808 Lake Washington Blvd. NE, Suite 300

Kirkland, Washington 98033

PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION

FOR 2017 ANNUAL MEETING OF STOCKHOLDERS

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

This proxy statement and the enclosed form of proxy are first being made available to stockholders on or about [], 2017 in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Rightside Group, Ltd., a Delaware corporation (“Rightside,” “we,” “us,” “our” or “the Company”), for use at our 2017 annual meeting of stockholders and any continuation, postponement or adjournment thereof (the “Annual Meeting”).  The Annual Meeting will be held on Friday, June 2, 2017 at 1:30 p.m. Pacific Time, at the Woodmark Hotel, located at 1200 Carillon Point, Kirkland, WA 98033.  On or about [], 2017, we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy statement for our Annual Meeting and our Annual Report to stockholders.

The information provided in the “question and answer” format below is for your convenience only and is merely a summary of the information contained in this proxy statement. You should read this entire proxy statement carefully. Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this proxy statement and references to our website address in this proxy statement are inactive textual references only.

What matters am I voting on?

You will be voting on:

 

the election of three Class III directors to hold office until our 2020 annual meeting;

 

ratification of selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017; and

 

any other business that may properly come before the meeting.

How does the Board recommend I vote on these proposals?

Our Board recommends that you vote your shares on the WHITE proxy card:

 

FOR the election of Diane M. Irvine, Robert J. Majteles and Taryn J. Naidu as Class III directors; and

 

FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2017.

Why might I be receiving proxy materials from Tonga Partners, L.P. or Cannell Capital LLC?

Tonga Partners, L.P. (“Tonga”), which is affiliated with Cannell Capital LLC (together with Tonga, “Cannell Capital”), a hedge fund with beneficial ownership of approximately 8.7% of our outstanding common stock, has provided notice that it may nominate at the Annual Meeting its own slate of three nominees (the “Cannell Nominees”) to stand for election as directors. You may receive solicitation materials from Cannell Capital seeking your proxy to vote for the Cannell Nominees, though at this point we have no knowledge that they will in fact send out any solicitation materials. IF YOU DO RECEIVE ANY MATERIALS OTHER THAN FROM THE COMPANY, THE BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY CANNELL CAPITAL OR ANY OTHER THIRD PARTY. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE BOARD’S NOMINEES, WHOSE NAMES ARE SET FORTH ON THE ENCLOSED WHITE PROXY CARD.

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Who is entitled to vote?

Holders of our common stock as of the close of business on April 12, 2017, the record date, may vote at the Annual Meeting. As of the record date, we had 19,504,057 shares of common stock outstanding. In deciding all matters at the Annual Meeting, each stockholder will be entitled to one vote for each share of common stock held on the record date. We do not have cumulative voting rights for the election of directors.

Stockholder of Record: Shares Registered in Your Name

If your shares are registered directly in your name with our transfer agent, you are considered the stockholder of record with respect to those shares, and the Notice was provided to you directly by us. As the stockholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or to vote in person at the Annual Meeting.

Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Agent

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by your broker or nominee, who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker or nominee how to vote your shares. Beneficial owners are also invited to attend the Annual Meeting. However, since a beneficial owner is not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you follow your broker’s procedures for obtaining a legal proxy. If you request a printed copy of the proxy materials by mail, your broker or nominee will provide a voting instruction card for you to use.

How do I vote?

Stockholder of Record: Shares Registered in Your Name

There are four ways to vote:

 

by internet at http://www.proxyvote.com, 24 hours a day, seven days a week, until 11:59 p.m. Eastern time, on June 1, 2017 (have your proxy card in hand when you visit the website);

 

by toll-free telephone at 1-800-690-6903, until 11:59 p.m. Eastern time, on June 1, 2017 (have your proxy card in hand when you call);

 

by completing and mailing your proxy card (if you received printed proxy materials); or

 

by written ballot at the Annual Meeting.

Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Agent

If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a voting instruction card and voting instructions with these proxy materials from that organization rather than from us. Simply complete and mail the voting instruction card to ensure that your vote is counted, or follow the instructions to submit your vote by the internet or telephone, if the instructions provide for internet and telephone voting. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker, bank or other agent included with these proxy materials, or contact your broker, bank or other agent to request a proxy form.

Can I change my vote?

Yes. If you are a stockholder of record, then you can change your vote or revoke your proxy any time before the Annual Meeting by:

 

entering a new vote by internet or by telephone;

 

returning a later-dated proxy card;

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notifying the Corporate Secretary of Rightside Group, Ltd., in writing, at the address listed on the front page; or

 

completing a written ballot at the Annual Meeting.

Your most current proxy card or telephone or internet proxy is the one that is counted.

If you are the beneficial owner, your broker, bank or other nominee can provide you with instructions on how to change your vote.

The Board of Directors urges you to revoke any proxy card you may have returned that you received from Cannell Capital. If you have previously signed a proxy card sent to you by Cannell Capital, you have every right to change your vote. You may revoke that proxy and vote as recommended by the Board of Directors by signing, dating and returning the enclosed WHITE proxy card in the enclosed postage-paid envelope or by voting via the Internet or by telephone by following the instructions provided on the enclosed WHITE proxy card. Only your latest-dated proxy will be counted. Submitting a Cannell Capital proxy card—even if you withhold your vote on the Cannell Nominees—will revoke any votes that you previously made on the WHITE proxy card. Accordingly, if you wish to vote pursuant to the recommendation of the Board of Directors, you should disregard any proxy card that you receive that is not a WHITE proxy card. Do not return any proxy card that you may receive from Cannell Capital, even as a protest vote against Cannell Capital or the Cannell Nominees.

What is the effect of giving a proxy?

Proxies are solicited by and on behalf of our Board. When proxies are properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instruction of the stockholder. Assuming there is no contested election and if no specific instructions are given, however, the shares will be voted in accordance with the recommendations of our Board as described above. If any matters not described in the proxy statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote your shares. Tracy Knox and Rick Danis have been designated as proxy holders by our Board. If the Annual Meeting is adjourned, the proxy holders can vote your shares on the new meeting date as well, unless you have properly revoked your proxy instructions, as described above.

Who will pay for the cost of this proxy solicitation?

We will bear the cost of the solicitation of proxies from our stockholders.  In addition to solicitation by mail, our directors, officers and employees, without additional compensation, may solicit proxies from stockholders by telephone or by other means of communication.  We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

As a result of the potential proxy contest initiated by Cannell Capital, we may incur substantial additional costs in connection with the solicitation of proxies. Our expenses related to the solicitation of proxies from stockholders this year may substantially exceed those normally spent for an annual meeting of stockholders if a contest is initiated. Such additional costs are expected to aggregate to approximately $[●], exclusive of any costs related to any litigation in connection with the Annual Meeting. These additional solicitation costs are expected to include: fees of outside counsel to advise the Company in connection with a contested solicitation of proxies; increased mailing costs, such as the costs of additional mailings of solicitation material to stockholders, including printing costs, mailing costs and the reimbursement of reasonable expenses of banks, brokerage houses and other agents incurred in forwarding solicitation materials to beneficial owners of Common Stock; and the costs of retaining an independent inspector of election. To date, we have incurred approximately $[●] of these solicitation costs.

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Why did I receive a Notice of Internet Availability of Proxy Materials instead of a full set of proxy materials?

In accordance with the rules of the Securities and Exchange Commission (“SEC”), we have elected to furnish our proxy materials, including this proxy statement and our Annual Report to our stockholders, primarily via the internet. On or about [], 2017, we expect to mail to our stockholders the Notice that contains instructions on how to access our proxy materials on the internet, how to vote at the meeting, and how to request printed copies of the proxy materials and Annual Report. Stockholders may request to receive all future proxy materials in printed form by mail or electronically by e-mail by following the instructions contained in the Notice. We encourage stockholders to take advantage of the availability of the proxy materials on the internet to help reduce our costs and the environmental impact of our annual meetings.

How are votes counted?

Votes will be counted by the inspector of election appointed for the Annual Meeting.  For Proposal No. 1, the inspector of election will separately count “For” and “Withheld” votes and broker non-votes for each nominee.  For Proposal No. 2, the inspector of election will separately count “For” and “Against” votes, abstentions and broker non-votes.  If your shares are held in street name, you will need to follow the instructions provided by your broker to instruct your broker how to vote your shares.  If you do not give instructions to your broker, your broker can vote your shares with respect to “routine” items, but not with respect to “non-routine” items. See below for more information regarding: “What are ‘broker non-votes’ and how do they affect the proposals?

What are “broker non-votes” and how do they affect the proposals?

A broker non-vote occurs if you are a beneficial owner and do not instruct your broker, bank or other agent on how to vote your shares, and your broker or nominee cannot vote your shares because a particular proposal is considered “non-routine.” Broker non-votes, as well as abstentions, are not counted as votes in favor of or against the proposal. Brokers and nominees can use their discretion to vote “uninstructed” shares only with respect to matters that are considered “routine.”

Under applicable rules, “non-routine” matters are matters that may substantially affect the rights or privileges of stockholders, such as mergers, stockholder proposals, elections of directors (even if not contested), executive compensation, and certain corporate governance proposals, even if management supported.  For brokerage or other nominee accounts that receive proxy materials from, or on behalf of, both Rightside and Cannell Capital in a contested election, all items listed in the notice for the meeting will be considered “non-routine” matters. In that case, if you do not submit any voting instructions to your broker or other nominee, your shares will not be counted in determining the outcome of any of the proposals at the Annual Meeting, nor will your shares be counted for purposes of determining whether a quorum exists. In an uncontested election, the broker or other nominee will be entitled to vote shares held for a beneficial owner on Proposal No. 2, even in the absence of your instruction.  Accordingly, if you receive proxy materials only from Rightside and you do not submit any voting instructions to your broker or nominee, your broker or nominee may vote your shares on Proposal No. 2, even in the absence of your instruction. If your shares are voted on Proposal No. 2 as directed by your broker or other nominee, your shares will constitute “broker non-votes” on each of the non-routine proposals and will not be counted in determining the number of shares necessary for approval of the non-routine proposals. If you are a beneficial owner and want your vote to count on the non-routine proposals, it is critical that you instruct your broker or other nominee how to vote your shares.

What is the quorum requirement?

A quorum of stockholders is necessary to hold a valid meeting.  The presence, in person or by proxy, of the holders of a majority of the total votes entitled to be cast constitutes a quorum. Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the meeting.  Abstentions and broker non-votes are counted towards the quorum requirement.

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How many votes are needed to approve each proposal?

With respect to Proposal No. 1, in the case of a contested election, in which the number of director nominees exceeds the number of directors to be elected (which may be the case as a result of Cannell Capital’s nomination of directors), you may vote “for” or “withhold” on each of the nominees for election as a director.  The three nominees receiving the highest number of “for” votes will be elected.  Broker non-votes will have no effect on the outcome of this proposal.

With respect to Proposal No. 2, the affirmative vote of the majority of votes cast is required for approval. Abstentions and broker non-votes will have no effect on the outcome of this proposal.

What should I do if I receive more than one proxy card?

If you hold your shares of Common Stock in more than one account, you will receive a WHITE proxy card for each account. To ensure that all of your shares of Common Stock are voted, please sign, date and return the WHITE proxy card for each account. You should vote all of your shares of Common Stock.

Cannell Capital has provided notice that it may nominate at the Annual Meeting the Cannell Nominees to stand for election as directors. As a result, you may receive proxy solicitation material from Cannell Capital. If you wish to vote pursuant to the recommendation of the Board of Directors, you should disregard any proxy card that you receive that is not a WHITE proxy card.

If you withhold your vote on any Cannell Nominee using Cannell Capital’s proxy card, your vote will not be counted as a vote for the Board of Directors’ nominees and will result in the revocation of any previous vote that you may have cast on the WHITE proxy card. THE BOARD OF DIRECTORS URGES YOU NOT TO RETURN ANY PROXY CARD THAT MAY BE SENT TO YOU BY CANNELL CAPITAL, EVEN AS A PROTEST VOTE AGAINST CANNELL CAPITAL OR THE CANNELL NOMINEES.

Is my vote confidential?

Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Rightside or to third parties, except as necessary to meet applicable legal requirements, to allow for the tabulation of votes and certification of the vote, or to facilitate a successful proxy solicitation.

Where can I find the voting results of the Annual Meeting?

Voting results will be announced by the filing of a Current Report on Form 8-K within four business days after the Annual Meeting. If final voting results are unavailable at that time, we will file an amended Current Report on Form 8-K within four business days of the day the final results are available.

What are the requirements for admission to the Annual Meeting?

Only stockholders and persons holding proxies from stockholders may attend the Annual Meeting.  If your shares are registered in your name, you must bring a form of identification to the Annual Meeting.  If your shares are held in the name of a broker, bank or other nominee that holds your shares, you must bring a proxy from that broker, trust, bank or other nominee that confirms you are the beneficial owner of those shares.  Attendance at the Annual Meeting without voting or revoking a previously submitted proxy in accordance with the voting procedures will not in and of itself revoke a proxy.

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What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?

To be considered for inclusion in next year’s proxy materials, stockholder proposals must be submitted in writing by December 21, 2017 to our Corporate Secretary, 5808 Lake Washington Blvd NE, Suite 300, Kirkland, Washington, 98033, and must comply with all applicable requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); provided, however, that if our 2018 annual meeting of stockholders is held before May 3, 2018 or after July 2, 2018, then the deadline is a reasonable amount of time prior to the date we begin to print and mail our proxy statement for the 2018 annual meeting of stockholders.

If you wish to submit a proposal (including a director nomination) at the 2018 annual meeting of stockholders that is not to be included in next year’s proxy materials, the proposal must be received by our Corporate Secretary not later than the close of business on March 4, 2018 nor earlier than February 2, 2018; provided however, that if our 2018 annual meeting of stockholders is held before May 3, 2018 or after August 1, 2018, then the proposal must be received no earlier than the close of business on the 120th day prior to such meeting and no later than the close of business on the later of the 90th day prior to such meeting or the 10th day following the day on which public announcement of the date of such meeting is first made.

You are also advised to review our bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations. Our bylaws may be obtained by accessing our filings on the SEC’s website at www.sec.gov, or by contacting our Corporate Secretary at our principal executive offices.

Separation from Demand Media, Inc. (now known as Leaf Group Ltd.)

On August 1, 2014, Rightside became an independent company as a result of the distribution by Demand Media, Inc., now known as Leaf Group Ltd. (“Demand Media”) of all of the outstanding common stock of Rightside to Demand Media’s stockholders (the “Separation”). Rightside was incorporated in Delaware on July 11, 2013 and is comprised of Demand Media’s former domain name services business.  Rightside’s Registration Statement on Form 10 was declared effective by the SEC on July 14, 2014. Rightside’s common stock began trading “regular way” on the NASDAQ Global Select Market (“NASDAQ”) under the stock ticker symbol “NAME” on August 1, 2014.  For additional information, please see Rightside’s Information Statement, which was filed as an exhibit to the Form 10 filed with the SEC on July 14, 2014.

 

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

Our Board currently consists of six members who are divided into three classes with staggered three-year terms.  Each director holds office until that director’s successor is duly elected and qualified or until his earlier death or resignation. At each annual meeting, the term of one class of directors expires. The class of directors with a term expiring at this Annual Meeting consists of three directors.

Our bylaws permit our Board to fix the authorized number of directors by resolution. There are currently six directors authorized, with no vacancies on our Board.

In the case of a contested election, in which the number of director nominees exceeds the number of directors to be elected (which currently is the case as a result of Cannell Capital’s nomination of an alternative slate of directors), the three nominees receiving the highest number of “for” votes will be elected.  

Director Nominees

Based upon the recommendation of our nominating and corporate governance committee, our Board has nominated Diane M. Irvine, Robert J. Majteles and Taryn J. Naidu for election as directors to the Board. Each nominee currently serves on our Board. Biographical information on each of the nominees is furnished below. If elected, each director nominee would serve a three-year term expiring at the close of our 2020 annual meeting, or until their successors are duly elected and qualified.

Information Regarding the Director Nominees

Set forth below is information as of the record date regarding each director nominee. There are no family relationships among any of our directors or executive officers. See the sections of this proxy statement captioned “Corporate Governance” and “Director Compensation” for additional information regarding the Board.

 

 

 

 

 

 

 

 

 

 

 

Current Term

Nominees

 

Class

 

Age

 

 

Position

 

Expires

Diane M. Irvine (2)(3)

 

III

 

 

58

 

 

Director

 

2017

Robert J. Majteles (1)(2)(3)

 

III

 

 

52

 

 

Director

 

2017

Taryn J. Naidu

 

III

 

 

39

 

 

Director

 

2017

 

(1)

Member of the audit committee.

(2)

Member of the nominating and corporate governance committee.

(3)

Member of the compensation committee.

Nominees for Election at the Annual Meeting to Serve for a Three-Year Term Expiring at the 2020 Annual Meeting of Stockholders

Diane M. Irvine has served as a director of Rightside since August 2014. Ms. Irvine served as chief executive officer of Blue Nile, Inc. (“Blue Nile”), an online retailer of diamonds and fine jewelry, from February 2008 until November 2011. Ms. Irvine was also president of Blue Nile from February 2007 until November 2011, and served as chief financial officer from December 1999 to September 2007. Prior to that, she served as chief financial officer of Plum Creek Timber Company, a timberland management and wood products company. Ms. Irvine was previously a partner with Coopers and Lybrand. Ms. Irvine currently serves on the boards of directors for the following public companies: XO Group Inc., a consumer internet and media company, since November 2014; and Yelp Inc., an online platform for local business reviews, since November 2011. Ms. Irvine previously served on the boards of directors for CafePress Inc., an online retailer from May 2012 to May 2015, Ebates Inc., an online cash back shopping website, from November 2013 until its acquisition by Rakuten, Inc. in October 2014, Blue Nile from May 2001 until November 2011, Ticketmaster Entertainment, Inc. from August 2008 to January 2010 and Davidson Companies from January 1998 to January 2009. She holds a B.S. in accounting from Illinois State University and an M.S. in taxation from Golden Gate University. Ms. Irvine brings to the Board valuable insight with her experience in internet-related and e-commerce industries and as a public company executive.

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Robert J. Majteles has served as a director of Rightside since August 2014. Mr. Majteles is the managing member of Treehouse Capital LLC (“Treehouse”), an investment firm he launched in 2000. Mr. Majteles is also an investor in and an advisor to Backstage Capital and is an operating partner with Oak Investment Partners, a venture capital firm. Mr. Majteles was the chief executive officer of three technology companies, including one which was publicly traded. Mr. Majteles has also served as a board member of, and an investor in, many public and private technology companies. In addition, Mr. Majteles has also been an investment banker and a mergers and acquisitions attorney. Since 2006, Mr. Majteles has served on the board of directors of U.S. Auto Parts Network, Inc., an e-commerce company focused on auto parts, and currently serves as its chairman. From June 2009 to June 2015, Mr. Majteles also served on the board of directors of iPass. Mr. Majteles holds a J.D. from Stanford University and a B.A from Columbia University. Mr. Majteles provides valuable advice and guidance to our management team and Board with his experience in leading companies and prior and current service on the boards of directors of innovative technology companies.

Taryn J. Naidu has served as a director of Rightside since December 2013, and is our chief executive officer. Prior to the Separation, Mr. Naidu was the executive vice president, domain services of Demand Media’s registrar business, a position he held since April 2011. Prior to April 2011, Mr. Naidu served as Demand Media’s executive vice president, registrar services and senior vice president, registrar services, and served as a consultant to Demand Media’s registrar business from 2006 until he was appointed senior vice president in 2007. Since 2011, Mr. Naidu has led the registry team to acquire generic Top Level Domain (“gTLD”) registry operator rights in ICANN’s program to expand new gTLDs (the “New gTLD Program”), build our technology platform to support our operated gTLDs and our back-end registry customers, and establish and implement domestic and international business operations to support our registry operations. Prior to joining Demand Media, Mr. Naidu worked at Momentous Corporation, a Canadian domain name marketing services group, from 2002 to 2006, where he held various roles including chief executive officer, and president of Pool.com, a domain name auction company. Mr. Naidu holds a B.Sc. in computer science, with a minor in mathematics from the University of Regina. Mr. Naidu brings to our Board leadership, management and strategic business experience as our chief executive officer and his extensive background in the domain name services industry.

Stockholder Interaction Information

At various times during 2016 and into early 2017, the Company’s CEO and Chief Financial Officer met with representatives of Cannell Capital to discuss the Company’s business and results of operations.

On March 3, 2017, Tonga Partners, L.P. (“Tonga”), which is affiliated with Cannell Capital LLC (together with Tonga, “Cannell Capital”), sent a letter to the Company nominating three candidates to stand for election to the Board of Directors at the Annual Meeting. At the time of the submission of that notice, Cannell Capital was the beneficial owner of approximately 1,704,805 shares of Common Stock, or approximately 8.7% of the outstanding Common Stock.

Information about the contacts and communications we had with representatives of Cannell Capital leading up to their nomination of the Cannell Nominees is set forth in Annex A to this Proxy Statement.

Board Recommendation

Our nominating and corporate governance committee has reviewed all director nominees, including the Cannell Nominees, in accordance with the director qualifications set forth in our corporate governance guidelines. Based on such review and the recommendation of our nominating and corporate governance committee, the Board Unanimously Recommends A Vote “For” Each Of Diane M. Irvine, Robert J. Majteles and Taryn J. Naidu.

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PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

Our audit committee has selected PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as our independent registered public accounting firm for the fiscal year ending December 31, 2017, and has further directed that management submit the selection of PricewaterhouseCoopers as our independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. A representative of PricewaterhouseCoopers is expected to be present at the Annual Meeting, will have an opportunity to make a statement if he or she so desires and is expected to be available to respond to appropriate questions.

Stockholder ratification of the selection of PricewaterhouseCoopers as our independent registered public accounting firm is not required by our bylaws or other applicable legal requirements. However, the Board is submitting the selection of PricewaterhouseCoopers to our stockholders for ratification as a matter of good corporate practice. If stockholders fail to ratify the appointment, the audit committee will reconsider whether or not to retain that firm. Even if the appointment is ratified, the audit committee in its discretion may direct the appointment of a different independent accounting firm at any time during the year if the audit committee determines that such a change would be in the best interests of Rightside and Rightside’s stockholders.

Principal Accounting Fees and Services

The following table presents fees billed to us by PricewaterhouseCoopers for professional services rendered for the fiscal years ended December 31, 2016 and 2015.  

 

Type of Fees

 

Fiscal 2016

 

 

Fiscal 2015

 

Audit Fees(1)

 

$

741,869

 

 

$

760,194

 

Audit-Related Fees(2)

 

$

651,972

 

 

$

85,558

 

Tax Fees(3)

 

$

102,303

 

 

$

48,848

 

All Other Fees(4)

 

$

1,800

 

 

$

2,579

 

Total

 

$

1,497,944

 

 

$

897,178

 

 

(1)

Includes the aggregate fees for services provided in connection with the audit of our annual consolidated financial statements, the review of our quarterly consolidated financial statements, and audit services that are normally provided by PricewaterhouseCoopers in connection with statutory or regulatory filings or engagements for those fiscal years, such as statutory audits.  

(2)

Includes fees for pre-implementation review of our enterprise resource planning system in fiscal 2015 and fees related to the audit of the carve-out financial statements of eNom, Incorporated in fiscal 2016.

(3)

Includes fees for domestic and international tax compliance, tax advice and tax planning.

(4)

Includes fees associated with our access to PricewaterhouseCoopers’ online research tool.

Pre-Approval Policies and Procedures

Our audit committee pre-approves all audit and non-audit services provided by our independent registered public accounting firm. The audit committee may delegate authority to one or more of the members of the audit committee to provide such pre-approvals for audit or non-audit services.  This policy is set forth in our audit committee’s charter, which is available at http://rightside.co/investors.

Auditor Independence

The audit committee has determined that the rendering of services other than audit services by PricewaterhouseCoopers is compatible with maintaining the principal accountant’s independence.

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Board Recommendation

The Board Unanimously Recommends a Vote “For” the Ratification of the Appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2017.

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AUDIT COMMITTEE REPORT

The following report of the audit committee shall not be deemed to be “soliciting material” or to otherwise be considered “filed” with the SEC, and such information shall not be incorporated by reference into any filing under the Securities Act or the Exchange Act except to the extent that the Company specifically incorporates such information by reference in such filing.

The audit committee consists of three directors, each of whom, in the judgment of the Board, is an “independent director” as defined in the listing standards for The Nasdaq Stock Market.  The audit committee acts pursuant to a written charter that has been adopted by the Board.  The audit committee charter is available at http://rightside.co/investors.

On behalf of the Board, the audit committee oversees the Company’s financial reporting process and its internal controls over financial reporting, areas for which management has the primary responsibility. PricewaterhouseCoopers, the independent registered public accounting firm (the “Auditors”), is responsible for expressing an opinion as to the conformity of the audited financial statements with accounting principles generally accepted in the United States of America. In fulfilling its oversight responsibilities, the audit committee has reviewed and discussed with management and the Auditors the audited financial statements and the quarterly unaudited financial statements of the Company for the fiscal year ended December 31, 2016, matters relating to the Company’s internal controls over financial reporting, and the processes that support certification of the financial statements by the Company’s chief executive officer and chief financial officer.

The audit committee discussed with the Auditors the overall scope and plans for the annual audit. The audit committee meets with the Auditors, with and without management present, to discuss the results of their examinations, their consideration of the Company’s internal controls in connection with their audit, and the overall quality of the Company’s financial reporting. The audit committee reviewed with the Auditors their judgments as to the quality and acceptability of the Company’s accounting principles and such other matters as are required to be discussed with the audit committee under generally accepted auditing standards.  The audit committee has discussed and reviewed with the Auditors all matters required to be discussed by Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 16, Communications with Audit Committees.

The audit committee has received the written disclosures and the letter from the Auditors required by applicable requirements of the PCAOB regarding the Auditors’ communications with the audit committee concerning independence, and has discussed with the Auditors the Auditors’ independence. Based on the review and discussions referred to above, the audit committee recommended to the Board that the audited financial statements for the year ended December 31, 2016 be included in our annual report on Form 10-K for 2016 for filing with the SEC.

The audit committee has also selected PricewaterhouseCoopers as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017.  The Board is recommending that stockholders ratify this selection at the Annual Meeting.

 

 

Members of the Audit Committee

 

 

 

James R. Quandt, Chairperson

 

Robert J. Majteles

 

Richard C. Spalding

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Information Regarding the Continuing Directors

Set forth below is information as of the record date regarding each director continuing in office. There are no family relationships among any of our directors or executive officers. See the sections of this proxy statement captioned “Corporate Governance” and “Director Compensation” for additional information regarding the Board.

 

 

 

 

 

 

 

 

 

 

 

Current Term

Continuing Directors

 

Class

 

Age

 

 

Position

 

Expires

James R. Quandt(1)(3)

 

I

 

 

67

 

 

Director

 

2018

David E. Panos

 

II

 

 

54

 

 

Director

 

2019

Richard C. Spalding (1)(2)

 

II

 

 

66

 

 

Director

 

2019

(1)

Member of the audit committee.

(2)

Member of the nominating and corporate governance committee.

(3)

Member of the compensation committee.

Director Continuing in Office until the 2018 Annual Meeting of Stockholders

James R. Quandt has served as a director of Rightside since July 2014.  Mr. Quandt currently serves as the chairman of the board of directors of Demand Media.  Since 2005, Mr. Quandt has served as co-founder and managing partner at Thomas James Capital, Inc., a private equity firm that also provides financial advisory services. Mr. Quandt has served on a number of public and private company boards, including Intermix Media, Inc., an internet marketing company that owned MySpace, Inc., Blue Label Interactive, Inc., Digital Orchid Incorporated, The FRS Company, where he is currently chairman of the board, and the Brain Corporation. Mr. Quandt is a member of the board of trustees of Saint Mary’s College of California and currently serves as chairman emeriti, and is the president of the Pacific Club of Newport Beach. Mr. Quandt participated in the Managerial Policy Institute at the University of Southern California’s Marshall School of Business, and received a B.S. in Business Administration from Saint Mary’s College. Mr. Quandt’s mix of executive leadership and financial expertise provides valuable insight and guidance to the Board. Mr. Quandt brings a seasoned and strategic perspective rooted in his role as a board member of various public and private companies in the internet and technology sectors, as well as his experience as a former member of the NYSE.

Directors Continuing in Office until the 2019 Annual Meeting of Stockholders

David E. Panos has served as a director of Rightside since August 2014, and is the non-executive chairman of the Board. Between 2008 and the Separation, Mr. Panos served in senior roles with Demand Media, including executive vice president, emerging markets, chief strategy officer and chief marketing officer. Mr. Panos played integral roles in our strategy to acquire gTLD registry operator rights in the New gTLD Program, as well as to establish and implement business operations to support our domestic and international registry operations. Since April 2015, Mr. Panos has served on the board of directors of iPass Inc., which provides global enterprises and telecommunications carriers with cloud-based mobility management and Wi-Fi connectivity services (“iPass”), and currently serves on its audit and nominating and corporate governance committees. An entrepreneur with more than 25 years of software company experience, Mr. Panos co-founded and previously served as chief executive officer of Pluck Corporation, a white label social media integrated community platform, from 2003 until acquired in 2008 by Demand Media. Prior to this, Mr. Panos was a venture partner at Austin Ventures from 2001 to 2003, and he served as vice president of marketing and new business development at DataBeam Corporation, a realtime communications software company, from 1992 to 1999, before its sale to IBM’s Lotus Development Corporation. He holds an M.B.A. from the Harvard Business School and is a Phi Beta Kappa graduate of Furman University with a B.A. in political science. Mr. Panos’ strong leadership, entrepreneurial and managerial skills combined with broad industry knowledge enable him to provide essential strategic and corporate governance leadership to our management team and Board.

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Richard C. Spalding has served as a director of Rightside since August 2014 and, since 2003, has been the managing director at Kearny Venture Partners, which focuses on life science and drug sector investments. From 2000 to 2003, Mr. Spalding was a general partner at ABS Ventures, investing in emerging companies in the healthcare sector. From 1997 to 1999, Mr. Spalding served as a vice president and the chief financial officer at Portal Software, a software company for online billing services, where Mr. Spalding’s responsibilities included working on corporate financing and legal and financial reporting. Prior to that, Mr. Spalding served as the chief financial officer at Fusion Medical Technologies, a medical device company, and was responsible for all aspects of the company’s initial public offering. Between 1991 and 1996, Mr. Spalding was with Alex, Brown and Sons, an investment bank to emerging growth companies, which he joined after 14 years at Brobeck, Phleger & Harrison LLP, acting as general counsel for initial public offerings, mergers and acquisitions, and corporate governance matters. Mr. Spalding has served on the board of directors of Auilix Biopharma, Inc., a biopharmaceutical company, 3D Systems Corporation, an integrated solutions 3D printing company, Emphasys Medical, Inc., a medical technology company, CBCA, Inc., a web-based health benefits services administrator, and SpinalMotion, Inc., a medical device company. Mr. Spalding has also served as an observer to the boards of directors of RoxRo Pharma, Aspreva Pharmaceuticals, Align Technologies, and Kai Pharmaceuticals, and recently joined the board of the Buck Institute for Research on Aging. Mr. Spalding received a J.D. from Columbia Law School and an A.B. from Harvard College. Mr. Spalding’s considerable expertise as a venture capitalist investing in and advising companies, as well as his management experience, provide unique and indispensable knowledge and direction to our management team and Board.

Corporate Governance

Our Board has adopted corporate governance guidelines to set forth a framework for its overall governance practices. These guidelines can be found in the corporate governance section of our investor relations website at http://rightside.co/investors. In addition, these guidelines are available in print to any stockholder who requests a copy. Please direct all requests to our Corporate Secretary, Rightside Group, Ltd., 5808 Lake Washington Blvd. NE, Suite 300, Kirkland, Washington 98033.

Board Leadership Structure

In accordance with our bylaws, our Board appoints our officers, including our chief executive officer. Mr. Panos serves as the chairman of the Board, and Mr. Naidu serves as chief executive officer and Board member of Rightside.  The roles of chief executive officer and chairman are currently separated in recognition of the differences between the two roles.  However, our Board does not have a formal policy on whether the role of the chairman and chief executive officer should be separate and, when separate, whether the chairman should be selected from the non-employee directors or be an employee and if it is to be combined, whether a lead independent director should be selected.

Currently, our Board has four independent members and two non-independent members. A number of our independent board members are currently serving or have served as members of senior management and/or directors of other public companies. We have three standing board committees comprised solely of directors who are considered independent under NASDAQ and SEC standards. We believe that the number of independent and experienced directors that make up our Board benefits us and our stockholders.

Risk Oversight

Our Board is primarily responsible for overseeing our risk management processes. Our Board, as a whole, determines the appropriate level of risk for our Company, assesses the specific risks that we face and reviews management’s strategies for adequately mitigating and managing the identified risks. Although our Board administers this risk management oversight function, our audit committee, nominating and corporate governance committee and compensation committee support our Board in discharging its oversight duties and address risks inherent in their respective areas. We believe this division of responsibilities is an effective approach for addressing the risks we face and that our Board leadership structure supports this approach.

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In particular, the audit committee is responsible for considering and discussing our significant accounting and financial risk exposures and the actions management has taken to control and monitor these exposures, and the nominating and corporate governance committee is responsible for considering and discussing our significant corporate governance risk exposures and the actions management has taken to control and monitor these exposures. As needed and when requested, the audit committee and the nominating and corporate governance committee receive reports from management regarding such risks.

Our compensation committee, with input from our management, assists our Board in reviewing and assessing whether any of our compensation policies and programs could potentially encourage excessive risk-taking. In considering our employee compensation policies and practices, the compensation committee reviews, in depth, our policies related to payment of salaries and wages, commissions, benefits, bonuses, stock-based compensation and other compensation-related practices and considers the relationship between risk management policies and practices, corporate strategy and compensation. A primary focus of our compensation program is to incentivize and reward the building of our registry business, and growth in adjusted EBITDA, among other metrics. We believe these metrics are positive indicators of our operating results and potential for long-term growth and stockholder value creation. We therefore believe that our compensation program does not create risks that are reasonably likely to have a material adverse effect on the Company.

While the Board oversees our risk management, company management is responsible for day-to-day risk management processes. Our Board expects company management to consider risk and risk management in each business decision, to proactively develop and monitor risk management strategies and processes for day-to-day activities and to effectively implement risk management strategies adopted by the audit committee and the Board. Our Board believes its administration of its risk oversight function has not affected the Board’s leadership structure.

Director Independence

Our Board has undertaken a review of the independence of each of the current directors. Based on information provided by each director concerning his or her background, employment and affiliations, our Board has determined that Ms. Irvine and Messrs. Majteles, Quandt and Spalding do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as defined under the applicable rules and regulations of the SEC and the listing requirements and rules of NASDAQ.  In making these determinations, our Board considered the current and prior relationships that each non-employee director has with Rightside and all other facts and circumstances our Board deemed relevant in determining their independence.

Board Meetings

Our Board held 19 meetings and acted by written consent once during 2016. During 2016, each Board member attended 75% or more of the aggregate of the meetings of the Board and the committees of which he or she was a member.  Except in unusual circumstances, the chairman of the Board, or his designee, determines the order of business and the procedure at each meeting, including the regulation of the manner of voting and the conduct of business. During regularly convened quarterly board meetings, the Board usually spends a portion of such meetings in executive session without management or other employees present.

We encourage all of our directors and nominees for director to attend our annual meetings of stockholders; however, attendance is not mandatory. All directors attended the 2016 annual meeting of stockholders.

Board Committees

Our Board maintains a standing audit committee, nominating and corporate governance committee and compensation committee. Each committee operates under a written charter that satisfies the applicable standards of the SEC and NASDAQ. The charter of each of these committees is available in the corporate governance section on the investor relations page of our website at http://rightside.co/investors.  These committee charters are also available in print to any stockholder who requests a copy. Please direct all requests to our Corporate Secretary, Rightside Group, Ltd., 5808 Lake Washington Blvd. NE, Suite 300, Kirkland, Washington 98033.

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The membership of our standing Board committees as of the record date is as follows:

 

 

 

 

 

Nominating

 

 

 

 

 

 

and Corporate

 

 

Director

 

Audit

 

Governance

 

Compensation

James R. Quandt

 

C

 

 

 

**

Robert J. Majteles

 

**

 

C

 

**

Diane M. Irvine

 

 

 

**

 

C

Richard C. Spalding

 

**

 

**

 

 

 

“C”

Chairperson

“**”

Member

Audit Committee

Our audit committee consists of Messrs. Majteles, Quandt and Spalding, each of whom satisfies the independence requirements under the NASDAQ listing standards and Rule 10A-3 of the Exchange Act. The chair of our audit committee is Mr. Quandt. Our Board has determined that each member of our audit committee has the requisite financial expertise required under the applicable requirements of NASDAQ. Our Board has also determined that Mr. Quandt is an audit committee “financial expert,” as that term is defined by the applicable rules of the SEC, and has the requisite financial sophistication as defined under the applicable rules and regulations of NASDAQ. The audit committee met eight times and acted by written consent five times during 2016.

The primary functions of this committee include:

 

reviewing and pre-approving the engagement of our independent registered public accounting firm to perform audit services and any permissible non-audit services;

 

evaluating the performance of our independent registered public accounting firm and deciding whether to retain their services;

 

reviewing our annual and quarterly financial statements and reports and discussing the statements and reports with our independent registered public accounting firm and management, including a review of disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;  

 

considering and approving or disapproving all related party transactions;

 

conducting annual review and assessment of the adequacy of its charter; and

 

establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters.  

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee consists of Ms. Irvine, and Messrs. Majteles and Spalding, each of whom our Board has determined to be independent under NASDAQ listing standards. The chair of our nominating and corporate governance committee is Mr. Majteles. The nominating and corporate governance committee met three times and acted by unanimous written consent once during 2016.

The primary functions of this committee include:

 

overseeing the annual self-evaluations of the Board and management;

 

developing and recommending to the Board policies and procedures in considering director nominees, including nominees recommended by stockholders;

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identifying qualified individuals to become members of the Board; and

 

conducting periodic review and assessment of the adequacy of the Corporate Governance Guidelines and its charter.

When recommending persons to be selected by the Board as nominees for election as directors, the committee considers necessary qualifications such as the highest personal and professional ethics, integrity and values, as well as the ability to make independent judgments, general understanding of the Company’s business, other board service, professional background and education.  In addition, the nominating and corporate governance committee considers diversity of relevant experience, expertise and background in identifying nominees for directors. When formulating its Board membership recommendations, the nominating and corporate governance committee will also consider advice and recommendations offered by our chief executive officer or our stockholders. The nominating and corporate governance committee may delegate any or all of its responsibilities to a subcommittee, but only to the extent consistent with the Company’s amended and restated certificate of incorporation (“certificate of incorporation”), bylaws, corporate governance guidelines, NASDAQ rules and other applicable law.

The nominating and corporate governance committee will consider director candidates recommended by stockholders. As set forth in our bylaws, submissions must include, among other things, (1) the name and address of the proposed nominee; (2) the class or series and number of shares that are, directly or indirectly, owned of record or beneficially owned by such proposed nominee; (3) information regarding the proposed nominee that is required to be disclosed in a proxy statement or other filings in a contested election pursuant to Section 14(a) under the Exchange Act; (4) a description of all direct and indirect compensation and other material monetary agreements during the past three years between the nominating person and the proposed nominee; and (5) a completed and signed questionnaire, representation and agreement of the proposed nominee. Our bylaws also specify further requirements as to the form and content of a stockholder’s notice. We recommend that any stockholder wishing to nominate a director review a copy of our bylaws, which is available, without charge, from our Corporate Secretary, Rightside Group, Ltd., 5808 Lake Washington Blvd. NE, Suite 300, Kirkland, Washington 98033.

Compensation Committee

Our compensation committee consists of Ms. Irvine, and Messrs. Majteles and Quandt, each of whom our Board has determined to be (i) independent under the NASDAQ listing standards and the rules and regulations of the SEC; (ii) a “non-employee director” as defined in Rule 16b-3 of the Exchange Act; and (iii) an “outside director” as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The chair of our compensation committee is Ms. Irvine. The compensation committee met five times and acted twice by written consent during 2016.

From time to time, management and other employees, as well as outside advisors or consultants may be invited by the compensation committee to make presentations, provide financial or other information or advice or otherwise participate in the meetings. The chief executive officer may not participate in, or be present during, any deliberations or determinations of the compensation committee regarding his compensation.

The compensation committee has the authority to obtain, at the expense of the Company, advice and assistance from internal and external legal, accounting or other advisors and other external resources that the compensation committee considers necessary or appropriate in the performance of its duties.  The compensation committee has direct responsibility for oversight of the work of any advisors engaged for the purpose of advising the compensation committee. In 2015 and 2017, the compensation committee retained Compensia, Inc., a compensation consultant, to provide it with information, recommendations and other advice relating to executive compensation. Compensia assisted in developing a group of peer companies to help us determine the appropriate level of overall compensation for our executive officers, as well as assess each separate element of compensation, with the goal of ensuring that the compensation that we offer to our executive officers is competitive and fair.

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The primary functions of this committee include:

 

determining the compensation and other terms of employment of our chief executive officer and our other executive officers;

 

reviewing and recommending to our Board the compensation of our directors;

 

reviewing and approving or making recommendations to the Board regarding incentive compensation and equity-based plans and arrangements; and

 

conducting periodic review and assessment of the adequacy of its charter.

Compensation Committee Interlocks and Insider Participation

The members of our compensation committee are Ms. Irvine and Messrs. Majteles and Quandt.  None of the foregoing members of our compensation committee currently serves, or in the past year has served, as an officer or employee of Rightside.  None of our executive officers currently serves, or in the past year has served, as a member of the board or compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of any entity that has one or more executive officers serving on our Board or compensation committee.

Communication with the Board

Stockholders may contact our Board as a group or any individual director by sending a letter to the following address: Board of Directors – Rightside Group, Ltd., Attn: General Counsel, 5808 Lake Washington Blvd. NE, Suite 300, Kirkland, Washington 98033. Our General Counsel will submit all correspondence to the chairman or any director to whom the correspondence is directed.

Code of Business Conduct and Ethics

Our Board has adopted a code of business conduct and ethics that applies to all of our employees, executive officers and directors. Our code of business conduct and ethics can be found in the corporate governance section on the investor relations page of our website at http://rightside.co/investors.  In addition, our code of business conduct and ethics is available in print to any stockholder who requests a copy. Please direct all requests to our Corporate Secretary, Rightside Group, Ltd., 5808 Lake Washington Blvd. NE, Suite 300, Kirkland, Washington 98033.

 

 

- 17 -


 

DIRECTOR COMPENSATION

Effective as of August 25, 2014, we maintain a compensation program for non-employee directors, or outside directors. The outside director compensation program is intended to fairly compensate each outside director with cash and equity compensation for the time and effort necessary to serve as a member of our Board.  Effective August 1, 2016, director compensation was adjusted based on guidelines provided by Compensia, Inc. In lieu of receiving compensation under the director compensation program, Mr. Panos was compensated pursuant to the Non-Executive Chairman Agreement, described below under “Non-Executive Chairman Compensation.”

Cash Compensation

Under the director compensation program, between January 1, 2016 and August 1, 2016, each outside director, other than Mr. Panos, was entitled to receive an annual cash retainer of $30,000, and effective August 1, 2016, an annual cash retainer of $25,000 for his or her services, payable in quarterly installments in arrears in conjunction with quarterly meetings of our Board. In addition, from January 1, 2016 to August 1, 2016, each outside director that served as the chair of the audit committee, compensation committee or nominating and corporate governance committee was entitled to receive an additional annual cash retainer of $12,500, $7,500 and $6,000, respectively. Effective August 1, 2016, the annual cash retainer for the chairs of the audit committee and the compensation committee were increased to $15,000 and $10,000, respectively. From January 1, 2016 to August 1, 2016, outside directors that served as non-chair members of the audit committee, compensation committee or nominating and corporate governance committee were entitled to receive additional annual cash retainers of $7,000, $4,000 or $3,000, respectively, and effective August 1, 2016, $6,800, $5,000, and $3000, respectively.

Equity Compensation

Effective August 1, 2016, each outside director is entitled to receive a one-time RSU award covering a number of shares of our common stock equal to $113,300, divided by the closing price of our common stock on the grant date, upon the outside director’s initial election to the Board. These initial equity grants vest in equal quarterly installments over three years from the grant date.

In addition, on the date of each annual stockholder meeting, any outside director who will continue in service following such meeting is entitled to receive (i) a RSU award covering a number of shares of our common stock valued at $46,250, divided by the closing price of our common stock on the grant date, and (ii) a stock option award covering a number of shares of our common stock valued at approximately $46,250 (with underlying shares subject to the stock option equal to 2.5 times the number of shares covered by the RSU award). The annual RSU and stock option awards granted to the outside directors vest in equal quarterly installments over one year from the date of grant.  Effective August 1, 2016, in connection with amendment of the director compensation plan, the compensation committee further approved acceleration of equity awards held by non-employee directors in a Change in Control (as defined in the Company’s 2014 Incentive Award Plan) of the Company, subject to the applicable non-employee director remaining a director through the Change in Control.

Non-Executive Chairman Compensation

Effective June 3, 2016, Mr. Panos entered into a Non-Executive Chairman Agreement with Rightside for a term ending on the earlier of (1) June 3, 2017 and (2) the date on which Mr. Panos ceases to serve as chairman of our Board.  Mr. Panos receives $110,000 in annual cash compensation, in lieu of director cash retainer/fees and other cash compensation paid to other non-employee directors, payable in substantially equal installments on the same schedule as annual fees are paid to our non-employee directors (and pro-rated for any partial service period). Mr. Panos also received an additional $30,000 for business development services to Rightside through December 31, 2016. Pursuant to the Non-Executive Chairman Agreement, Mr. Panos (and his spouse and eligible dependents to the extent provided in applicable plans and programs) are eligible to participate in health and welfare benefit plans and programs maintained by Rightside for the benefit of its employees, including medical, dental and insurance plans and programs.

- 18 -


 

Director Compensation Table

The following table sets forth information concerning the compensation earned by or paid to each of our non-employee directors during the year ended December 31, 2016, excluding any reimbursement of out-of-pocket travel and lodging expenses which we may have paid.  Mr. Naidu received no additional compensation for his service as a director.  Mr. Naidu’s compensation is discussed under the caption “Executive Compensation.”  

 

Name

 

Fees Earned or Paid in Cash($)(1)

 

 

Stock Awards($)(2)

 

 

Option Awards ($)(3)

 

 

All Other Compensation ($)

 

 

Total($)

 

Diane M. Irvine (4)

 

 

39,458

 

 

 

46,247

 

 

 

48,248

 

 

 

 

 

133,952

 

Robert J. Majteles (5)

 

 

45,250

 

 

 

46,247

 

 

 

48,248

 

 

 

 

 

139,744

 

David E. Panos (6)

 

 

171,108

 

 

 

46,247

 

 

 

48,248

 

 

 

13,631

 

 

 

279,233

 

James R. Quandt (7)

 

 

45,875

 

 

 

46,247

 

 

 

48,248

 

 

 

 

 

140,369

 

Richard C. Spalding (8)

 

 

37,833

 

 

 

46,247

 

 

 

48,248

 

 

 

 

 

132,327

 

 

(1)

With the exception of Mr. Panos, fees earned or paid in cash to non-employee directors consist of the following annual cash retainers payable in quarterly installments in arrears in conjunction with quarterly meetings of our Board, as applicable:

 

Retainer

 

January 1 to August 1, 2016 (Prorated)($)

 

 

August 1 to December 31, 2016 (Prorated)($)

 

General Board Member

 

 

30,000

 

 

 

25,000

 

Audit Committee Chair

 

 

12,500

 

 

 

15,000

 

Compensation Committee Chair

 

 

7,500

 

 

 

10,000

 

Nominating and Corporate Governance Committee Chair

 

 

6,000

 

 

 

6,000

 

Audit Committee Member

 

 

7,000

 

 

 

6,800

 

Compensation Committee Member

 

 

4,000

 

 

 

5,000

 

Nominating and Corporate Governance Committee Member

 

 

3,000

 

 

 

3,000

 

 

(2)

Amounts reflect the aggregate grant date fair value of restricted stock units (“RSUs”), computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. The grant date fair value of each RSU award granted to the non-employee directors on July 28, 2016 (the annual equity grant following the 2016 Annual Meeting of Stockholders) was $11.91 multiplied by the number of shares of our common stock covered by the award.  There can be no assurance that awards will vest (and if the awards do not vest, no value will be realized by the individual), or that the value upon vesting will approximate the aggregate grant date fair value determined under ASC Topic 718.

(3)

Amounts reflect the aggregate grant date fair value of stock options, computed in accordance with ASC Topic 718.  We compute the value of stock options using a Black-Scholes valuation methodology.  The grant date fair value of each stock option award  granted to the non-employee directors on July 28, 2016  was $4.97 multiplied by the number of shares of our common stock covered by the award.

(4)

Ms. Irvine was granted 3,883 RSUs and 9,708 shares subject to stock options under the Company’s director compensation plan. As of December 31, 2016, Ms. Irvine held 11,236 unvested RSUs and 7,281 shares underlying outstanding stock options.

(5)

Mr. Majteles was granted 3,883 RSUs and 9,708 shares subject to stock options under the Company’s director compensation plan. As of December 31, 2016, Mr. Majteles held 11,236 unvested RSUs and 7,281 shares underlying outstanding stock options.

(6)

Fees earned pursuant to the Non-Executive Chairman Agreement dated January 9, 2014, as amended, which terminated June 2, 2016, and the Non-Executive Chairman Agreement effective June 3, 2016.  Mr. Panos was granted 3,883 RSUs and 9,708 shares subject to stock options under the Company’s director compensation plan and as of December 31, 2016, Mr. Panos held 13,805 unvested RSUs and 7,281 shares underlying outstanding stock options. Mr. Panos receives coverage under Rightside’s medical and dental healthcare plans, and the Company paid portion of Mr. Panos’ healthcare insurance was $13,631.

(7)

Mr. Quandt was granted 3,883 RSUs and 9,708 shares subject to stock options under the Company’s director compensation plan. As of December 31, 2016, Mr. Quandt held 11,236 unvested RSUs and 7,281 shares underlying outstanding stock options.  Mr. Quandt also holds 9,350 fully vested but unexercised stock options, which were originally granted by Demand Media and converted to Rightside equity in connection with the Separation. 

(8)

Mr. Spalding was granted 3,883 RSUs and 9,708 shares subject to stock options under the Company’s director compensation program. As of December 31, 2016, Mr. Spalding held 11,236 unvested RSUs. and 7,281 shares underlying outstanding stock options

- 19 -


 

EXECUTIVE OFFICERS

Set forth below is information regarding each of our executive officers as of [], 2017.

 

Name

 

Age

 

 

Position

Taryn J. Naidu

 

 

39

 

 

Director and Chief Executive Officer

Tracy Knox

 

 

45

 

 

Chief Financial Officer

Rick Danis

 

 

47

 

 

General Counsel

Wayne M. MacLaurin

 

 

49

 

 

Chief Technology Officer

Matthew Delgado

 

 

35

 

 

Senior Vice President, Operations

Taryn J. Naidu is our chief executive officer and a member of our Board.  Please see Mr. Naidu’s biography under the caption “Board of Directors and Corporate Governance.”

Tracy Knox has served as our chief financial officer since August 2014 and joined Rightside’s business in January 2014 as the chief financial officer of Rightside Operating Co., a subsidiary of Demand Media that became a subsidiary of Rightside upon the Separation. From March 2013 to January 2014, Ms. Knox served as chief financial officer for A Place for Mom, Inc., a private equity backed company, where she oversaw the company’s operating and capital plans. From September 2011 to March 2013, Ms. Knox served as chief financial officer at UIEvolution.com, a mobile software products and services producer. From May 2008 until August 2011, Ms. Knox was the chief finance officer of Drugstore.com, an online retailer and a public company until its sale to Walgreen Co. in 2011. From 2003 to 2008, Ms. Knox also served in various financial leadership roles with Drugstore.com. Prior to Drugstore.com, Ms. Knox held senior financial leadership roles at Western Wireless International, Freeinternet.com, and PricewaterhouseCoopers. Ms. Knox received a B.S. in business from Indiana University and an M.B.A. from the University of Washington.

Rick Danis has served as our general counsel since August 2014.  From April 2013 to the Separation, Mr. Danis served as Demand Media’s senior vice president, assistant general counsel. From 2009 to April 2013, Mr. Danis served as vice president, assistant general counsel and vice president, business & legal affairs at Demand Media. Prior to joining Demand Media, Mr. Danis held senior positions in the legal departments of Nokia Corporation, a global leader in mobile communications, from 2008 to 2009, Yahoo! Inc., a leading internet portal and online media company, from 1999 to 2008, and was assistant general counsel at broadcast.com, an internet streaming media company, prior to its acquisition by Yahoo! in 1999. Mr. Danis holds a J.D. from the DePaul University College of Law and a B.B.A in accounting, cum laude, from Ohio University.

Wayne M. MacLaurin has served as our chief technology officer since August 2014. From April 2013 to the Separation, Mr. MacLaurin served as senior vice president, technology for Demand Media’s domain name services business. Prior to joining Demand Media, Mr. MacLaurin served as chief technology officer at Sedari, a consulting firm focused on ICANN’s New gTLD Program, and as the executive director of the Domain Name System Operations, Analysis and Research Center (DNS-OARC), a non-profit organization seeking to improve the internet’s domain name system infrastructure, from April 2010 to September 2012. From 2007 to 2010, Mr. MacLaurin was a consultant to the Canadian Internet Registration Authority (CIRA), director of internet services at Distributel Communications, Ltd., an internet services provider, and a consultant to Minto Group Inc., a real estate builder and developer. From 2001 to 2006, Mr. MacLaurin served as chief technology officer and vice president of Momentous Corporation, a Canadian domain name marketing services group. While with Momentous, he was actively involved with both Namescout.com, a large ICANN accredited registrar, and Pool.com, a key player in the secondary domain name market. Mr. MacLaurin holds a B.Sc. in electrical engineering from the University of Ottawa and is a member of the Professional Engineers of Ontario.

Matthew Delgado has served as our senior vice president, operations since August 2014, after taking a leading role in the Separation. From December 2006 to July 2014, Mr. Delgado led financial planning and analysis, business planning and business operations efforts for Demand Media through various roles, including manager of business analytics, director of finance and vice president of operations. Mr. Delgado holds a B.S. in business administration from the University of Southern California.

- 20 -


 

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning the compensation of our named executive officers for the fiscal years ended December 31, 2016, and 2015.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non—Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

Option

 

 

Incentive Plan

 

 

All Other

 

 

 

 

 

 

 

 

Salary

 

 

 

Awards

 

Awards

 

 

Compensation

 

 

Compensation

 

 

 

 

Name and Principal Position

 

Year

 

($)

 

Bonus($)

 

($)(1)

 

($)(1)

 

 

($)

 

 

($)(2)

 

 

Total($)

 

Taryn J. Naidu

 

2016

 

397,500

 

 

637,500

(4)

744,045

 

 

298,000

 

 

9,000

 

 

2,086,045

 

Director and Chief

   Executive Officer

 

2015

 

385,833

 

 

1,168,000

 

 

 

245,438

 

 

9,000

 

 

1,808,270

 

Tracy Knox

 

2016

 

332,167

 

 

300,004

(4)

350,140

 

 

179,000

 

 

9,000

 

 

1,170,311

 

Chief Financial Officer

 

2015

 

320,833

 

50,000

(3)

541,998

 

 

 

133,238

 

 

9,000

 

 

1,055,069

 

Rick Danis

 

2016

 

248,667

 

 

274,996

 

 

 

101,000

 

 

9,000

 

 

633,663

 

General Counsel

 

2015

 

240,833

 

 

299,994

 

 

 

63,525

 

 

7,675

 

 

612,028

 

Wayne M. MacLaurin

 

2016

 

257,500

 

 

324,991

(5)

 

 

103,000

 

 

 

 

685,491

 

Chief Technology Officer

 

2015

 

247,500

 

 

299,994

 

 

 

65,625

 

 

 

 

613,119

 

Matthew Delgado

 

2016

 

248,200

 

 

255,000

(4)

 

 

110,000

 

 

3,750

 

 

616,950

 

Senior Vice President,

   Operations(6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Awards reflect the 2016 and 2015 Annual Equity Awards described below. Amounts reflect the aggregate grant date fair value of restricted stock units (“RSUs”) and stock options, computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. We compute the value of stock options using a Black-Scholes valuation methodology. Further information regarding the assumptions used to calculate the value of all stock awards made to named executive officers is provided in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on March 15, 2017. There can be no assurance that awards will vest (and if the awards do not vest, no value will be realized by the individual), or that the value upon vesting will approximate the aggregate grant date fair value determined under ASC Topic 718.

(2)

Amounts under the “All Other Compensation” column reflect 401(k) company-match contributions for each of our named executive officers.

(3)

Pursuant to Ms. Knox’s employment agreement, Ms. Knox received the second of two installments of a bonus payment within 30 days of the one-year anniversary of the effective date of her employment, as described under the caption “Executive Compensation Arrangements and Potential Payments Upon Termination or Change in Control” below.

(4)

Amount does not reflect RSU awards subject to performance-based vesting contingent upon achievement of a threshold level of performance. The maximum value of the performance shares that could have vested based on achievement of the highest level of performance objectives was $49,995. On February 15, 2017, based upon actual performance results as of December 31, 2016, the compensation committee determined the minimum level of performance objectives were not met and therefore, the RSU award did not vest and was canceled.

(5)

Amount reflects annual equity award valued at $274,996 and a RSU award subject to performance-based vesting valued at $49,995, the maximum value of the performance shares that could have vested based on achievement of the highest level of performance objectives.  On February 15, 2017, based upon actual performance results as of December 31, 2016, the compensation committee determined that the highest level of performance objective was met and the RSU award vested in its entirety.  

(6)

Mr. Delgado was not determined to be a named executive officer until 2017 and therefore, his compensation for fiscal year ended December 31, 2015 is not presented.

- 21 -


 

Narrative Disclosure to Summary Compensation Table

Base Salaries

The base salaries for each of Messrs. Naidu, Danis, and MacLaurin, and Ms. Knox were $375,000, $235,000, $235,000, and $310,000 respectively in the beginning of 2015.  Effective March 2015, the salaries of Messrs. Naidu, Danis, and MacLaurin, were increased to $385,000, $242,000, and $250,000, respectively, and Ms. Knox’s salary was increased to $323,000.  Effective March 2016, the salaries of Messrs. Naidu, Danis, and MacLaurin were increased to $400,000, $250,000, and $259,000, respectively, and Ms. Knox’s salary was increased to $334,000. Mr. Delgado’s base salary was $239,200 in the beginning of 2016, and effective March 2016, increased to $250,000. Our Board and compensation committee determined that salaries of our named executive officers were commensurate with compensation in comparison to peer companies.

2015 and 2016 Annual Bonus Programs

Under Rightside’s 2015 annual bonus program (the “2015 Bonus Program”) and 2016 annual bonus program (the “2016 Bonus Program”), implemented under our Incentive Award Plan, all of our employees, including the named executive officers, were eligible to receive incentive awards based on the achievement of individual and Company performance objectives established by our compensation committee.  Cash and equity bonuses are designed to incentivize our named executive officers to strive to attain Company and/or individual performance goals that further the interests of the Company and its stockholders.

The target incentive payout for Messrs. Naidu, Danis, MacLaurin and Delgado and Ms. Knox were 85%, 35%, 35%, 30% and 55%, respectively, of his or her salary for fiscal years 2015 and 2016. Awards under the 2015 Bonus Program to all employees, including named executive officers, were paid in 2016 for performance in 2015, and awards under the 2016 Bonus Program to all employees, including named executive officers, were paid in 2017 for performance in 2016. The actual amount of such bonuses is tied to the achievement of corporate operating and financial goals, and any other criteria that the compensation committee may determine in its sole discretion to consider other individual and corporate performance objectives.  The bonus percentages for 2017 for each of these officers remain unchanged from 2015 and 2016.

Upon determination of each individual award to named executive officers, 100% of the 2015 bonus awards and the 2016 bonus awards were paid in cash.  The incentive award pool was funded based on Rightside’s achievement of pre-established targets of adjusted EBITDA, before expense associated with the company-wide incentive award pool, as well as other company-performance objectives.  

Under the 2015 Annual Bonus Program, each of Messrs. Naidu, Danis and MacLaurin, and Ms. Knox received 75% of his or her target incentive payout in cash compensation of $245,438, $63,525, $65,625 and $133,238, respectively. Under the 2016 Annual Bonus Program, in addition to pre-established target incentives, the compensation committee considered and took into account performance toward our strategic corporate objectives, and accordingly, Messrs. Naidu, Danis, MacLaurin and Delgado, and Ms. Knox received cash compensation of $298,000, $101,000, $103,000, $110,000 and $179,000, respectively.  

2015 and 2016 Annual Equity Awards

For annual equity awards issued in fiscal year 2015, the compensation committee approved RSU awards, which generally vests in 16 substantially equal installments on each three month anniversary following the grant date, to all named executive officers as set forth below. Named executive officers, other than Mr. Naidu and Ms. Knox also received an annual equity award in fiscal year 2016 consistent entirely of RSU awards subject to the same terms.  In lieu of receiving their 2016 annual equity awards entirely in RSU awards, Mr. Naidu and Ms. Knox received (i) a RSU award covering a number of shares of our common stock valued at $637,500 and $300,000, respectively, and (ii) a stock option award valued at approximately $637,500 and $300,000, respectively (with underlying shares subject to the stock option equal to 2.5 times the number of shares covered by the RSU award). Twenty five percent of the shares subject to the stock option awards vest on the first annual anniversary of the vesting commencement date, and the remainder of the shares vests in 12 equal installments on each three month anniversary thereafter.

- 22 -


 

The compensation committee approved these grants consistent with the value of equity compensation grants at approximately the 50th percentile range of comparable executive officers at peer group companies, as compiled by Compensia.  In considering the value of these annual equity awards, the compensation committee considers the total value of the shares underlying the restricted stock units and stock option awards, as applicable, based on the closing value of our common stock on the grant date, and, with respect to stock options, the compensation committee considers the grant date fair value of the stock options as determined under ASC Topic 718.

In fiscal year 2015, Mr. Naidu was granted 142,962 RSUs; Ms. Knox was granted 66,340 RSUs and each of Messrs. MacLaurin and Danis were granted 36,719 RSUs.  In fiscal year 2016, Mr. Naidu was granted 72,691 RSUs, Ms. Knox was granted 34,208 RSUs, Mr. Delgado was granted 31,677 RSUs, and each of Messrs. MacLaurin and Danis were granted 34,161 RSUs. Mr. Naidu was also granted 181,727 shares of common stock subject to stock options, and Ms. Knox was granted 85,519 shares of common stock subject to stock options in fiscal year 2016.

2016 Performance Based Equity Awards

In July 2016, the compensation committee awarded additional performance-based RSU awards to the executive officers as set forth below, with vesting of such awards wholly contingent upon the achievement of specified performance goals for fiscal year 2016.  Each of Ms. Knox, and Messrs. Naidu and Delgado was granted 4,219 RSUs, the vesting of which was contingent upon achievement of a threshold level of performance on the Company’s goals relating to adjusted EBITDA and cash registry revenue in fiscal year 2016.  The minimum threshold for vesting of these awards was not reached, and therefore, these RSU awards did not vest in whole or in part.  Mr. MacLaurin was granted 4,219 RSUs, the vesting of which was contingent upon achievement of a threshold level of performance on the Company’s goal related to reductions to the Company’s internet technology and infrastructure costs in fiscal year 2016.  The maximum threshold for a full vesting of the RSU award to Mr. MacLaurin was reached, and on February 15, 2017, Mr. MacLaurin’s RSU award vested in full.  

Other Elements of Compensation

Retirement Plans.  We established a defined contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”) covering all our full time employees who meet certain eligibility requirements. Our named executive officers are eligible to participate in the 401(k) Plan on the same terms generally applicable to other full-time employees. Eligible employees may defer up to 90% of their pre-tax eligible compensation, up to the annual maximum allowed by the Internal Revenue Service. Effective January 1, 2013, we began matching a portion of the employee contributions under the 401(k) Plan up to a defined maximum. Our contributions to the 401(k) Plan were $0.1 million, and $0.1 million, respectively for the three months ended December 2016 and 2015, and $0.6 million and $0.6 million, respectively for the twelve months ended December 31, 2016 and 2015. We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) Plan, and making matching contributions, adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies.

Employee Benefits and Perquisites. Rightside provides the following benefits to its employees: medical, dental, and vision benefits, medical and dependent care flexible spending accounts, employee assistance program, short-term and long-term disability insurance, accidental death and dismemberment insurance and basic life insurance coverage. These benefits were provided to Ms. Knox and Messrs. Naidu, Danis, MacLaurin and Delgado on the same general terms as they are provided to all of our full-time U.S. employees.

- 23 -


 

Equity Compensation Plan Table

The following table provides certain information as of December 31, 2016, with respect to all of our equity compensation plans in effect on that date.  

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

 

 

 

 

 

 

 

Securities

 

 

 

Number of

 

 

 

 

 

 

Remaining

 

 

 

Securities to be

 

 

Weighted

 

 

Available for

 

 

 

Issued Upon

 

 

Average

 

 

Future

 

 

 

Exercise of

 

 

Exercise Price

 

 

Issuance Under

 

 

 

Outstanding

 

 

of Outstanding

 

 

Equity

 

 

 

Options and

 

 

Options and

 

 

Compensation

 

Plan

 

Rights

 

 

Rights(2)

 

 

Plans

 

Equity compensation plans approved by stockholders(1)

 

 

1,889,130

 

 

$

13.60

 

 

 

351,885

 

Equity compensation plans not approved by stockholders

 

 

0

 

 

 

0

 

 

 

0

 

Total

 

 

1,889,130

 

 

$

13.60

 

 

 

351,885

 

 

(1)

Includes securities issuable under our 2014 Incentive Award Plan.

(2)

Excludes restricted stock unit awards because they have no exercise price.

Outstanding Equity Awards at 2016 Fiscal Year-End

The following table summarizes the number of shares of our common stock underlying outstanding equity incentive plan awards for certain named executive officers as of December 31, 2016. All RSU and stock option awards are subject to the named executive officer’s continued employment through the applicable vesting date and accelerated vesting under certain circumstances, as described under the caption “Executive Compensation Arrangements and Potential Payments Upon Termination or Change in Control” below.

Adjusted Demand Media Options. Immediately prior to the Separation, all unvested stock options of Demand Media were accelerated and became fully vested and exercisable. Upon the Separation, each option to purchase shares of common stock of Demand Media (“Demand Option”) was adjusted to reflect the distribution through conversion into an adjusted Demand Option and an option to purchase shares of our common stock (“Rightside Option”). The number of shares of our common stock and common stock of Demand Media subject to the new Rightside Option and the post-distribution Demand Option, respectively, as well as the exercise prices applicable to these options were determined based on the value of our common stock and Demand Media’s post-distribution common stock, respectively, in each case, relative to the value of Demand Media’s common stock prior to the Separation.

Adjusted Rightside RSU Awards. Awards received prior to the Separation were granted by Demand Media. Upon the Separation, Demand Media RSU awards held by Rightside employees, including the named executive officers, converted into Rightside RSU awards covering a number of Rightside shares such that the pre-distribution value of the underlying Demand Media RSU awards was approximately preserved.  Each adjusted RSU award retained its original vesting schedule.

- 24 -


 

 

 

 

 

 

Option Awards(1)

 

 

Stock Awards(1)

 

 

 

 

 

 

Number of

 

 

Number of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities

 

 

Securities

 

 

 

 

 

 

 

 

 

 

Number of

 

 

Market Value

 

 

 

 

 

 

Underlying

 

 

Underlying

 

 

 

 

 

 

 

 

 

 

Shares or

 

 

of Shares or

 

 

 

 

 

 

Unexercised

 

 

Unexercised

 

 

Option

 

 

Option

 

 

Units of Stock

 

 

Units of Stock

 

 

 

 

 

 

Options

 

 

Options

 

 

Exercise

 

 

Expiration

 

 

That Have Not

 

 

That Have Not

 

Name

 

Grant Date(2)

 

 

Exercisable

 

 

Unexercisable

 

 

Price($)

 

 

Date

 

 

Vested

 

 

Vested($)(3)

 

Taryn J. Naidu

 

7/15/2016

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

4,219

 

 

 

34,891

 

 

 

4/12/2016

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

59,062

 

 

 

488,443

 

 

 

4/12/2016

 

(6)

 

 

 

 

181,727

 

 

 

8.77

 

 

 

4/12/2026

 

 

 

 

 

 

 

 

 

2/13/2015

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

80,416

 

 

 

665,040

 

 

 

11/3/2014

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

43,474

 

 

 

359,530

 

 

 

8/25/2014

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

52,362

 

 

 

433,034

 

 

 

4/5/2013

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

2,138

 

 

 

17,681

 

 

 

8/3/2010

 

(7)

 

5,928

 

 

 

 

 

 

19.07

 

 

8/3/2020

 

 

 

 

 

 

 

 

 

3/24/2010

 

(8)

 

6,139

 

 

 

 

 

 

19.07

 

 

3/24/2020

 

 

 

 

 

 

 

 

 

3/24/2009

 

(9)

 

5,084

 

 

 

 

 

 

9.36

 

 

3/24/2019

 

 

 

 

 

 

 

 

 

1/29/2008

 

(10)

 

7,627

 

 

 

 

 

 

10.59

 

 

1/29/2018

 

 

 

 

 

 

 

 

 

10/26/2007

 

(11)

 

7,627

 

 

 

 

 

 

8.43

 

 

10/26/2017

 

 

 

 

 

 

 

 

 

4/27/2007

 

(12)

 

5,084

 

 

 

 

 

 

5.85

 

 

4/27/2017

 

 

 

 

 

 

 

 

 

2/28/2007

 

(13)

 

2,471

 

 

 

 

 

 

5.85

 

 

2/28/2017

 

 

 

 

 

 

 

Tracy Knox

 

7/15/2016

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

4,219

 

 

 

34,891

 

 

 

4/12/2016

 

(6)

 

 

 

 

85,519

 

 

 

8.77

 

 

 

4/12/2026

 

 

 

 

 

 

 

 

 

4/12/2016

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

27,794

 

 

 

229,856

 

 

 

2/13/2015

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

37,316

 

 

 

308,603

 

 

 

11/3/2014

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

3,949

 

 

 

32,658

 

 

 

8/25/2014

 

(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

28,771

 

 

 

237,936

 

Rick Danis

 

2/11/2016

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

27,756

 

 

 

229,542

 

 

 

2/13/2015

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

20,655

 

 

 

170,817

 

 

 

10/29/2014

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

5,343

 

 

 

44,187

 

 

 

8/25/2014

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

10,794

 

 

 

89,266

 

 

 

3/17/2014

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,871

 

 

 

15,473

 

 

 

4/5/2013

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,198

 

 

 

9,907

 

 

 

4/5/2013

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

642

 

 

 

5,309

 

 

 

3/24/2010

 

(15)

 

2,501

 

 

 

 

 

 

19.07

 

 

3/24/2020

 

 

 

 

 

 

 

 

 

7/30/2009

 

(16)

 

3,254

 

 

 

 

 

 

12.58

 

 

7/30/2019

 

 

 

 

 

 

 

Wayne MacLaurin

 

7/15/2016

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

4,219

 

 

 

34,891

 

 

 

2/11/2016

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

27,756

 

 

 

229,542

 

 

 

2/13/2015

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

20,655

 

 

 

170,817

 

 

 

10/29/2014

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

16,720

 

 

 

138,274

 

 

 

8/25/2014

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

7,196

 

 

 

59,511

 

 

 

3/17/2014

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

2,352

 

 

 

19,451

 

 

 

7/29/2013

 

(17)

 

 

 

 

 

 

 

 

 

 

 

 

 

856

 

 

 

7,079

 

Matthew Delgado

 

7/15/2016

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

4,219

 

 

 

34,891

 

 

 

2/11/2016

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

25,739

 

 

 

212,862

 

 

 

2/12/2015

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

18,604

 

 

 

153,855

 

 

 

10/29/2014

 

(5)