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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

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Preliminary Proxy Statement

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

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under §240.14a-12

LEAF GROUP LTD.

(Name of Registrant as Specified In Its Charter)

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

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No fee required.

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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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):

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Dear Stockholders:

You are cordially invited to attend a special meeting of stockholders of Leaf Group Ltd., a Delaware corporation (referred to as “Leaf Group” or the “Company”), which will be held virtually on June 10, 2021 at 9:00 AM, Pacific Time, at www.virtualshareholdermeeting.com/LEAF2021SM, referred to as the “special meeting.”

At the special meeting, you will be asked to consider and vote upon the adoption of the Agreement and Plan of Merger, dated as of April 3, 2021 (as it may be amended, supplemented or otherwise modified from time to time, referred to as the “merger agreement”), by and among Graham Holdings Company, a Delaware corporation, referred to as “Parent,” Pacifica Merger Sub, Inc. a Delaware corporation and wholly owned subsidiary of Parent, referred to as the “merger subsidiary,” and the Company, which provides for the merger of the merger subsidiary with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent, referred to as the “merger,” on the terms set forth in the merger agreement. If the merger is completed, you will be entitled to receive $8.50 in cash, without interest and less any applicable withholding taxes, for each share of common stock of the Company, par value $0.0001 per share (referred to as “common stock”), that you own as of immediately prior to the effective time of the merger, unless you seek and validly perfect your statutory appraisal rights under Delaware law.

After careful consideration, the Company’s board of directors (referred to as the “Board”) unanimously: (i) approved and declared advisable the merger agreement and the merger, (ii) determined that the merger is in the best interests of the Company and its stockholders, (iii) directed that the merger agreement be submitted to the stockholders of the Company for adoption and (iv) resolved to recommend that the Company’s stockholders vote in favor of the adoption of the merger agreement. Accordingly, the Board recommends a vote “FOR” the proposal to adopt the merger agreement and “FOR” each of the other proposals to be voted on at the special meeting.

The proxy statement accompanying this letter provides you with more specific information concerning the special meeting, the merger agreement, the merger and the other transactions contemplated by the merger agreement. A copy of the merger agreement is attached as Annex A to the proxy statement. We encourage you to read the proxy statement, the accompanying annexes and any documents incorporated by reference in the proxy statement carefully and in their entirety.

Your vote is important, regardless of the number of shares of common stock you own. The merger cannot be completed unless the merger agreement is adopted by stockholders holding a majority of the outstanding shares of common stock entitled to vote thereon at the special meeting. If you abstain from voting, fail to vote (via the Internet during the special meeting or by proxy) or fail to give voting instructions to your bank, broker or other nominee, it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Whether or not you plan to attend the special meeting virtually, we urge you to submit your proxy as soon as possible, whether over the Internet, by telephone or by completing, signing and returning the enclosed proxy card by mail in the prepaid reply envelope. If you are a stockholder of record, you may also attend the special meeting and vote your shares virtually at the special meeting. If you are a beneficial owner of shares of common stock held in “street name,” you may instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. In order to attend the virtual special meeting and vote online, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. The control number is designed to verify your identity and allow you to vote your shares of common stock at the special meeting or to vote by proxy prior to the special meeting. If you are a beneficial owner of shares of common stock held in “street name,” you may contact the bank, broker or other institution where you hold your account if you have questions about obtaining your control number and attending the special meeting. If you attend the special meeting and vote via the Internet, your vote will revoke any proxy that you have previously submitted.

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LEAF GROUP LTD.

1655 26th Street
Santa Monica, California 90404

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON June 10, 2021

	Time and Date:			9:00 AM, Pacific Time, on June 10, 2021
	Place:			Virtually via www.virtualshareholdermeeting.com/LEAF2021SM. If you plan to participate in the virtual meeting, please follow the instructions provided under “General Information” in the proxy statement accompanying this notice. Stockholders will be able to listen, vote, and submit questions from their home or from any remote location that has Internet connectivity. There will be no physical location for stockholders to attend.
	Purpose:			1. To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of April 3, 2021 as it may be amended, supplemented or otherwise modified from time to time (referred to as the “merger agreement”), by and among the Company, Graham Holdings Company, a Delaware corporation (referred to as “Parent”), and Pacifica Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (referred to as the “merger subsidiary”) (referred to as the “merger proposal”);
				2. To consider and vote on a non-binding, advisory proposal to approve the compensation that may be paid or may become payable to the Company’s named executive officers in connection with the merger (referred to as the “advisory, non-binding compensation proposal”); and
				3. To consider and vote on a proposal to adjourn or postpone the special meeting to a later date or time, if necessary or appropriate as determined by the Company, to solicit additional proxies if there are insufficient votes at the time of the special meeting or any adjournment or postponement thereof to approve the merger proposal (referred to as the “adjournment proposal”).
	Record Date:			Only holders of shares of common stock of the Company, par value $0.0001 per share (referred to as “common stock”), as of the close of business on May 3, 2021, are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements thereof.

General:

The Company’s board of directors (referred to as the “Board”) unanimously: (i) approved and declared advisable the merger agreement and the merger, (ii) determined that the merger is in the best interests of the Company and its stockholders, (iii) directed that the merger agreement be submitted to the stockholders of the Company for adoption and (iv) resolved to recommend that the Company’s stockholders approve the adoption of the merger agreement. Accordingly, the Board unanimously recommends that the Company’s stockholders vote “FOR” the merger proposal, “FOR” the advisory, non-binding compensation proposal and “FOR” the adjournment proposal.

Assuming a quorum is present, the merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of common stock entitled to vote on the merger proposal, and each of the advisory, and the non-binding compensation proposal and the adjournment proposal require the affirmative vote of the holders of a majority in voting power of the shares of common stock which are present in person virtually or by proxy and entitled to vote thereon.

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Completion of the merger is conditioned on, among other things, approval of the merger proposal by the holders of common stock.

Under Delaware law, the Company’s stockholders who do not vote in favor of the adoption of the merger agreement will have the right to seek appraisal of the fair value of their shares of common stock as determined by the Delaware Court of Chancery if the merger is completed, but only if they submit a written demand for appraisal prior to the vote on the merger proposal and comply with the other Delaware law procedures for exercising statutory appraisal rights, which are summarized in the section titled “Appraisal Rights” in the accompanying proxy statement. The applicable Delaware appraisal statute is also reproduced in its entirety in Annex C to the accompanying proxy statement.

Your vote is important, regardless of the number of shares of common stock you own. Whether or not you plan to attend the special meeting virtually, we strongly urge you to submit your proxy as soon as possible, whether over the Internet, by telephone or by completing, signing and returning the enclosed proxy card by mail in the prepaid reply envelope. If you are a stockholder of record, you may also attend the special meeting and vote your shares virtually at the special meeting. If you are a beneficial owner of shares of common stock held in “street name,” you may instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. In order to attend the virtual special meeting and vote online, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. The control number is designed to verify your identity and allow you to vote your shares of common stock at the special meeting or to vote by proxy prior to the special meeting. If you are a beneficial owner of shares of common stock held in “street name,” you may contact the bank, broker or other institution where you hold your account if you have questions about obtaining your control number and attending the special meeting. If you attend the special meeting and vote via the Internet, your vote will revoke any proxy that you have previously submitted.

A list of stockholders entitled to vote at the special meeting will be available for examination by any stockholder for any purpose germane to the special meeting beginning ten days prior to the special meeting, and ending on the date of the special meeting, upon request to the Company’s Investor Relations department at 415-264-3419, subject to the satisfactory verification of stockholder status. Such list will also be available at the special meeting during the duration of the meeting via the special meeting website at www.virtualshareholdermeeting.com/LEAF2021SM.

The foregoing matters are more fully described in the accompanying proxy statement, which forms a part of this notice and is incorporated herein by reference. A copy of the merger agreement is attached as Annex A to the proxy statement. We encourage you to read the proxy statement, the accompanying annexes and any documents incorporated by reference in the proxy statement carefully and in their entirety. If you have any questions concerning the merger agreement, the merger or the other transactions contemplated by the merger agreement, the special meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement, or need help submitting a proxy to have your shares of common stock voted, please contact the Company’s proxy solicitor:

Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022

Stockholders may call toll free: (877) 717-3922
Banks and Brokers may call collect: (212) 750-5833

By order of the Board of Directors

Sean Moriarty

Chief Executive Officer

Santa Monica, California, May 6, 2021

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SUMMARY TERM SHEET

This summary term sheet highlights selected information in this proxy statement and may not contain all of the information about the merger agreement, the voting agreement or the merger and other transactions contemplated by the merger agreement and voting agreement that are important to you. You should carefully read this proxy statement in its entirety, including the annexes hereto and the other documents to which we have referred you, for a more complete understanding of the matters being considered at the special meeting. You may obtain, without charge, copies of any of the documents we file with the Securities and Exchange Commission (referred to as the “SEC”) by following the instructions under the section of this proxy statement titled “Where You Can Find Additional Information.”

In this proxy statement,(i) the terms “we,” “us,” “our,” the “Company” and “Leaf Group” refer to Leaf Group Ltd.; (ii) the term “Parent” refers to Graham Holdings Company; (iii) the term “merger subsidiary” refers to Pacifica Merger Sub, Inc.; (iv) the term “merger agreement” refers to the Agreement and Plan of Merger, dated as of April 3, 2021, by and among Parent, the merger subsidiary and the Company, as the same may be amended, supplemented or otherwise modified from time to time; (v) the term “common stock” refers to common stock of the Company, par value $0.0001 per share; and (vi) the term “voting agreement” refers to the Voting Agreement, dated as of April 3, 2021, by and among Parent and the holders of common stock party thereto.

The Parties

Leaf Group Ltd. Leaf Group Ltd. is a diversified consumer internet company that builds enduring, creator-driven brands that reach passionate audiences in large and growing lifestyle categories, including fitness and wellness and home, art and design. Its business is comprised of three segments: Society6 Group, its made-to-order marketplace business; Saatchi Art Group, one of the world’s largest online art galleries with a focus on emerging artists; and Media Group, a diverse portfolio of media properties that educate and inform consumers on a broad range of topics.

We were incorporated in 2006 as Demand Media, Inc., a Delaware corporation. Later in 2016, we changed our name to Leaf Group Ltd. Our shares of common stock are quoted on the New York Stock Exchange (referred to as “NYSE”) under the symbol “LEAF.” Our principal executive office is located at:

Leaf Group Ltd.
1655 26th Street
Santa Monica, CA 90404
(310) 656-6253

Additional information about Leaf Group is contained in its public filings, certain of which are incorporated by reference herein. See the sections of this proxy statement titled “Where You Can Find Additional Information” and “The Parties — Leaf Group Ltd.”

Graham Holdings Company. Graham Holdings Company (NYSE: GHC) is a diversified education and media company whose operations include educational services; television broadcasting; online, podcast, print and local TV news and other content; social-media advertising services; manufacturing; automotive dealerships; restaurants and entertainment venues; custom framing; and home health and hospice care. Parent’s Kaplan, Inc. subsidiary provides a wide variety of educational services, both domestically and outside the United States. Parent’s media operations comprise the ownership and operation of television broadcasting (through the ownership and operation of seven television broadcast stations) plus Slate and Foreign Policy magazines; and Pinna, an ad-free audio streaming service for children. Parent’s home health and hospice operations provide home health, hospice and palliative services. Parent’s manufacturing companies comprise the ownership of a supplier of pressure treated wood, an electrical solutions company, a manufacturer of lifting solutions, and a supplier of certain parts used in electric utilities and industrial systems. Parent also owns automotive dealerships, restaurants, a custom framing service company, a cybersecurity training company, a marketing solutions provider, and a customer data and analytics software

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company. Upon completion of the merger, Leaf Group will be a direct wholly owned subsidiary of Parent. See the section of this proxy statement titled “The Parties — Graham Holdings Company.”

Graham Holdings Company
1300 North 17th Street
Arlington, Virginia
(703) 345-6300

Pacifica Merger Sub, Inc. The merger subsidiary is a wholly owned subsidiary of Parent and was formed by Parent solely for the purpose of engaging in the transactions contemplated by the merger agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the merger agreement. Upon completion of the merger, the merger subsidiary will cease to exist. See the section of this proxy statement titled “The Parties — Pacifica Merger Sub, Inc.”

Pacifica Merger Sub, Inc.
c/o Graham Holdings Company
1300 North 17th Street
Arlington, Virginia
(703) 345-6300

The Merger

The Company, Parent and the merger subsidiary entered into the merger agreement on April 3, 2021. A copy of the merger agreement is included as Annex A to this proxy statement. On the terms and subject to the conditions set forth in the merger agreement and in accordance with the General Corporation Law of the State of Delaware (referred to as the “DGCL”), at the effective time of the merger (referred to as the “effective time”), the merger subsidiary will merge with and into the Company, the separate corporate existence of the merger subsidiary will thereupon cease, and the Company will continue as the surviving corporation of the merger as a wholly owned subsidiary of Parent. From time to time in this proxy statement, we refer to the Company as it will exist after the completion of the merger as the “surviving corporation.”

At the effective time of the merger, and without any action by any stockholder, each share of common stock that is outstanding immediately prior to the effective time of the merger (other than shares held by the Company as treasury stock, owned by Parent or the merger subsidiary or as to which holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be automatically converted into the right to receive cash in an amount equal to $8.50, without interest and less any applicable withholding taxes, which is referred to as the “merger consideration.”

The Special Meeting

The special meeting will be held on June 10, 2021, at 9:00 AM Pacific Time, virtually via www.virtualshareholdermeeting.com/LEAF2021SM. At the special meeting, holders of common stock will be asked to, among other things, vote for the adoption of the merger agreement. Please see the section of this proxy statement titled “The Special Meeting” for additional information on the special meeting, including how to vote your shares of common stock.

Record Date and Stockholders Entitled to Vote; Vote Required

Only holders of common stock of record as of the close of business on May 3, 2021, the record date for the special meeting, are entitled to receive notice of and to vote the shares of common stock they held on the record date at the special meeting. As of the close of business on the record date, there were 36,032,095 shares of common stock outstanding and eligible to vote at the special meeting. On each of the proposals presented at the special meeting, each holder of common stock will be entitled to one vote for each share of common stock held by such stockholder on the record date. The adoption of the merger agreement by the holders of common stock requires the affirmative vote of stockholders holding a majority of the outstanding shares of common stock entitled to vote thereon as of the close of business on the record date. The approval of the advisory, non-binding compensation proposal and adjournment proposal each require the

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affirmative vote of the holders of a majority in voting power of the shares of common stock which are present in person virtually or by proxy and entitled to vote thereon.

Background of the Merger

A description of the process we undertook that led to the proposed merger, including our discussions with Parent, is included in this proxy statement under “The Merger — Background of the Merger.”

Reasons for the Merger; Recommendation of the Board

After careful consideration, the Board unanimously: (i) approved and declared advisable the merger agreement and the merger, (ii) determined that the merger is in the best interests of the Company and its stockholders, (iii) directed that the merger agreement be submitted to the stockholders of the Company for adoption and (iv) recommended that the Company’s stockholders vote in favor of the adoption of the merger agreement. Accordingly, the Board recommends a vote “FOR” the merger proposal. The Board also recommends a vote “FOR” the advisory, non-binding compensation proposal and “FOR” the adjournment proposal.

For a discussion of the material factors that the Board considered in determining to recommend the adoption of the merger agreement, please see the section of this proxy statement titled “The Merger — Reasons for the Merger; Recommendation of the Board.”

Opinion of Leaf Group’s Financial Advisor

Pursuant to an engagement letter, dated March 12, 2021, the Company retained Canaccord Genuity LLC (referred to as “Canaccord Genuity”) as a financial advisor in connection with a possible acquisition of the Company and to deliver a fairness opinion in connection with the proposed merger.

At the meeting of the Board held on April 3, 2021, Canaccord Genuity rendered its oral opinion to the Board that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the merger consideration to be paid to the holders of shares of common stock in the merger was fair, from a financial point of view, to such holders. Canaccord Genuity subsequently confirmed its oral opinion by delivering its written opinion to the Board, dated April 3, 2021, that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the merger consideration to be paid to the holders of shares of common stock in the merger was fair, from a financial point of view, to such holders.

The full text of the written opinion of Canaccord Genuity, dated April 3, 2021, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of Canaccord Genuity set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. The Company’s stockholders are urged to read the opinion in its entirety.

Canaccord Genuity’s written opinion was addressed to the Board (in its capacity as such) in connection with and for the purposes of its evaluation of the merger, was directed only to the merger consideration to be paid in the proposed merger and did not address any other aspect of the merger. Canaccord Genuity expressed no opinion as to the fairness of the consideration to the holders of any class of securities, creditors or other constituencies of the Company, other than the holders of common stock, or as to the underlying decision by the Company to engage in the merger. The issuance of Canaccord Genuity’s opinion was approved by a fairness committee of Canaccord Genuity. The opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote with respect to the merger or any other matter.

For more information, see the section of this proxy statement titled “The Merger — Opinion of Leaf Group’s Financial Advisor.”

Certain Effects of the Merger

Upon the consummation of the merger, the merger subsidiary will be merged with and into the Company, the separate corporate existence of the merger subsidiary will thereupon cease, and the Company will continue to exist following the merger as a wholly owned subsidiary of Parent.

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Following the consummation of the merger, shares of the Company’s common stock will be delisted from the NYSE, and the registration of shares of common stock under the Securities Exchange Act of 1934, as amended (referred to as the “Exchange Act”), will be terminated.

Effects on the Company if the Merger Is Not Completed

In the event that the merger proposal does not receive the required approval from the holders of common stock, or if the merger is not completed for any other reason, the holders of common stock will continue to own their shares and will not receive any payment for their shares of common stock in connection with the merger. Instead, the Company will remain an independent public company, with the common stock listed and traded on the NYSE. Under certain circumstances, if the merger agreement is terminated, the Company may be obligated to pay to Parent a termination fee. Please see the section of this proxy statement titled “The Merger Agreement — Termination Fee.”

Treatment of Equity and Equity-Based Awards

At the effective time, by virtue of the merger and without any action on the part of the holders, (i) each outstanding option to purchase shares of common stock (each referred to as a “Leaf Group Option”) issued under the Company’s Amended and Restated 2010 Incentive Award Plan (referred to as the “Incentive Plan”) will be cancelled and, in consideration thereof, the holder of such Leaf Group Option will receive an amount (such amount is referred to as the “Leaf Group Option Consideration”) in cash equal to, net of applicable tax withholding, the product of (x) the excess, if any, of the merger consideration over the exercise price per share of common stock underlying such Leaf Group Option, multiplied by (y) the total number of shares of common stock subject to such Leaf Group Option, (ii) each outstanding restricted stock unit of the Company (each, referred to as a “Leaf Group RSU”) issued under the Incentive Plan that is vested immediately prior to the effective time of the merger (or would become vested by the terms thereof as a result of the merger) will be cancelled and, in consideration thereof, the holder of such Leaf Group RSU will receive an amount (such amount is referred to as the “Leaf Group RSU Consideration”) in cash equal to, net of applicable tax withholding, the merger consideration in respect of each share of common stock subject to such Leaf Group RSU, and (iii) each outstanding Leaf Group RSU that is not vested immediately prior to the effective time of the merger (and would not become vested by the terms thereof as a result of the merger) will, as of the effective time, be cancelled and, in consideration thereof, the holder of such unvested Leaf Group RSU will receive the Leaf Group RSU Consideration, subject to and conditioned on the same terms and conditions (including any terms and conditions relating to vesting and acceleration thereof) as applicable to such unvested awards to which such Leaf Group RSU Consideration relates.

Prior to the execution of the merger agreement, all Leaf Group Options held by Company employees were vested according to their terms. Thus, the merger has no effect on the vesting of any outstanding Leaf Group Options held by employees. Leaf Group Options held by the Company’s non-employee directors that are not otherwise vested prior to the effective time of the merger will become automatically vested as of the effective time of the merger, pursuant to their terms.2 In addition, and for the avoidance of doubt, any Leaf Group Option with an exercise price equal to or greater than the merger consideration will be cancelled for no consideration.

Treatment of Employee Stock Purchase Plan

The Board (or, if appropriate, any committee administering the Company’s 2010 Employee Stock Purchase Plan (the “ESPP”)) will adopt resolutions or take other actions to provide that: (a) if the current offering period under the ESPP is scheduled to end after the closing date of the merger, (i) the final exercise date for such offering period will be no later than the date that is five days prior to the effective time of the merger, (ii) each ESPP participant’s accumulated contributions under the ESPP will be used to purchase shares of Company common stock in accordance with the terms of the ESPP as of the final exercise date and (iii) the ESPP will terminate on the date immediately prior to the date on which the effective time of the merger occurs and no further rights will be granted or exercised under the ESPP thereafter; (b) if the current offering period is scheduled to end prior to the closing date of the merger, such offering period and the ESPP will be operated in the ordinary course in accordance with the existing terms of the ESPP and such offering period (except as provided in the clause (c) below); and (c) from and after the date of the merger

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agreement, no new offering periods will commence under the ESPP, no new participants will be entitled to enroll in the ESPP, and no current ESPP participants will be permitted to increase their elections under the ESPP.

All shares of Company common stock purchased on the final exercise date will be cancelled at the effective time of the merger and converted into the right to receive the merger consideration. The current offering period is scheduled to end in September 2021, after the expected closing of the merger, so it is expected that the provisions summarized in clause (a) above will apply.

Interests of the Company’s Directors and Executive Officers in the Merger

For additional information regarding beneficial ownership of common stock by each of the Company’s directors and executive officers and beneficial ownership of common stock by all of such directors and executive officers as a group, please see the section titled “Security Ownership of Certain Beneficial Owners and Management.” Upon the closing of the merger, each of the Company’s directors and executive officers will be entitled to receive, for each share of common stock he or she holds as of the effective time of the merger, the same merger consideration in cash in the same manner as other holders of common stock.

The Company’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of the Company’s stockholders generally. The members of the Board were aware of and considered these interests in reaching the determination to approve the merger agreement and deem the merger agreement, the merger and the other transactions and agreements contemplated by the merger agreement to be advisable, fair to and in the best interests of the Company and its stockholders, and in recommending that the stockholders vote for the adoption of the merger agreement. These interests include:

•

the Company’s directors and executive officers hold Leaf Group RSUs and Leaf Group Options that will be afforded the treatment described immediately above under “Treatment of Equity and Equity-Based Awards”;

•

the Company’s executive officers are party to executive agreements with the Company that provide for severance in the case of a qualifying termination of employment within 12 months following a change in control, which will include completion of the merger;

•

the Company’s executive officers, other than Sean Moriarty, are entitled to a bonus pursuant to the Company’s Retention Program (as defined below); and

•

the Company’s directors and executive officers are entitled to continued indemnification and insurance coverage following the merger under the merger agreement. Please see the section below titled “The Merger — Director and Officer Indemnification” and the section of this proxy statement titled “— The Merger Agreement — Indemnification of Directors and Officers and Insurance.”

Please see the section titled “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger” for additional information about these financial interests.

Voting Agreement

Concurrently with the execution of the merger agreement, Parent entered into the voting agreement, as further described in the section titled “Agreements Related to the Merger — The Voting Agreement,” with the Company’s directors and executive officers as of the date of the merger agreement. Under the voting agreement, such directors and executive officers have agreed to vote or cause to be voted all of the shares of common stock beneficially owned by them in favor of the stockholder proposals submitted at the special meeting. As of the record date, the directors and executive officers of the Company collectively held in the aggregate approximately 766,821 shares of common stock, or approximately 2.1% of the outstanding shares of common stock at such time.

Financing of the Merger

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equivalents, and investments in marketable securities of approximately $1.0 billion. The obligation of Parent and the merger subsidiary to consummate the merger is not subject to any financing condition.

For more information regarding the financing, see the section of this proxy statement titled “The Merger — Financing of the Merger.”

Conditions of the Merger

The obligations of the Company, Parent and the merger subsidiary to consummate the merger are subject to the satisfaction or waiver of various conditions on or prior to the effective time of the merger, including the following:

•

adoption of the merger agreement by the Company’s stockholders;

•

expiration or early termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (referred to as the “HSR Act”) (see the section titled “The Merger — Regulatory Approvals Required for the Merger”);

•

the absence of any legal or regulatory restraints enjoining or otherwise preventing or making illegal the consummation of the merger;

•

each party’s obligation to consummate the merger is also subject to the satisfaction or waiver of certain additional conditions, including:

•

subject to certain materiality and other qualifiers, the accuracy of the representations and warranties of the other party;

•

performance in all material respects by the other party of its obligations under the merger agreement; and

•

in the case of Parent’s and the merger subsidiary’s obligations, the absence of a Company material adverse effect (which term is described in the section titled “The Merger Agreement — Representations and Warranties”).

The consummation of the merger is not conditioned upon Parent’s receipt of financing.

Before the closing, each of the Company, Parent and the merger subsidiary may waive any of the conditions to its obligation to consummate the merger even though one or more of the conditions described above has not been met, except where waiver is not permissible under applicable law. Please see the section of this proxy statement titled “The Merger Agreement — Conditions of the Merger.”

Regulatory Approvals Required for the Merger

The consummation of the merger is subject to review under the HSR Act. As described above in the section titled “— Conditions of the Merger,” the obligations of Parent and the Company to consummate the merger are subject to expiration or early termination of any applicable waiting period under the HSR Act. Under the HSR Act and the rules and regulations promulgated thereunder, the merger may not be completed until notifications have been filed and certain information has been furnished to the Federal Trade Commission (referred to as the “FTC”) and the Antitrust Division of the Department of Justice (referred to as the “DOJ”) and the specified waiting period has expired or been terminated. The Company and Parent each filed or caused to be filed the requisite notification forms under the HSR Act with the DOJ and the FTC on April 16, 2021, and both requested “early termination” of the waiting period. The required waiting period is scheduled to expire at 11:59 p.m. Eastern time on May 17, 2021, unless earlier terminated or if the FTC or DOJ extends that period by issuing a request to the parties for additional information. Both before and after the expiration or termination of the applicable waiting period, the FTC and the DOJ retain the authority to challenge the merger on antitrust grounds.

The merger agreement includes covenants obligating each of the parties to use reasonable best efforts to cause the merger to be consummated and to take certain actions to resolve objections under any antitrust laws. Among other things, the Company and Parent have agreed to (i) use commercially reasonable efforts to obtain all consents and approvals required from third parties in connection with the transactions

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contemplated thereby; and (ii) use reasonable best efforts to cause to be taken, on a timely basis, all other actions necessary or appropriate for the purpose of consummating and effectuating the transactions contemplated thereby. The Company is not required to pay, prior to the effective time, any fee, penalty or other consideration to any person for any consent or approval required for the consummation of any of the transactions contemplated thereby. For more information regarding these covenants, see the section of this proxy statement titled “The Merger Agreement — Reasonable Best Efforts; Antitrust Filings.”

No-Shop; Board Recommendation Change

The merger agreement generally restricts, subject to certain limited exceptions, the Company’s ability to solicit, initiate or encourage the submission of acquisition proposals (as defined below in the section titled “The Merger Agreement — No- Shop; Board Recommendation Change”) from third parties (including by furnishing non-public information), to enter into, participate in or continue any discussions or negotiations with third parties regarding any acquisition proposals, to enter into any agreement with respect to an acquisition proposal or waive, terminate, modify, fail to enforce or release any person under any “standstill” or similar agreement.

Between the signing of the merger agreement and the adoption of the merger agreement by the Company’s stockholders, if the Board receives an unsolicited, written bona fide acquisition proposal that was not solicited in breach of the merger agreement, and the Board determines in good faith (after consultation with outside legal counsel and an independent financial advisor of nationally recognized reputation) constitutes or would reasonably be expected to lead to a superior proposal (as defined below in the section titled “The Merger Agreement — No-Shop; Board Recommendation Change — Board Recommendation Change”), then, subject to providing Parent with prior notice thereof, the Board may furnish non-public information to, and participate in discussions or negotiations with, the party that made the acquisition proposal.

The Board generally is not permitted under the merger agreement to change its recommendation in favor of the adoption of the merger agreement. However, in certain circumstances, the Board is permitted to withdraw, qualify or modify its recommendation in response to certain unforeseen, change in circumstances or to accept a superior proposal if, in either case, the Board determines in good faith, after consultation with outside legal counsel and consultation with a financial advisor of nationally recognized reputation, that the failure to do so would be inconsistent with its fiduciary duties under Delaware law, and subject to the procedures set forth in the merger agreement, the Company negotiates in good faith with Parent, if requested by Parent, for five business days (and for each subsequent modification to the financial terms of or material modification to a superior proposal, over a three business day period) to make adjustment to the terms of the merger agreement and other transactions referenced therein so that the Board’s fiduciary duties no longer require it to make a Board recommendation change in response to the change in circumstances or so that the acquisition proposal no longer constitutes a superior proposal. See the section of this proxy statement titled “The Merger Agreement — No-Shop; Board Recommendation Change — Board Recommendation Change.”

Termination

The merger agreement may be terminated at any time prior to the effective time of the merger in the following circumstances:

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by mutual written consent of Parent and the Company at any time prior to the effective time of the merger;

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by either Parent or the Company if:

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the merger is not consummated on or before August 31, 2021 (referred to as the “end date”), but no party will be permitted to terminate the merger agreement on this basis if such party’s breach of the merger agreement has been the primary cause of, or primarily resulted in, the closing to not have occurred on or before the end date (referred to as the “end date termination”);

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there is any law enacted after the date of the merger agreement and remaining in effect that makes the merger illegal or that prohibits the consummation of the merger, or any court of

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competent jurisdiction or other governmental entity issues a final and nonappealable order or takes any other action, in either case permanently restraining, enjoining, or otherwise prohibiting the merger. No party will be permitted to terminate the merger agreement on this basis if such party’s breach of the merger agreement has been the primary cause of, or primarily resulted in, any such order or action; or

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if, upon a vote at a duly held meeting to obtain the requisite approval of the Company’s stockholders, the Company’s stockholders fail to adopt the merger agreement (referred to as a “stockholder vote termination”);

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by Parent if:

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the Company breaches or fails to perform any of its representations, warranties or covenants contained in the merger agreement, which breach or failure to perform (i) would give rise to the failure of any of the closing conditions and (ii) cannot be or has not been cured within 20 business days (or, if earlier, the end date) after the giving of written notice to the Company of such breach (as long as Parent is not then in breach of any representation, warranty or covenant contained in the merger agreement that would give rise to a Parent breach termination, as defined below) (referred to as a “Company breach termination”); or

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(i) the Board changes its recommendation that the stockholders vote in favor of the adoption of the merger agreement (referred to as a “recommendation change termination”); or (ii) the Company breaches in any material respect the no-shop provisions in the merger agreement (referred to as a “no-shop breach termination”); and

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by the Company if:

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Parent breaches or fails to perform any of its representations, warranties or covenants contained in the merger agreement, which breach or failure to perform (i) would give rise to the failure of any of the closing conditions and (ii) cannot be or has not been cured within 20 business days (or, if earlier, the end date) after the giving of written notice to Parent of such breach (as long as the Company is not then in breach of any representation, warranty or covenant in the merger agreement that would give rise to a Company breach termination) (referred to as a “Parent breach termination”); or

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prior to the adoption of the merger agreement by the Company’s stockholders, the Company receives a superior proposal and determines to terminate the merger agreement in order to immediately enter into a binding and definitive agreement for such superior proposal, in which case the Company must prior to or concurrently with such termination pay to Parent the termination fee (as defined below) (referred to as a “superior proposal termination”).

Termination Fee

The Company will be required to pay Parent a termination fee (which is referred to as the “termination fee”) of $12,900,000 if (i) Parent terminates the merger agreement pursuant to the recommendation change termination; (ii) Parent terminates the merger agreement pursuant to the no-shop breach termination; (iii) the Company terminates the merger agreement pursuant to the superior proposal termination; (iv) either party terminates the merger agreement pursuant to the stockholder vote termination or the Company terminates the merger agreement pursuant to the end date termination, in each case if at the time of such termination Parent had the right to terminate the merger agreement pursuant to the recommendation change termination or the no-shop breach termination; or (v) an acquisition proposal has been made to the Company or to the Board or has otherwise been publicly announced (which proposal has not been withdrawn at the time of the event giving rise to the relevant termination right) and thereafter (A) the merger agreement is terminated pursuant to the end date termination, the stockholder vote termination or the Company breach termination and (B) within 12 months of such termination the Company or any of its subsidiaries enters into an acquisition agreement with respect to any acquisition proposal relating to 50% of the Company’s securities or assets, or any such acquisition proposal is consummated, subject to certain limitations. See “The Merger Agreement — Termination Fee.”

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Appraisal Rights

Pursuant to Section 262 of the DGCL, Leaf Group stockholders who do not vote in favor of adoption of the merger agreement, who continuously hold their shares of common stock through the effective time of the merger and who otherwise comply with the applicable requirements of Section 262 of the DGCL have the right to seek appraisal of the fair value of their shares of common stock, as determined by the Delaware Court of Chancery, if the merger is completed. The “fair value” of shares of common stock as determined by the Delaware Court of Chancery could be greater than, the same as, or less than the per share merger consideration that stockholders would otherwise be entitled to receive under the terms of the merger agreement if they did not seek appraisal of their shares of common stock.

The right to seek appraisal will be lost if a Leaf Group stockholder votes “FOR” the merger proposal. However, abstaining or voting against adoption of the merger agreement is not in itself sufficient to perfect appraisal rights because additional actions must also be taken to perfect such rights. To exercise appraisal rights, Leaf Group stockholders who wish to exercise the right to seek an appraisal of their shares must so advise the Company by submitting a written demand for appraisal (or by electronic transmission directed to an information processing system, if any, expressly designated for that purpose in the notice of appraisal) to the Company prior to the taking of the vote on the merger proposal at the special meeting, and must otherwise follow the applicable procedures and requirements prescribed by Section 262 of the DGCL. A person having a beneficial interest in shares of common stock held of record in the name of another person, such as bank, broker or other nominee, must act promptly to cause the record holder to follow the steps required by Section 262 of the DGCL and in a timely manner to perfect appraisal rights. In view of the complexity of Section 262 of the DGCL, Leaf Group stockholders that may wish to pursue appraisal rights are urged to consult their legal and financial advisors. In addition, under Section 262 of the DGCL, the Delaware Court of Chancery will dismiss any appraisal proceedings as to all stockholders who have perfected their appraisal rights unless (i) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of common stock, (ii) the value of the per share merger consideration multiplied by the total number of shares of common stock entitled to appraisal exceeds $1 million or (iii) the merger was approved pursuant to Sections 253 or 267 of the DGCL. See the section of this proxy statement titled “Appraisal Rights.”

Material U.S. Federal Income Tax Considerations

The receipt of cash by a holder of common stock who is a U.S. holder (as defined below in the section of this proxy statement titled “The Merger — Material U.S. Federal Income Tax Considerations”) in exchange for shares of common stock pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for U.S. federal income tax purposes, if you are a U.S. holder, you will recognize gain or loss equal to the difference, if any, between the amount of cash you receive (or are deemed to receive) in the merger and your adjusted tax basis in the shares of common stock converted into cash in the merger. If you are a holder of common stock who is a non-U.S. holder (as defined below in the section of this proxy statement title “The Merger — Material U.S. Federal Income Tax Considerations”), the merger will generally not be a taxable transaction to you under U.S. federal income tax laws unless you have certain connections to the United States, or the Company is, or was during the relevant period, a U.S. real property holding corporation. Further, the merger may be a taxable transaction to you under non-U.S. tax laws, and you are encouraged to seek tax advice regarding such matters. Because individual circumstances may differ, we urge you to consult your own tax advisor to determine the particular tax effects to you. You are urged to read the section of this proxy statement titled “The Merger — Material U.S. Federal Income Tax Considerations” for a more complete discussion of the material U.S. federal income tax consequences of the merger.

Current Price of Common Stock

The closing sale price of common stock on the NYSE on May 5, 2021, the most recent practicable date before the filing of this proxy statement, was $8.72. You are encouraged to obtain current market quotations for common stock in connection with voting your shares of common stock.

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to briefly address some commonly asked questions regarding the special meeting and the merger. These questions and answers may not address all questions that may be important to you as a holder of common stock. You should read the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement.

Why am I receiving this proxy statement?

On April 3, 2021, the Company entered into the merger agreement with Parent and the merger subsidiary. Pursuant to the merger agreement, the merger subsidiary will be merged with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Parent.

You are receiving this proxy statement in connection with the solicitation of proxies by the Board in favor of the proposal to adopt the merger agreement and the other matters to be voted on at the special meeting described below under “— What proposals will be considered at the special meeting?”

As a holder of Leaf Group common stock, what will I receive in the merger?

Each share of common stock that is outstanding immediately prior to the effective time of the merger (other than shares held by the Company as treasury stock, owned by Parent or the merger subsidiary or as to which the holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be automatically converted into the right to receive the merger consideration.

The exchange of shares of common stock for cash pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes. Please see the section of this proxy statement titled “The Merger — Material U.S. Federal Income Tax Considerations” for a more detailed description of the U.S. federal income tax consequences of the merger. You are urged to consult your own tax advisor for a full understanding of how the merger will affect you for federal, state, local and/or non-U.S. tax purposes.

How does the merger consideration compare to the recent trading price of Leaf Group common stock?

The merger consideration of $8.50 per share represents a premium of approximately 21% over the Company’s closing stock price on April 1, 2021 (the last full trading day before the announcement of the transactions contemplated by the merger agreement). On May 5, 2021, the most recent practicable date before the filing of this proxy statement, the closing price of the common stock was $8.72 per share.

What will happen to outstanding Company equity awards in the merger?

At the effective time, by virtue of the merger and without any action on the part of the holders, (i) each Leaf Group Option issued under the Incentive Plan will be cancelled and, in consideration thereof, the holder of such Leaf Group Option will receive the Leaf Group Option Consideration and (ii) each outstanding Leaf Group RSU issued under the Incentive Plan will be cancelled and, in consideration thereof, the holder of such Leaf Group RSU will receive the Leaf Group RSU Consideration. Notwithstanding the foregoing, each outstanding Leaf Group RSU that is not vested immediately prior to the effective time of the merger (or would not become vested by the terms thereof as a result of the merger) will, as of the effective time of the merger, be cancelled and, in consideration thereof, the holder of such unvested Leaf Group RSU will receive the Leaf Group RSU Consideration, subject to and conditioned on the same terms and conditions (including any terms and conditions relating to vesting and acceleration thereof) as applicable to such unvested awards to which such Leaf Group RSU Consideration relates. Leaf Group RSU Consideration with respect to a Leaf Group RSU that is not vested immediately prior to the effective time of the merger (and would not become vested by the terms thereof as a result of the merger) will be paid as soon as reasonably practicable after the final day of the calendar quarter in which the applicable vesting date occurs, but in any event no later than the earlier of (i) the first regular payroll date of the surviving corporation or Parent, or an affiliate thereof, as applicable, that is at least 10 business days following the end of such calendar quarter, and (ii) March 15 of the calendar year immediately after such applicable vesting date.

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Prior to the execution of the merger agreement, all Leaf Group Options held by Company employees were vested according to their terms. Thus, the merger has no effect on the vesting of any outstanding Leaf Group Options held by employees. Leaf Group Options held by the Company’s non-employee directors that are not otherwise vested prior to the effective time of the merger will become automatically vested as of the effective time of the merger, pursuant to their terms. In addition, and for the avoidance of doubt, any Leaf Group Option with an exercise price equal to or greater than the merger consideration will be cancelled for no consideration at the effective time.

What will happen to the rights of participants under the Company’s employee stock purchase plan?

The Board (or, if appropriate, any committee administering the ESPP) will adopt resolutions or take other actions to provide that: (a) if the current offering period under the ESPP is scheduled to end after the closing date of the merger, (i) the final exercise date for such offering period will be no later than the date that is five days prior to the effective time of the merger, (ii) each ESPP participant’s accumulated contributions under the ESPP will be used to purchase shares of Company common stock in accordance with the terms of the ESPP as of the final exercise date and (iii) the ESPP will terminate on the date immediately prior to the date on which the effective time of the merger occurs and no further rights will be granted or exercised under the ESPP thereafter; (b) if the current offering period is scheduled to end prior to the closing date of the merger, such offering period and the ESPP will be operated in the ordinary course in accordance with the existing terms of the ESPP and such offering period (except as provided in the clause (c) below); and (c) from and after the date of the merger agreement, no new offering periods will commence under the ESPP, no new participants will be entitled to enroll in the ESPP, and no current ESPP participants will be permitted to increase their elections under the ESPP.

When and where is the special meeting of our stockholders?

The special meeting will be held on June 10, 2021, at 9:00 AM, Pacific Time, virtually via www.virtualshareholdermeeting.com/LEAF2021SM.

Who is entitled to vote at the special meeting?

Only holders of record of common stock as of the close of business on May 3, 2021, the record date for the special meeting (referred to as the “record date”), are entitled to vote the shares of common stock they held as of the record date at the special meeting. As of the close of business on the record date, there were 36,032,095 shares of common stock outstanding and entitled to vote. On each of the proposals presented at the special meeting, each holder of common stock is entitled to one vote for each share of common stock held by such stockholder on the record date.

May I attend the special meeting and vote in person?

Leaf Group is hosting the special meeting virtually via www.virtualshareholdermeeting.com/LEAF2021SM. There will be no physical location for stockholders to attend.

If you are a stockholder of record, you may attend the special meeting and vote your shares virtually at the special meeting.

In order to attend the virtual special meeting and vote online, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. The control number is designed to verify your identity and allow you to vote your shares of common stock at the special meeting or to vote by proxy prior to the special meeting. If you are a beneficial owner of shares of common stock held in “street name,” you may contact the bank, broker or other institution where you hold your account if you have questions about obtaining your control number and attending the special meeting. If you attend the special meeting and vote via the Internet, your vote will revoke any proxy that you have previously submitted.

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Please note that even if you plan to attend the special meeting, we recommend that you vote using the enclosed proxy card in advance, to ensure that your shares will be represented.

What proposals will be considered at the special meeting?

At the special meeting, holders of common stock will be asked to consider and vote on the following proposals:

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a proposal to adopt the merger agreement (referred to as the “merger proposal”);

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a proposal to approve, on an advisory, non-binding basis, the specified compensation that may become payable to Leaf Group’s named executive officers in connection with the merger (referred to as the “advisory, non-binding compensation proposal”); and

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a proposal to adjourn or postpone the special meeting (referred to as the “adjournment proposal”).

In accordance with the Leaf Group’s Amended and Restated Bylaws (referred to as the “bylaws”), the only business that will be transacted at the special meeting are the merger proposal, the advisory, non-binding compensation proposal and the adjournment proposal, as stated in the accompanying notice of the special meeting.

What constitutes a quorum for purposes of the special meeting?

The presence at the special meeting in person, by means of remote communication in a manner, if any, authorized by the Board in its sole discretion, or represented by proxy, of the holders of a majority in voting power of the shares of common stock issued and outstanding and entitled to vote at the meeting will constitute a quorum for the transaction of business at the special meeting. The inspector of election appointed for the special meeting will determine whether a quorum is present. The inspector of election will treat abstentions as present for purposes of determining the presence of a quorum.

If a quorum is not present, the only business that can be transacted at the special meeting is the adjournment or postponement of the meeting to another date or time.

What vote of our stockholders is required to approve each of the proposals?

The approval of the merger proposal requires the affirmative vote of stockholders holding a majority of the outstanding shares of common stock entitled to vote thereon as of the close of business on the record date. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide voting instructions to such holder’s bank, broker or other nominee or failure to vote at the special meeting, abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.

The approval of the advisory, non-binding compensation proposal and the adjournment proposal each require the affirmative vote of the holders of a majority in voting power of the shares of common stock which are present in person virtually or by proxy and entitled to vote thereon. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee or failure to vote at the special meeting, and broker non-votes will have no effect on the outcome of the advisory, non-binding compensation proposal or the adjournment proposal. Abstentions will have the same effect as a vote “AGAINST” the advisory, non-binding compensation proposal and the adjournment proposal.

What is a “broker non-vote”?

If a beneficial owner of shares of common stock held in “street name” by a bank, broker or other nominee does not provide the organization that holds its shares with specific voting instructions, then, under applicable rules, the organization that holds its shares may generally vote on “discretionary” matters but cannot vote on “non-discretionary” matters. If the organization that holds the beneficial owner’s shares does not receive instructions from such stockholder on how to vote its shares on any proposal to be voted on at the special meeting, that bank, broker or other nominee will inform the inspector of election at the special meeting that it does not have authority to vote on any proposal at the special meeting with respect to

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such shares, and, furthermore, such shares will not be deemed to be in attendance at the meeting. This is generally referred to as a “broker non-vote.” However, if the bank, broker or other nominee receives instructions from such stockholder on how to vote its shares as to at least one proposal but not all of the proposals, the shares will be voted as instructed on the proposal as to which voting instructions have been given but will not be voted on the other, uninstructed proposal(s).

How does the Board recommend that I vote?

The Board recommends a vote “FOR” the merger proposal, “FOR” the advisory, non-binding compensation proposal and “FOR” the adjournment proposal.

For a discussion of the factors that the Board considered in determining to recommend that the Company’s stockholders adopt and approve of the merger agreement, please see the section of this proxy statement titled “The Merger — Reasons for the Merger; Recommendation of the Board.” In addition, in considering the recommendation of the Board with respect to the merger agreement, you should be aware that certain of the Company’s directors and executive officers have interests that may be different from, or in addition to, the interests of the Company’s stockholders generally. Please see the section of this proxy statement titled “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger.”

How do the Company’s directors and executive officers intend to vote?

Concurrently with the execution of the merger agreement, Parent entered into the voting agreement, as further described in the section titled “Agreements Related to the Merger — The Voting Agreement,” with the Company’s directors and executive officers as of the date of the merger agreement. Under the voting agreement, such directors and executive officers have agreed to vote or cause to be voted, all of the shares of common stock beneficially owned by them in favor of the stockholder proposals submitted at the special meeting. As of the record date, the directors and executive officers of the Company collectively held in the aggregate approximately 766,821 shares of common stock, or approximately 2.1% of the outstanding shares of common stock at such time.

Why am I being asked to cast an advisory, non-binding vote to approve the compensation that may be paid or may become payable to the Company’s named executive officers in connection with the merger?

The SEC, in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, adopted rules that require the Company to seek an advisory (non-binding) vote with respect to certain payments that may be made to the Company’s named executive officers in connection with the merger.

What will happen if the Company’s stockholders do not approve the advisory, non-binding compensation proposal?

The vote on the advisory, non-binding compensation proposal is a vote separate and apart from the vote to adopt the merger agreement. Because the vote on the advisory, non-binding compensation proposal is advisory only, it will not be binding on Leaf Group, the Board, Parent or the surviving corporation. Accordingly, because Leaf Group is contractually obligated to pay the compensation, if the merger agreement is adopted by the Leaf Group of common stock and the merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the advisory, non-binding vote.

What happens if I sell my shares of Leaf Group common stock before the special meeting?

The record date for the special meeting is earlier than the date of the special meeting. If you sell or transfer your shares of common stock after the record date, but before the special meeting, you will retain your right to vote such shares at the special meeting. However, the right to receive the merger consideration will pass to the person to whom you transferred your shares. In order to receive the merger consideration in connection with the merger, you must hold your shares of common stock through the effective time of the merger.

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How do I cast my vote if I am a stockholder of record?

If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company LLC, you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by the Company. If you are a stockholder of record as of the record date, you may vote such shares via the Internet during the special meeting or by submitting your proxy via the Internet, by telephone or by completing, signing and returning the enclosed proxy card by mail in the prepaid reply envelope. For more detailed instructions on how to vote using one of these methods, please see the section of this proxy statement titled “The Special Meeting — Voting Procedures.”

If you are a holder of record of shares of common stock and you submit a proxy card or voting instructions but do not direct how to vote on each item, the persons named as proxies will vote your shares in favor of each of the merger proposal, the advisory, non-binding compensation proposal and the adjournment proposal.

How do I cast my vote if my shares of common stock are held in “street name” by my bank, broker or other nominee?

If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record.

If you are a beneficial owner of shares of common stock held in “street name,” you may follow the instructions from your bank, broker or other nominee in order to vote such shares. Your bank, broker or other nominee will vote your shares only if you provide instructions on how to vote by properly completing the voting instruction form sent to you by your bank, broker or other nominee with this proxy statement. Without providing those instructions, your shares will not be voted by your bank, broker or other nominee, which will have the same effect as a vote “AGAINST” the merger proposal.

If you are a beneficial owner of shares of common stock held in “street name,” you may also attend the special meeting and vote your shares virtually at the special meeting. For more detailed instructions on how to vote virtually at the special meeting, please see the section of this proxy statement titled “The Special Meeting — Voting Procedures.”

What will happen if I abstain from voting or fail to vote on any of the proposals?

If you abstain from voting, fail to cast your vote via the Internet during the special meeting or by proxy or fail to give voting instructions to your broker, it will have the same effect as a vote “AGAINST” the merger proposal, the advisory, non-binding compensation proposal, and the adjournment proposal.

Can I change my vote after I have delivered my proxy or my voting instructions?

Yes. If you are a stockholder with shares of common stock registered in your name, unless you have executed the voting agreement, you may revoke your proxy at any time prior to the time it is voted by filing with the Corporate Secretary of the Company an instrument revoking the proxy (by submitting a new proxy bearing a later date, by using the telephone or Internet proxy submission procedures described under “The Special Meeting — Voting Procedures”) or by virtually attending the special meeting and voting by ballot. Merely attending the special meeting will not, by itself, revoke a proxy. Please note, however, that only your last- dated proxy or your vote by ballot will count. If you want to revoke your proxy by sending a new proxy card or an instrument revoking the proxy to the Company, you should ensure that you send your new proxy card or instrument revoking the proxy in sufficient time for it to be received by the Company prior to the special meeting. If you are a beneficial owner of shares of common stock held in “street name,” you may contact your bank, broker or other nominee to change your vote, or by attending the virtual special meeting online and electronically voting your shares during the special meeting.

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What should I do if I receive more than one set of voting materials?

You may receive more than one set of voting materials, including multiple copies of this proxy statement or multiple proxy or voting instruction cards. For example, if you hold your shares of common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares of common stock. If you are a holder of common stock of record and your shares of common stock are registered in more than one name, you will receive more than one proxy card. Please submit each proxy and voting instruction card that you receive to ensure that all your shares of common stock are voted.

If I hold my shares of common stock in certificated form, should I send in my stock certificates now?

No. Promptly after the effective time of the merger, each holder of a certificate representing shares of common stock that have been converted into the right to receive the merger consideration will be sent a letter of transmittal describing the procedure for surrendering his, her or its shares in exchange for the merger consideration. If you hold your shares in certificated form, you will receive your cash payment after the paying agent receives your stock certificates and any other documents requested in the instructions. You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal. If you hold shares of common stock in uncertificated, book-entry form, you will not be required to deliver a stock certificate, and you will receive your cash payment after the payment agent receives an “agent’s message” and any other documents requested in the instructions.

Where can I find the voting results of the special meeting?

The Company intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the special meeting. All reports that the Company files with the SEC are publicly available when filed. For more information, please see the section of this proxy statement titled “Where You Can Find Additional Information.”

Am I entitled to rights of appraisal under the DGCL?

If the merger is completed, holders of common stock who do not vote in favor of the adoption of the merger agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the merger under Section 262 of the DGCL. This means that holders of shares of common stock are entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with interest on the amount determined to be fair value, if any, as determined by the court (or, in certain circumstances described below, on the difference between the amount determined to be the fair value and the amount paid to each stockholder entitled to appraisal prior to the entry of judgment in the appraisal proceeding). Holders of common stock who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The requirements under Section 262 of the DGCL for exercising appraisal rights are described in additional detail in this proxy statement, and Section 262 of the DGCL regarding appraisal rights is reproduced in Annex C to this proxy statement. Failure to comply with the provisions of Section 262 of the DGCL in a timely and proper manner may result in the loss of appraisal rights. See the section of this proxy statement titled “Appraisal Rights.”

When is the merger expected to be completed?

We are working toward completing the merger as promptly as possible, but as of the date of this proxy statement we cannot accurately estimate the closing date of the merger because the merger is subject to the satisfaction (or, to the extent permitted by applicable law, waiver) of the conditions to Parent, the merger subsidiary and the Company’s respective obligations to consummate the merger, some of which are not within the parties’ control. However, we currently expect the merger to close in June or July of 2021.

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What effect will the merger have on the Company?

If the merger is consummated, the merger subsidiary will be merged with and into the Company, the separate corporate existence of the merger subsidiary will thereupon cease, and the Company will continue to exist following the merger as a wholly owned subsidiary of Parent. Following such consummation of the merger, shares of common stock will be delisted from the NYSE, and the registration of shares of common stock under the Exchange Act will be terminated.

What happens if the merger is not completed?

If the merger proposal is not approved by the Company’s stockholders, or if the merger is not completed for any other reason, the holders of common stock will not receive any payment for their shares of common stock in connection with the merger. Instead, the Company will remain an independent public company and stockholders will continue to own their shares of common stock. The common stock will continue to be registered under the Exchange Act and listed and traded on the NYSE. Under certain circumstances, if the merger is not completed, the Company may be obligated to pay to Parent a termination fee. For more information, please see the section of this proxy statement titled “The Merger Agreement — Termination Fee.”

What is householding and how does it affect me?

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement and annual report addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

Who can help answer my questions?

If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact Leaf Group’s proxy solicitor:

Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022

Stockholders may call toll free: (877) 717-3922
Banks and Brokers may call collect: (212) 750-5833

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement, and the documents incorporated by reference in this proxy statement, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company generally identifies forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words.

These statements are only predictions. The Company has based these forward-looking statements largely on its then-current expectations and projections about future events and financial trends as well as the beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond the Company’s control. The Company’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to:

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the possibility that competing offers will be made;

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the fact that under the terms of the merger agreement, the Company is unable to solicit other acquisition proposals;

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the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, including in circumstances which would require the Company to pay the termination fee or other expenses;

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the failure of the parties to satisfy conditions to completion of the merger, including the failure of our stockholders to adopt the merger agreement;

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the fact that receipt of the all-cash merger consideration would be taxable to stockholders that are treated as U.S. holders (as defined under the caption “The Merger — Material U.S. Federal Income Tax Considerations”) for U.S. federal income tax purposes;

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the risk that antitrust or other approvals are delayed or are subject to terms and conditions that are not anticipated;

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changes in the Company’s business or in the Company’s businesses’ operating prospects;

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the effect of the announcement or pendency of the transactions contemplated by the merger agreement on the Company’s ability to retain and hire key personnel, its ability to maintain relationships with its customers, suppliers and others with whom it does business, or its operating results and business generally;

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risks related to diverting management’s attention from the Company’s ongoing business operations;

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the outcome of any legal proceedings that may be instituted against the Company, Parent or others following announcement of the merger agreement and transactions contemplated therein;

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changes in domestic and global economic, political and market conditions;

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risks that the Company’s stock price may decline significantly if the merger is not completed; and

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the response of Company stockholders to the proposed merger.

Other factors that may cause actual results to differ materially include those set forth in the Company’s most recent Annual Report on Form 10-K (as amended by the Amendment No. 1 to the Form 10-K filed with the SEC on April 30, 2021), and subsequent reports filed with the SEC, as well as other documents that may be filed by the Company from time to time with the SEC. See the section of this proxy statement titled “Where You Can Find Additional Information.” These forward-looking statements reflect Leaf Group’s expectations as of the date of this proxy statement. Leaf Group undertakes no obligation to update the information provided herein. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date hereof.

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THE PARTIES

Leaf Group Ltd.

Leaf Group is a diversified consumer internet company that builds enduring, creator-driven brands that reach passionate audiences in large and growing lifestyle categories, including fitness and wellness (Well+Good, Livestrong.com and MyPlate App), and home, art and design (Saatchi Art, Society6 and Hunker).

We were incorporated in 2006 as Demand Media, Inc., a Delaware corporation. Later in 2016, we changed our name to Leaf Group Ltd. Our shares of common stock are quoted on the NYSE under the symbol “LEAF.” Our principal executive office is located at:

Leaf Group Ltd.

1655 26th Street

Santa Monica, CA 90404

(310) 656-6253

Graham Holdings Company

Graham Holdings Company (NYSE: GHC) is a diversified education and media company whose operations include educational services; television broadcasting; online, podcast, print and local TV news and other content; social-media advertising services; manufacturing; automotive dealerships; restaurants and entertainment venues; custom framing; and home health and hospice care. Parent’s Kaplan, Inc. subsidiary provides a wide variety of educational services, both domestically and outside the United States. Parent’s media operations comprise the ownership and operation of television broadcasting (through the ownership and operation of seven television broadcast stations) plus Slate and Foreign Policy magazines; and Pinna, an ad-free audio streaming service for children. Parent’s home health and hospice operations provide home health, hospice and palliative services. Parent’s manufacturing companies comprise the ownership of a supplier of pressure treated wood, an electrical solutions company, a manufacturer of lifting solutions, and a supplier of certain parts used in electric utilities and industrial systems. Parent also owns automotive dealerships, restaurants, a custom framing service company, a cybersecurity training company, a marketing solutions provider, and a customer data and analytics software company.

Upon completion of the merger, Leaf Group will be a direct wholly owned subsidiary of Parent.

Graham Holdings Company

1300 North 17th Street

Arlington, Virginia

(703) 345-6300

Pacifica Merger Sub, Inc.

The merger subsidiary is a wholly owned subsidiary of Parent and was formed by Parent solely for the purpose of engaging in the transactions contemplated by the merger agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the merger agreement. Upon completion of the merger, the merger subsidiary will cease to exist.

Pacifica Merger Sub, Inc.

c/o Graham Holdings Company

1300 North 17th Street

Arlington, Virginia

(703) 345-6300

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THE SPECIAL MEETING

We are furnishing this proxy statement to the holders of common stock as part of the solicitation of proxies by the Board for use at the special meeting and at any adjournments or postponements thereof.

Date, Time and Place

The special meeting will be held on June 10, 2021, at 9:00 AM, Pacific Time, virtually via www.virtualshareholdermeeting.com/LEAF2021SM, where you, or your proxy, will be able to attend the special meeting and vote electronically. Please note that you will not be able to attend the special meeting in person. The special meeting will begin online promptly at 9:00 AM, Pacific Time.

Stockholders will be able to listen, vote, and submit questions from their home or from any remote location that has Internet connectivity.

Purpose of the Special Meeting

At the special meeting, holders of common stock will be asked to consider and vote on the following proposals:

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the merger proposal (see the section of this proxy statement titled “The Merger Agreement”);

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the advisory, non-binding compensation proposal (see the section of this proxy statement titled “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger”); and

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the adjournment proposal (see the section of this proxy statement titled “Proposal 3: Adjournment Proposal”).

A copy of the merger agreement is attached as Annex A to this proxy statement.

Recommendation of the Board

Record Date and Stockholders Entitled to Vote

Only holders of common stock of record as of the close of business on May 3, 2021, the record date for the special meeting (referred to as the “record date”), are entitled receive notice of and to vote the shares of common stock they held on the record date at the special meeting. As of the close of business on the record date, 36,032,095 shares of common stock were eligible to vote at the special meeting. On each of the proposals presented at the special meeting, each holder of common stock is entitled to one vote for each share of common stock held by such stockholder on the record date. The adoption of the merger agreement by the holders of common stock requires the affirmative vote of stockholders holding a majority of the outstanding shares of common stock entitled to vote thereon as of the close of business on the record date.

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Quorum

Under the bylaws, the holders of a majority in voting power of the shares of common stock issued and outstanding and entitled to vote at the meeting, present virtually or represented by proxy, shall constitute a quorum at any meeting of stockholders. If less than a quorum is present at a meeting, then either (i) the chairperson of the meeting or (ii) a majority in voting power of the stockholders entitled to vote at the meeting, present virtually or represented by proxy, shall have power to adjourn the meeting from time to time. The inspector of election appointed for the special meeting will determine whether a quorum is present. The inspector of election will treat abstentions as present for purposes of determining the presence of a quorum.

If a beneficial owner of shares held in “street name” by a bank, broker or other nominee does not provide the organization that holds its shares with specific voting instructions, then, under applicable rules, the organization that holds its shares may generally vote on “discretionary” matters but cannot vote on “non-discretionary” matters. If the organization that holds the beneficial owner’s shares does not receive instructions from such stockholder on how to vote its shares on any proposal to be voted on at the special meeting, that bank, broker or other nominee will inform the inspector of election at the special meeting that it does not have authority to vote on any proposal at the special meeting with respect to such shares, and, furthermore, such shares will not be deemed to be in attendance at the meeting. This is generally referred to as a “broker non-vote.” However, if the bank, broker or other nominee receives instructions from such stockholder on how to vote its shares as to at least one proposal but not all of the proposals, the shares will be voted as instructed on any proposal which voting instructions have been given but will not be voted on the other, uninstructed proposal(s).

If a quorum is not present, the only business that can be transacted at the special meeting is the adjournment or postponement of the meeting to another date or time.

Vote Required

Adoption of the Merger Proposal

The approval of the merger proposal requires the affirmative vote of stockholders holding a majority of the outstanding shares of common stock entitled to vote thereon as of the close of business on the record date. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee or failure to vote at the special meeting, abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.

Under the merger agreement, stockholder approval of the merger proposal is a condition to the consummation of the merger.

Approval of the Advisory, Non-binding Compensation Proposal

The approval of the advisory, non-binding compensation proposal requires the affirmative vote of the holders of a majority in voting power of the shares of common stock which are present in person virtually or by proxy and entitled to vote thereon. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee or failure to vote at the special meeting, and broker non-votes will have no effect on the outcome of the advisory, non-binding compensation proposal. Abstentions will have the same effect as a vote “AGAINST” the advisory, non-binding compensation proposal.

The vote on the advisory, non-binding compensation proposal is a vote separate and apart from the vote to adopt the merger agreement. Because the vote on the advisory, non-binding compensation proposal is advisory only, it will not be binding on the Company, the Board, Parent or the surviving corporation. Accordingly, because the Company is contractually obligated to pay the compensation, if the merger agreement is adopted by the holders of common stock and the merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the advisory, non-binding vote.

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Approval of the Adjournment Proposal

The approval of the adjournment proposal requires the affirmative vote of the holders of a majority in voting power of the shares of common stock which are present in person virtually or by proxy and entitled to vote thereon. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee or failure to vote at the special meeting, and broker non-votes will have no effect on the outcome of the adjournment proposal. Abstentions will have the same effect as a vote “AGAINST” the adjournment proposal.

The vote on the adjournment proposal is a vote separate and apart from the vote to adopt the merger agreement. The Company will not call a vote on this proposal if the merger proposal is approved at the special meeting.

Tabulation of Votes; Results

The Company will retain an independent party to receive and tabulate the proxies and ballots, and to serve as the inspector of election to certify the results of the special meeting.

Voting Procedures

Whether or not you plan to attend the special meeting virtually and regardless of the number of shares of common stock you own, your careful consideration of, and vote on, the merger agreement is important and we encourage you to vote promptly.

To ensure that your shares of common stock are voted at the special meeting, we recommend that you promptly submit your proxy, even if you plan to attend the special meeting virtually, using one of the following four methods:

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through the Internet by logging onto the website specified on your proxy card and following the prompts using the control number located on the proxy card;

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by calling using the toll-free telephone number listed on your proxy card;

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by completing, signing, dating and returning your proxy card in the postage-paid return envelope provided; or

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by attending the virtual special meeting and voting online at virtualshareholdermeeting.com/LEAF2021SM on June 10, 2021, at 9:00 AM, Pacific Time. We encourage you to allow reasonable time for online check-in, which begins at 8:45 AM, Pacific Time. In order to attend the virtual special meeting and vote online, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. The control number is designed to verify your identity and allow you to vote your shares of common stock at the special meeting or to vote by proxy prior to the special meeting.

If you vote via the Internet or by telephone, please do not return a signed proxy card.

If you are a beneficial owner of shares of common stock held in “street name,” you may instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. If you are a beneficial owner of shares of common stock held in “street name,” you may contact the bank, broker or other institution where you hold your account if you have questions about obtaining your control number and attending the special meeting.

Please note that even if you plan to attend the special meeting online, the Company recommends that you vote using the enclosed proxy card in advance, to ensure that your shares will be represented. If you wish to vote at the special meeting, you can participate in the virtual special meeting and vote your shares using the on-screen instructions provided by the host.

Brokerage firms and other intermediaries holding shares of common stock in “street name” for their customers are generally required to vote such shares in the manner directed by their customers. In the absence

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of timely directions, your broker will have discretion to vote your shares on “discretionary” matters. Your broker will not have discretion to vote on “non-discretionary” matters, absent direction from you.

Revocation of Proxies

You may revoke your proxy or change your vote at any time before the closing of the polls at the special meeting. If you are a stockholder of record at the record date (the close of business on May 3, 2021), you can revoke your proxy or change your vote by:

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filing a written notice of revocation bearing a later date than the proxy with the Company’s Corporate Secretary at the Company’s principal executive offices, located at 1655 26th Street, Santa Monica, California 90404. Your notice must be received by the Company’s Corporate Secretary before June 10, 2021;

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duly executing a later-dated proxy relating to the same shares and delivering it to the Company’s Corporate Secretary at the Company’s principal executive offices, located at 1655 26th Street, Santa Monica, California 90404. Your notice must be received by the Company’s Corporate Secretary before June 10, 2021;

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attending the special meeting (or, if the special meeting is adjourned or postponed, attending the adjourned or postponed meeting) virtually and voting online, which automatically will cancel any proxy previously given, although your attendance at the special meeting will not in and of itself constitute a revocation of a proxy; or

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if you voted by telephone or via the Internet, voting again by the same means prior to 11:59 PM, Eastern Time on June 9, 2021 (your latest telephone or internet vote, as applicable, will be counted and all earlier votes will be disregarded).

If you are a beneficial owner of shares of common stock held in “street name,” you may contact your bank, broker or other nominee to change your vote, or by attending the virtual special meeting online and electronically voting your shares during the special meeting.

Solicitation of Proxies

The Board is soliciting proxies for the special meeting from its stockholders. The Company will bear the cost of soliciting proxies, including the expense of preparing, printing and distributing this proxy statement. In addition to soliciting proxies by mail, telephone or electronic means, we may request banks, brokers and other nominees to solicit their customers who have common stock registered in their names and will, upon request, reimburse them for the reasonable, out-of-pocket costs of forwarding proxy materials in accordance with customary practice. We may also use the services of our directors, officers and other employees to solicit proxies, personally, by telephone or by electronic means, without additional compensation. In addition, the Company has retained Innisfree M&A Incorporated (referred to as “Innisfree”) to solicit stockholder proxies. As compensation for its services, we have agreed to pay Innisfree a cash fee equal to $50,000 plus an additional $200,000 contingent upon the approval of the merger proposal by the Company’s stockholders at the special meeting. We have also agreed to reimburse Innisfree for certain reasonable expenses and to indemnify Innisfree against certain losses, damages and expenses.

Householding

A number of brokers with account holders who are stockholders of the Company will be “householding” the Company’s proxy materials. A single set of the Company’s proxy materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at

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any time, you no longer wish to participate in “householding” and would prefer to receive a separate set of the proxy materials, please notify your broker or direct a written request to the Corporate Secretary at 1655 26th Street, Santa Monica, California 90404. The Company undertakes to deliver promptly, upon any such oral or written request, a separate copy of the proxy materials to a stockholder at a shared address to which a single copy of these documents was delivered. Stockholders who currently receive multiple copies of the proxy materials at their address and would like to request “householding” of their communications should contact their broker, bank or other nominee, or contact the Company at the above address or phone number.

Adjournments

The special meeting may be adjourned or postponed from time to time to another hour, date or place. Under the bylaws, notice need not be given of any such adjournment of less than 30 days if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned special meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present virtually and vote at such adjourned meeting will be given to each stockholder of record entitled to receive notice of or to vote at the meeting. All proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been validly revoked or withdrawn prior to the time such proxies are voted at the reconvened meeting.

Voting by Company Directors and Executive Officers

Certain of the Company’s directors and executive officers have interests in the merger that may be different from, or in addition to, those of the Company’s stockholders generally. For more information, please see the section of this proxy statement titled “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger.”

What to Do if You Have Technical Difficulties or Trouble Accessing the Virtual Meeting Website

Technicians will be ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting website log-in page at www.virtualshareholdermeeting.com/LEAF2021SM.

Assistance; Proxy Solicitor

If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact the Company’s proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders may call toll free: (877) 717-3922

Banks and Brokers may call collect: (212) 750-5833

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

As discussed elsewhere in this proxy statement, at the special meeting holders of common stock will consider and vote on the merger proposal. The merger cannot be completed without the adoption of the merger agreement by the Company’s stockholders. You are urged to carefully read this proxy statement in its entirety for more detailed information concerning the merger agreement and the merger, including the information set forth under the sections of this proxy statement titled “The Merger” and “The Merger Agreement.” A copy of the merger agreement is attached as Annex A to this proxy statement. You are urged to read the merger agreement carefully and in its entirety.

The approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares common stock. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee or failure to vote at the special meeting, abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.

The Board recommends a vote “FOR” the approval of the merger proposal.

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PROPOSAL 2: ADVISORY VOTE ON MERGER-RELATED COMPENSATION

In accordance with Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, the Company is providing holders of common stock with the opportunity to cast a vote on the advisory, non-binding compensation proposal. As required by those rules, the Company is asking holders of common stock to vote on the adoption of the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger, as disclosed in the table titled “Potential Payments to Named Executive Officers,” including the associated narrative discussion, and the agreements or understandings pursuant to which such compensation may be paid or become payable, is hereby APPROVED.”

The vote on executive compensation payable in connection with the merger is a vote separate and apart from the merger proposal. Because the vote is advisory in nature only, it will not be binding on the Company or the Board. Accordingly, because the Company is contractually obligated to pay the compensation, such compensation will be paid or become payable, subject only to the conditions applicable thereto, if the merger is consummated and regardless of the outcome of the advisory vote.

The approval of the advisory, non-binding compensation proposal requires the affirmative vote of the holders of a majority in voting power of the shares of common stock which are present in person virtually or by proxy and entitled to vote thereon. Broker non-votes will not count as votes cast on the advisory, non-binding compensation proposal. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee or failure to vote at the special meeting, and broker non-votes will have no effect on the outcome of the advisory, non-binding compensation proposal. Abstentions will have the same effect as a vote “AGAINST” the advisory, non-binding compensation proposal.

The Board recommends a vote “FOR” the approval of the advisory, non-binding compensation proposal.

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PROPOSAL 3: ADJOURNMENT PROPOSAL

As discussed elsewhere in this proxy statement, at the special meeting holders of common stock will consider and vote, if necessary or appropriate as determined by the Company, on the adjournment proposal.

Leaf Group is asking you to authorize the holder of any proxy solicited by the Board to vote in favor of any adjournment or postponement of the special meeting, if necessary or appropriate as determined by the Company, to solicit additional proxies if there are not sufficient votes to approve the merger proposal at the time of the special meeting.

The approval of the adjournment proposal requires the affirmative vote of the holders of a majority in voting power of the shares of common stock which are present in person virtually or by proxy and entitled to vote thereon. Broker non-votes will not count as votes cast on the adjournment proposal. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee or failure to vote at the special meeting, and broker non-votes will have no effect on the outcome of the adjournment proposal. Abstentions will have the same effect as a vote “AGAINST” the adjournment proposal.

The vote on the adjournment proposal is a vote separate and apart from the merger proposal. Leaf Group will not call a vote on this proposal if the merger proposal is approved at the special meeting.

The Board recommends a vote “FOR” the approval of the adjournment proposal.

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THE MERGER

Background of the Merger

The following chronology summarizes the key meetings and events that led to the signing of the merger agreement. The following chronology does not purport to catalogue every conversation among the Board, members of Company management or the Company’s representatives and other parties.

The Company is a diversified consumer internet company that builds enduring, creator-driven brands that reach passionate audiences in large and growing lifestyle categories, including fitness and wellness and home, art and design. The Company’s business is comprised of three segments: Society6 Group, Saatchi Art Group, and Media Group.

The Board, together with Company management and with the assistance of the Company’s advisors, periodically reviews and considers various strategic and other opportunities available to the Company to enhance stockholder value, taking into consideration the Company’s performance, competitive dynamics, macroeconomic developments and industry trends. These reviews have included discussions as to whether the continued execution of the Company’s strategy as a standalone company (including possible operational and capital structure changes), the separation or divestiture of its business segments, possible acquisitions or the possible sale of the Company to, or combination of the Company with, a third party, offered the best avenue to enhance stockholder value, and the potential benefits and risks of any such course of action. For purposes of conducting these reviews, and in the ordinary course of business, Company management has maintained regular dialogue with representatives of other industry participants, including certain strategic and financial sponsor parties, regarding trends and developments in the industries in which the Company operates and potential strategic transactions.

On March 12, 2019, following various communication with the Company over several months, Osmium Partners, LLC, a stockholder of the Company, and certain of its affiliates (collectively referred to as “Osmium”) nominated three candidates to be elected at the Company’s 2019 annual meeting of stockholders in opposition to the Board’s nominees. On April 15, 2019, following a series of discussions with Osmium and other stockholders of the Company, the Board announced it would commence a comprehensive review of its strategic alternatives, including a potential sale of the Company. Also on April 15, 2019, the Company announced that Charles (Lanny) Baker had been appointed to the Board. The closing price for the Company’s common stock on April 15, 2019 was $8.76 per share. On April 16, 2019, Osmium announced the withdrawal of its director nominations for the Company’s 2019 annual meeting.

From April 15, 2019 through May 2020, the Board considered a broad range of alternatives to maximize stockholder value, including a sale of the Company, divestiture of certain assets and various financing alternatives. During this time, the Company and its advisors contacted over 160 potential acquirors regarding various types of transactions and entered into confidentiality agreements with 45 of those parties to facilitate discussions (this strategic review process is referred to as the “2019 – 20 Strategic Process”). While the Company received several indications of interest regarding certain assets, which the Board did not believe provided sufficient value, the 2019 – 20 Strategic Process did not yield a single offer to acquire the entire Company. Accordingly, on May 20, 2020, the Company announced that it was concluding the 2019 – 20 Strategic Process and was focusing on the execution of its existing business plan. The closing price for the Company’s common stock on May 20, 2020 was $1.70 per share.

As all of the members of the Company’s nominating and corporate governance committee were up for election at the Company’s 2020 annual meeting of stockholders, the Board formed an ad hoc committee consisting of all other independent directors for the purpose of nominating directors for election at the Company’s 2020 annual meeting of stockholders. The ad hoc committee of the Board nominated Mr. Baker and Jennifer Schulz for election as directors at the Company’s 2020 annual meeting of stockholders, and determined not to nominate two incumbent members of the Board, John Hawkins and Brian Regan, for reelection at the Company’s 2020 annual meeting of stockholders. Mr. Hawkins was affiliated with Generation Capital Partners II LP and Generation Partners II LLC (referred to as “Generation Partners”) and Mr. Regan was affiliated with Spectrum Equity Investors V, L.P. and Spectrum Equity Associates V, L.P. (referred to as “Spectrum Equity Management”). At the time of the Company’s 2020 annual meeting of stockholders, Generation Partners and Spectrum Equity Management beneficially owned approximately

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3.0% and 10.4% of the Company’s outstanding shares of common stock, respectively. The terms of Mr. Hawkins’ and Mr. Regan’s directorships were scheduled to expire at the Company’s 2020 annual meeting of stockholders. Mr. Regan resigned as a director of the Company on April 17, 2020 and Mr. Hawkins resigned as a director of the Company on May 1, 2020. On May 18, 2020, at the Company’s 2020 annual meeting of stockholders, Mr. Baker and Ms. Schulz were elected as directors of the Company to serve until the Company’s 2023 annual meeting of stockholders.

On June 29, 2020, an investor group consisting of Osmium, PEAK6 Investments LLC, Boyle Capital Opportunity Fund, LP, Oak Management Corp. (referred to as “Oak Management”), Generation Partners and Spectrum Equity Management (collectively referred to as the “First Activist Group”), who collectively beneficially owned 40% of the Company’s outstanding shares of common stock, issued a public letter to the Board demanding that the Board, among other things, remove the Company’s Chief Executive Officer, Sean Moriarty, enhance corporate governance by refreshing and de-classifying the Board and sell both of the Company’s media and marketplace assets. The closing price for the Company’s common stock on June 29, 2020 was $3.59 per share.

Following the emergence of the First Activist Group, the Board appointed an independent committee of the Board to engage with this group, comprised of Beverly K. Carmichael and Deborah Benton (referred to as the “Independent Committee”), who were both independent directors under NYSE rules and did not have any business or other relationships with any member of the First Activist Group, nor were they investors in any funds affiliated with members of the First Activist Group. To the fullest extent permitted by Delaware law, the Independent Committee had sole decision-making power with respect to the issues raised by the First Activist Group, including full authority to accept or reject any of the actions proposed by the First Activist Group.

On July 30, 2020, the Company announced financial results for the quarter ended June 30, 2020, with revenue of $51 million representing a 42% year-over-year growth and its highest quarterly revenue since 2013. The closing price for the Company’s common stock on July 31, 2020 was $5.13 per share.

Between June 29 and September 25, 2020, the First Activist Group issued nine public press releases criticizing the Company and the Board regarding a broad range of topics in addition to those set forth in its June 29, 2020 letter. During this period, there were several discussions between the Independent Committee and various members of the First Activist Group relating to, among other things, the issues raised in the First Activist Group’s public statements. During this time, three members of the Board resigned: Mitchell Stern resigned as a director on July 10, 2020, Mr. Baker resigned as a director on August 11, 2020, and James Quandt resigned as a director on September 21, 2020.

Throughout the summer of 2020, the Board conducted a comprehensive search utilizing a search firm to identify directors who would be a right fit for the Company and with skill sets to complement those of the then-current Board and to contribute to creating value for the Company stockholders.

On October 22, 2020, representatives of Spectrum Equity Management and Oak Management sent a letter to the Board setting forth a proposal on behalf of the First Activist Group, consisting of the following terms:

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The Company’s commitment to starting a new strategic review process no later than March 31, 2021 unless the Company maintains an average stock price of $9.00 per share or more throughout the first quarter of 2021;

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Mr. Moriarty receiving a stock award package in connection with a sale of the Company which would result in him receiving at least $6 million if the Company is sold for at least $9.00 per share;

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The appointment to the Board of two new directors affiliated with the First Activist Group — Robert Majteles and Michael McConnell;

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The capping of the size of the Board at a total of seven directors;

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The establishment of a new strategic review committee composed of the First Activist Group’s two director nominees and one current outside director of the Board’s choosing, which would select new financial and legal advisors for the strategic review and oversee the process; and

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Mr. Moriarty remaining Chief Executive Officer of the Company.

On October 29, 2020, the Company announced financial results for the quarter ended September 30, 2020, with revenue of $63.3 million, representing a 58% year-over-year growth, its highest revenue since 2013 and its strongest year-over-year growth since its initial public offering in 2011. The closing price for the Company’s common stock on October 30, 2020 was $5.70 per share.

On November 9, 2020, the Company issued a letter rejecting the First Activist Group’s proposal and indicating the Board’s belief that it was in the Company stockholders’ best interest for the Company to continue to drive results to increase stockholder value. The closing price for the Company’s common stock on November 9, 2020 was $5.49 per share.

On November 6, 2020, John Pleasants resigned as a director and the Board appointed Suzanne Hopgood and Rob Krolik as directors, and on November 20, 2020, the Board appointed Harold Logan as a director. The Board determined that Mr. Krolik’s financial leadership experience in e-commerce and digital businesses, Ms. Hopgood’s perspective on leading global trends in corporate governance and Mr. Logan’s senior management experience and strong technology background, each would be beneficial to the Board and help drive Company growth.

On December 14, 2020, the Company announced that it closed an underwritten public offering of 8,216,750 shares of its common stock, at a public offering price of $4.20 per share, less underwriting discounts and commissions, resulting in net proceeds to the Company of approximately $32.0 million. Canaccord Genuity acted as sole book-running manager for the offering. The closing price for the Company’s common stock on December 11, 2020 (the trading day immediately prior to the announcement of the public offering) was $4.90 per share, and on December 15, 2020 (the trading day immediately following the announcement of the closing of the public offering) was $4.58 per share.

On December 29, 2020, VIEX Opportunities Fund, LP and certain of its affiliates (referred to as “Viex”) filed a Schedule 13D with the SEC reporting beneficial ownership of approximately 6.49% of the Company’s outstanding shares of common stock.

Also on December 29, 2020, Spectrum Equity Management filed an amendment to its Schedule 13D with the SEC reporting that it ceased to beneficially own any shares of the Company’s common stock.

On January 7, 2021, each member of the First Activist Group filed an amendment to its Schedule 13D with the SEC reporting that they had terminated their “group,” within the meaning of Section 13(d)(3) of the Exchange Act.

On January 15, 2021, Parent’s President and Chief Executive Officer, Timothy O’Shaughnessy, initiated a call with Mr. Moriarty. During the call, Mr. O’Shaughnessy indicated that Parent was interested in learning more about the Company and exploring a potential investment in the Company. During this call, there was no discussion of a possible acquisition of the Company by Parent.

On January 18, 2021, the Company and Parent entered into a confidentiality agreement to facilitate further discussions. The confidentiality agreement did not contain any standstill provision because at the time Parent indicated to the Company that it was interested in an investment in the Company, and not an acquisition of the Company.

On January 19, 2021, Mr. Moriarty and the Company’s Executive Vice President & General Counsel, Adam Wergeles, had an introductory call with Mr. O’Shaughnessy and Parent’s Senior Vice President — Planning and Development, Jacob Maas. During the call, Mr. O’Shaughnessy and Mr. Maas indicated that Parent might be interested in a range of potential transactions with the Company, from an investment to an acquisition of the entire Company.

On January 22, 2021, Mr. O’Shaughnessy called Mr. Moriarty and stated that while an investment in the Company was not of interest to Parent, an acquisition might be worth exploring. On a subsequent call later that day, Mr. Moriarty requested that Parent provide an indication of value prior to engaging in further acquisition conversations. Mr. O’Shaughnessy indicated that Parent would need to conduct more detailed analysis and review of the Company’s information before determining whether to make an offer for an

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acquisition of the entire Company, and requested that the Company make available to Parent certain preliminary business information about the Company and make management presentations to Parent so that Parent could have sufficient information to that end. Mr. O’Shaughnessy indicated that Parent would work in good faith to determine whether or not to submit a non-binding indication of interest for an acquisition of the Company within two weeks after such information was made available to Parent. Given Parent’s interest in a potential acquisition of the Company, Parent and the Company discussed amending the confidentiality agreement to incorporate a customary standstill provision. Following the call, Parent provided a business information request list to the Company.

On January 25, 2021, the Company and Parent entered into an amendment to their confidentiality agreement that included a customary standstill provision with a nine-month duration that allowed Parent to make confidential proposals to the Company at any time and that would automatically terminate upon the Company’s execution of a definitive agreement with a third party to effect a sale of the Company. Following execution of the amendment to the confidentiality agreement, Parent was provided with limited nonpublic information regarding the Company that was responsive to Parent’s business information request list.

From January 25 through February 8, 2021, at Parent’s request, calls and virtual meetings were held between members of Company management and representatives of Parent. These calls were focused on addressing Parent’s diligence questions regarding the Company’s businesses and financial outlook. No proposals were made during these calls. Also during this period, the Company provided to Parent certain nonpublic information regarding the Company that was responsive to Parent’s diligence requests.

On January 26, 2021, Company management discussed with representatives of Moorgate Securities LLC (referred to as “Moorgate”) Parent’s interest in a potential acquisition of the Company and the possibility of Moorgate acting as a financial advisor to assist the Company in its evaluation of the expected proposal from Parent and any other acquisition proposals that the Company may receive. The Company contacted Moorgate because (i) of its earlier engagement as a financial advisor in connection with the 2019 – 20 Strategic Process, (ii) of its substantial knowledge of and familiarity with the Company’s business and operations, competitors and the industries in which the Company operates and (iii) if the Company were sold by June 2021, Moorgate would be entitled to a transaction fee under its prior engagement letter with the Company.

On January 27, 2021, the Board held a meeting with members of Company management and representatives of Goodwin Procter LLP (referred to as “Goodwin”), the Company’s outside legal counsel, present. Mr. Moriarty discussed Parent’s interest in exploring a potential acquisition of the Company, the parties’ discussions to date, that the parties had entered into a confidentiality agreement and that the Company had provided preliminary and limited due diligence information to Parent. Representatives of Goodwin provided an overview of the fiduciary duties of the Company’s directors under Delaware law and the legal standards applicable to their decisions and actions in evaluating and responding to an offer to acquire the Company. Company management discussed the potential engagement of Moorgate to assist the Board with regard to the expected proposal from Parent and any other acquisition proposals that the Company may receive. In light of the factors described above, the Board approved the engagement of Moorgate as financial advisor, subject to the negotiation of a satisfactory engagement letter. Representatives of Goodwin also discussed that, because Moorgate does not provide fairness opinions, in the event of a sale of the Company the Company would have to engage an additional financial advisor to deliver a fairness opinion. The Board discussed that it would be appropriate to consider Canaccord Genuity to deliver such a fairness opinion, given that Canaccord Genuity was the sole book-running manager in the Company’s December 14, 2020 public offering and its substantial knowledge and familiarity with the Company and its industry. Company management also informed the Board that it was in the process of finalizing its 2021 financial plan and its five-year standalone plan, which upon completion would be presented to the Board. Following discussion, the Board authorized the Company and its advisors to continue discussions with Parent. Also at the meeting, Company management provided an update on the Company’s preliminary financial outlook for the then-current fiscal quarter.

On February 7, 2021, the Board held a meeting with members of Company management and representatives of Goodwin present. Company management presented its 2021 operating plan and its five-year standalone plan, which included management’s projections for the fiscal years ended December 31, 2021 through December 31, 2025 (which are summarized below under the section titled “— Certain Financial

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Projections by the Management of Leaf Group,” and referred to as the “projections”), and the assumptions on which the projections were based. In the context of reviewing the projections, the Board discussed the risks, challenges, and strategic opportunities facing the Company, including those described below in greater detail under the heading “— Reasons for the Merger; Recommendation of the Board — Business Risks Facing the Company.” Following discussion and questions of management regarding various matters relating to the projections, including the assumptions on which the projections were based, the Board approved the projections for disclosure to prospective bidders and for use by the Company’s financial advisors in conducting their financial analyses of the Company.

On February 9, 2021, following the two-week period requested by Parent to more carefully review the nonpublic information made available by the Company to inform its decision whether to make a proposal, Parent delivered a written non-binding proposal to acquire the Company for $8.50 per share in cash that was subject to, among other conditions, satisfactory completion of remaining due diligence. The proposal indicated that the purchase price would be paid by Parent through its existing cash and available lines of credit, and that the proposal would not be subject to any financing condition. The proposal also stated that Parent would expect a 45-day exclusivity period within which to complete its due diligence and negotiate a definitive merger agreement with the Company. The proposal stated that it would expire on February 16, 2021. The closing price for the Company’s common stock on February 9, 2021 was $6.71 per share.

On February 11, 2021, the Board held a meeting with members of Company management and representatives of Moorgate and Goodwin present. The Board reviewed the terms and conditions of Parent’s proposal. Representatives of Goodwin provided an overview of the fiduciary duties of the Company’s directors and the legal standards applicable to their decisions and actions in evaluating and responding to the proposal and the Board’s consideration of any alternatives, including remaining as a standalone company. Representatives of Moorgate discussed certain financial aspects of Parent’s proposal based in part on preliminary valuation analyses, including a discounted cash flow analysis with respect to the Company based on the projections and Wall Street estimates of the Company’s financial prospects, as well as comparable public companies and comparable precedent transactions. Representatives of Moorgate also gave their preliminary views on the Company’s general strategic position, potential responses to Parent’s proposal, and the various strategies and methods by which the Board might seek to maximize stockholder value in the event the Board chose to explore a sale or other strategic transaction.

Following these discussions, the Board concluded that Parent’s proposal represented an attractive valuation of the Company for stockholders when considered in light of the Board’s knowledge and understanding of the business, operations, management, financial condition and prospects of the Company, including the various challenges presented if the Company were to continue as a standalone company, and that the Company and its advisors should continue discussions with Parent and seek to have Parent improve its offer price. The Board directed management, with the assistance of Moorgate and Goodwin, to continue to engage with Parent and encourage Parent to improve its proposed offer price.

Additionally, the Board determined that it was an appropriate time to pursue discussions with an additional number of third parties to determine their interest in acquiring the Company (referred to as the “2021 Strategic Process”). The Board discussed the parties identified by representatives of Moorgate at the meeting that were perceived as most likely to be interested in, and capable of, acquiring the Company, taking into account factors including such parties’ (i) interest in the Company and its businesses, (ii) perceived financial strength, (iii) resources to pursue a transaction in a timely manner, (iv) historical acquisition activity and (v) knowledge of the digital media and marketplace sectors. Representatives of Goodwin and Moorgate cautioned that the market check would have to be conducted in an expeditious manner in order to not risk losing Parent’s proposal. The Board discussed this issue noting that in order not to lose the “bird in hand” that was Parent’s proposal, the scope of the market check would have to be limited to a certain extent and focused on parties who understood the Company and the industries in which it operates and could move quickly. Representatives of Goodwin and Moorgate further noted that the Company had executed confidentiality agreements with many parties during the 2019 – 20 Strategic Process, which could be reused to expedite the 2021 Strategic Process. The risks associated with conducting a public consideration of strategic alternatives were discussed and it was noted that, during the 2019 – 2020 Strategic Process, the per share price of the Company’s common stock had declined from $8.76 to $1.70 and the 2019 – 2020 Strategic Process had significantly destabilized the Company, negatively impacting its performance. Representatives of

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Moorgate reviewed with the Board a list of proposed parties to contact as part of the 2021 Strategic Process. As a result of this discussion, the Board directed Moorgate to contact ten potentially interested parties from among those parties discussed with Moorgate at the meeting, consisting of eight strategic parties and two financial sponsors (all of which participated in the 2019 – 20 Strategic Process), to determine whether they had an interest in exploring a potential strategic transaction with the Company, and authorized management and Moorgate to have discussions with any such parties that expressed interest in a strategic transaction. In light of the foregoing, representatives of Moorgate advised that it could conduct the market check within approximately two to three weeks.

From February 12 through March 1, 2021, at the direction of the Board, representatives of Moorgate had discussions with the ten parties selected at the February 11, 2021 Board meeting. Of those parties, six parties, consisting of four strategic parties and two financial sponsors, expressed initial interest and executed confidentiality agreements with the Company. Each confidentiality agreement was substantially identical to the confidentiality agreement respectively entered into by each such party with the Company during the 2019 – 20 Strategic Process. Four of these confidentiality agreements contained customary standstill provisions that automatically terminated upon the Company’s execution of a definitive agreement with a third party to effect a sale of the Company. Two of these confidentiality agreements did not contain any standstill provision.

The six parties that executed confidentiality agreements with the Company were provided access to an online data room containing nonpublic information regarding the Company and received a process letter that set a deadline of March 1, 2021 for the submission of a written, preliminary non-binding indication of interest for an acquisition of the Company.

On February 13, 2021, members of Company management and representatives of Moorgate and Goodwin had a call with representatives of Parent and representatives of Parent’s outside counsel, Covington & Burling LLP (referred to as “Covington”). During the call, Company management and representatives of Moorgate indicated that the Board did not view the $8.50 per share price in Parent’s proposal as sufficient and the Board wanted Parent to increase its offer price. Representatives of Goodwin indicated that the Company could not enter into an exclusivity agreement with Parent because the Board, in furtherance of its fiduciary obligations, had a duty to maximize stockholder value and thus needed to engage in a process to determine whether there was interest from other parties regarding a potential acquisition of the Company at a price greater than $8.50 per share. Representatives of Goodwin proposed that Parent conduct its due diligence and negotiate definitive transaction documents with the Company at the same time that the Company conduct its market check. Later that same day, a representative of Moorgate had additional discussions with Mr. Maas to advocate for an improved offer price.

On February 16, 2021, Mr. Maas and Mr. Wergeles spoke, and Mr. Maas indicated that, while Parent’s offer had expired by its terms, Parent did not object to the Company conducting a market check and would still work in good faith towards a potential acquisition after such market check had been completed. However, Mr. Maas indicated that Parent would not continue discussions with the Company regarding its acquisition proposal or engage in more extensive due diligence unless and until the Company and Parent entered into an agreement to negotiate exclusively for an acquisition of the Company at a price of $8.50 per share, and urged Mr. Wergeles that the Company’s market check should be completed within a reasonable period of time or Parent might choose to make other capital allocation decisions that could result in Parent’s withdrawal of its proposal. Mr. Wergeles indicated that he was disappointed with this response, but acknowledged Parent’s position. During this conversation, Mr. Maas confirmed to Mr. Wergeles that Parent’s $8.50 per share offer price was its best and final offer.

From February 16 through March 2, 2021, various discussions occurred between Mr. Moriarty and Mr. Wergeles, on the one hand, and Mr. O’Shaughnessy and Mr. Maas, on the other hand. During these discussions, Mr. Moriarty and Mr. Wergeles reiterated the Company’s interest in a potential transaction with Parent and confirmed their belief that the market check should be completed by early March. Mr. O’Shaughnessy and Mr. Maas reconfirmed that Parent’s $8.50 per share offer price was its best and final offer and that it would only further engage its resources on a potential transaction once the Company completed its market check and entered into exclusive negotiations with Parent.

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Also on February 16, 2021, the Board held a meeting with members of Company management and representatives of Moorgate and Goodwin present. Management and representatives of Moorgate updated the Board on the status of the discussions with Parent, noting that there was risk that Parent could withdraw its proposal if the parties did not enter into an exclusivity agreement in the next several weeks. Representatives of Moorgate updated the Board on the status of discussions with the other potentially interested parties, including their stated level of interest in evaluating an acquisition of the Company. Representatives of Moorgate reviewed with the Board the proposed timeline for receiving indications of interest from the other potentially interested parties. Representatives of Goodwin reviewed with the Board its fiduciary duties in the context of evaluating the proposals and considering a potential sale of the Company. The Board discussed whether Parent’s proposal represented an attractive valuation of the Company for its stockholders when considered in light of the Board’s knowledge and understanding of the business, operations, management, financial condition and prospects of the Company, including the various challenges presented if the Company were to continue as a standalone company as described below in greater detail under the heading “— Reasons for the Merger; Recommendation of the Board — Business Risks Facing the Company.” The Board discussed the consequences of rejecting Parent’s proposal and request for exclusivity. Following this discussion, the Board directed Company management and the Company’s advisors to continue the discussions with Parent and continue efforts to improve Parent’s offer price. The Board also directed Company management and the Company’s advisors to continue discussions with the other interested parties and complete the market check expeditiously to avoid the potential loss of Parent’s proposal.

On February 17, 2021, Oak Management, Osmium and Viex (which are collectively referred to as the “Second Activist Group”) publicly announced that they had formed a “group,” within the meaning of Section 13(d)(3) of the Exchange Act and had delivered a notice to the Company nominating three candidates to be elected at the Company’s 2021 annual meeting of stockholders in opposition to the Board’s nominees. The Second Activist Group disclosed that it collectively beneficially owned 25.1% of the Company’s outstanding shares of common stock.

On February 23, 2021, the Board held a meeting with members of Company management present. Management updated the Board on the status of the discussions with Parent and the other potentially interested parties, including their stated level of interest in an acquisition of the Company. The Board also discussed the engagement of Moorgate to serve as a financial advisor to the Company in connection with the potential sale of the Company. Following this discussion, the Board authorized management to finalize the engagement of Moorgate as a financial advisor in connection with the potential transaction, and the Company executed a customary engagement letter with Moorgate.

On February 25, 2021, after the closing of trading on the NYSE, the Company announced financial results for the fourth quarter and fiscal year ended December 31, 2020. The closing price for the Company’s common stock on February 26, 2021 was $5.52 per share.

As of March 1, 2021, the deadline stated in the process letter, none of the six parties that received the process letter submitted an indication of interest for an acquisition of the Company. Two of the parties (one strategic party and one financial sponsor) expressed preliminary interest in select media assets of the Company; however, no written proposals were submitted.

On March 1, 2021, Mr. Moriarty received an unsolicited voicemail from an investment banker (referred to as the “Investment Banker”) indicating that a private company (referred to as “Company A”) had an interest in exploring a possible acquisition of Society6 Group. Company A was contacted in the 2019 – 20 Strategic Process and showed limited interest, and as a result, Company A was not contacted in the 2021 Strategic Process. Mr. Moriarty informed representatives of Moorgate and Goodwin regarding this inquiry. Later on March 1, 2021, representatives of Moorgate contacted the Investment Banker to discuss his inquiry and to request that Company A enter into a confidentiality agreement with the Company to facilitate discussions. On March 2, 2021, the Investment Banker requested that the Company provide a confidentiality agreement for Company A to review. On March 2, 2021, the Company provided to the Investment Banker to forward to Company A a confidentiality agreement that included a customary standstill provision that would automatically terminate upon the Company’s execution of a definitive agreement with a third party to effect a sale of the Company.

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On March 2, 2021, the Board held a meeting with members of Company management and representatives of Moorgate and Goodwin present. Representatives of Moorgate discussed with the Board the 2021 Strategic Process and that while six parties entered into confidentiality agreements with the Company, none of them submitted an indication of interest for an acquisition of the Company. Representatives of Moorgate discussed with the Board that two parties had expressed preliminary interest in select media assets of the Company, noting that no definitive proposals were made. Representatives of Moorgate updated the Board on the Investment Banker’s inquiry on behalf of Company A and the Board discussed the credibility of Company A’s interest in a possible acquisition of Society6 Group. The Board noted that none of these three indications of interest regarding assets were actionable or provided the Board with any sense of the value the Company would receive for the assets or the timeframe on which they could be executed. Company management and representatives of Moorgate also updated the Board on the discussions with Parent and that Parent was firm in its $8.50 offer price and was not willing to increase it, and that Parent was firm in its requirement for an exclusivity period.

Representatives of Goodwin provided the Board with an overview of their fiduciary duties under Delaware law and the application of those principles to Parent’s proposed acquisition of the Company. The Board then discussed Parent’s proposal of $8.50 per share. The Board also discussed that Parent’s proposal was conditioned on the Company entering into exclusivity with Parent and that it seemed unlikely that Parent would improve its offer price. The Board discussed the advantages and risks of a proposed transaction with Parent, including, among other things, whether Parent’s proposal represented an attractive valuation of the Company for stockholders when considered in light of the Board’s knowledge and understanding of the business, operations, management, financial condition and prospects of the Company, including the various challenges presented if the Company were to continue as a standalone company. The Board also discussed that in both the 2019 – 20 Strategic Process and the 2021 Strategic Process no party had indicated interest in acquiring the Company. The Board noted that Parent’s proposal was the only offer to acquire the Company.

Based on the Board’s discussion at this meeting and previous meetings regarding the risks, challenges and strategic opportunities facing the Company, the Board concluded that Parent’s proposal would, if consummated, provide greater certainty of value and be in the best interests of the Company’s stockholders. The Board then further discussed how best to again encourage Parent to increase its offer price. Following these discussions, the Board directed management and representatives of Moorgate to again seek to have Parent improve its price, while preserving the opportunity to pursue Parent’s proposal at $8.50 per share. The Board also authorized management to enter into an exclusivity agreement with Parent based on an offer price of at least $8.50 per share and an exclusivity period of up to 45 days, with the understanding that management would seek to limit the exclusivity period to 30 days.

Later on March 2, 2021, at the direction of the Board, a representative of Moorgate contacted Mr. Maas to advocate for a higher offer price. Mr. Maas again indicated that Parent was not willing to improve its price and was not interested in acquiring the Company at a price higher than $8.50 per share.

Also on March 2, 2021, as directed by the Board, Mr. Moriarty contacted Mr. O’Shaughnessy to advocate for a higher offer price. Mr. O’Shaughnessy emphasized that Parent would not increase its offer price. In a subsequent call that same day, as authorized by the Board, Mr. Moriarty indicated to Mr. O’Shaughnessy that the Board was willing to move forward with negotiating and finalizing a definitive merger agreement with Parent at a price of $8.50 per share and to enter into a 30-day exclusive negotiating period with Parent.

Also on March 2, 2021, the Company provided a draft exclusivity agreement to Parent providing for a 30-day exclusive negotiating period that the Company could terminate if Parent reduced its proposed $8.50 per share cash offer price.

On March 3, 2021, representatives of Goodwin and Covington had a telephonic call where they discussed structuring the proposed acquisition as a merger requiring adoption by the affirmative vote of the holders of a majority of the outstanding shares of the Company’s common stock. The representatives of Goodwin and Covington agreed that (i) Parent would not contact any of the Company’s stockholders prior to the execution of a definitive merger agreement between Parent and the Company, (ii) the Company would not be required to reimburse any of Parent’s expenses if, upon being put to a vote, the Company’s

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stockholders did not vote to adopt a definitive merger agreement, and (iii) the Company would agree to a package of “deal protection” terms favorable to Parent (including the terms of the “no-shop” covenant, the Company’s ability to enter into negotiations with competing bidders, the board’s right to withdraw the recommendation of the merger to Company stockholders, the terms of the Company’s ability to terminate the agreement to accept a superior proposal and the related matching right, the termination fee amount and triggers, among other matters).

Also on March 3, 2021, Goodwin provided an initial draft of the merger agreement to Covington.

On March 4, 2021, the Company and Parent entered into the exclusivity agreement providing for exclusivity through April 3, 2021. The closing price for the Company’s common stock on March 4, 2021 was $5.04 per share.

Also on March 4, 2021, Parent was provided access to an online data room containing nonpublic information regarding the Company.

From March 4 through April 2, 2021, representatives of the Company, Moorgate, Goodwin, Parent and Covington, had various telephonic and virtual meetings to facilitate Parent’s further due diligence.

On March 5, 2021, members of Company management discussed with representatives of Canaccord Genuity engaging Canaccord Genuity to provide a fairness opinion to the Board in connection with a potential acquisition of the Company, based on Canaccord Genuity’s role as sole book-running manager in the Company’s December 14, 2020 public offering and its substantial knowledge and familiarity with the Company and its industry.

On March 6, 2021, the Investment Banker informed the Company that Company A would execute the confidentiality agreement with the Company, as long as the term of the confidentiality agreement was limited to two years. As required under the terms of the exclusivity agreement entered into with Parent, Mr. Wergeles then informed Mr. Maas about the contact from the Investment Banker and Company A’s purported interest in Society6 Group. Mr. Wergeles and Mr. Maas agreed that the terms of the exclusivity agreement did not allow for the Company to engage with Company A regarding its purported interest in Society6 Group at that time. Later that day, Mr. Wergeles informed the Investment Banker that the Company would not be engaging with Company A regarding its interest in Society6 Group until the end of the month. On March 11, 2021, the Investment Banker indicated that he would follow-up with the Company at the end of the month, and also reiterated that Company A would accept the Company’s proposed confidentiality agreement so long as the term was limited to two years. The Company did not have any further contact with the Investment Banker or Company A, and a confidentiality agreement was not executed.

On March 12, 2021, Madison Avenue Partners, LP and certain of its affiliates filed a Schedule 13D with the SEC disclosing that it beneficially owned approximately 6.4% of the Company’s outstanding shares of common stock and announced that it intended to vote against the Company’s slate of nominees for election at the Company’s 2021 annual meeting. On March 12, 2021, the closing price of the Company common stock was $6.05 per share.

On March 12, 2021, the Board held a meeting with members of Company management and representatives of Goodwin present. Company management and representatives of Goodwin provided an update on the discussions with Parent and Parent’s due diligence efforts, noting that the exclusivity agreement had been entered into between the parties. Company management and representatives of Goodwin discussed with the Board the expected timetable for Parent completing its diligence and the parties entering into a definitive merger agreement, noting that representatives of Parent had indicated that they would use the full length of the exclusivity period (through April 3, 2021) to complete diligence and finalize the definitive merger agreement with the Company.

The Board also discussed and authorized management to engage Canaccord Genuity as a financial advisor to deliver a fairness opinion to the Board regarding the transaction with Parent. The Board considered Canaccord Genuity as a potential financial advisor to assist and advise the Board given, among other things, its relationship with the Company as sole book-running manager in the Company’s December 2020 public offering of Company common stock and its substantial knowledge of and familiarity with the Company and the industries in which it operates. Management noted that Canaccord Genuity

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had confirmed that during the past two years it did not have any relationships with, nor received any compensation from, Parent. Canaccord Genuity executed an engagement letter with the Company on March 12, 2021 and was paid a fee upon the delivery of its fairness opinion in connection with the transaction with Parent.

Also on March 12, 2021, Covington provided a revised draft of the merger agreement to Goodwin.

From March 12 through April 2, 2021, representatives of Goodwin, with input from the Board and Company management, and Parent’s representatives and Covington exchanged drafts and participated in discussions regarding the terms of the merger agreement and related documents. The items negotiated with respect to the merger agreement and related documents included, among other things: the representations and warranties to be made by the parties; the restrictions on the conduct of the Company’s businesses until completion of the transaction; the definition of Company material adverse effect; the “no-shop” provisions applicable to the Company; the conditions to completion of the merger; the provisions regarding the Company’s employee benefit plans and equity awards; the remedies available to each party under the merger agreement, including the triggers for the termination fee payable to Parent; the amount of the Company termination fee; and the terms of the voting agreement proposed to be executed by the Company’s officers and directors concurrently with the execution of the merger agreement.

On April 3, 2021, the Board held a meeting to discuss the final proposed terms of the merger. Members of Company management and representatives of Moorgate, Canaccord Genuity and Goodwin were present. Representatives of Goodwin reviewed the fiduciary duties of the Board in connection with a potential sale of the Company. Representatives of Goodwin provided an overview of the negotiation process to date with Parent’s representatives, as well as a presentation regarding the material terms of the draft merger agreement and the draft voting agreement. The Board also discussed that to date Parent had not had, and had not requested to have, discussions with Company management regarding their future roles, compensation, retention or investment arrangements in connection with the proposed transaction.

The Board then further discussed the advantages and risks of the merger that are described below in greater detail under the heading “— Reasons for the Merger; Recommendation of the Board.” In light of these discussions, the Board concluded that the merger, if consummated, would provide greater certainty of value (and less risk) to the Company’s stockholders relative to the potential trading price of the Company’s shares as a standalone business over a longer period after accounting for the long-term risks to the Company’s business resulting from operational execution risk and evolving industry dynamics. After considering the Company’s strategic alternatives to the transaction with Parent and the Company’s ability to continue as a standalone company, the Board concluded that the transaction with was the best alternative for the Company’s stockholders.

Also at this meeting, representatives of Canaccord Genuity presented Canaccord Genuity’s financial analyses and rendered to the Board the oral opinion of Canaccord Genuity, subsequently confirmed by the delivery of a written opinion of Canaccord Genuity, dated April 3, 2021, to the Board, that, as of such date and based upon and subject to the factors and assumptions set forth in its written opinion, the merger consideration to be paid to the holders of the Company’s common stock in the proposed merger was fair, from a financial point of view, to such holders, all as more fully described below under the heading “— Opinion of the Company’s Financial Advisor.”

After further discussions, and taking into account the factors described below in greater detail under the heading “— Reasons for the Merger; Recommendation of the Board,” including the Board’s belief that the merger is more favorable to the Company’s stockholders than other strategic alternatives available to the Company, including remaining as an independent public company, the Board unanimously adopted resolutions which, among other things, approved the merger agreement, the voting agreement, the merger and the other transactions contemplated by the merger agreement, and recommended that the Company’s stockholders vote in favor of the adoption of the merger agreement.

Later on April 3, 2021, following the Board meeting, the Company, Parent and the merger subsidiary executed the merger agreement and all signatories to the voting agreement executed the voting agreement.

On the morning of April 5, 2021, prior to the opening of trading on the NYSE, the Company issued a press release announcing its entry into the merger agreement.

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Reasons for the Merger; Recommendation of the Board

Recommendation of the Board

In evaluating the merger agreement, the merger and the other transactions contemplated by the merger agreement, the Board consulted with Company management and its financial advisors, and with its outside legal counsel regarding its fiduciary duties, the terms and conditions of the merger agreement and other related matters.

The Board unanimously (i) approved and declared advisable the merger agreement and the merger, (ii) determined that the merger is in the best interests of the Company and its stockholders, (iii) directed that the merger agreement be submitted to the stockholders of the Company for adoption and (iv) recommended that the Company’s stockholders vote in favor of the adoption of the merger agreement.

The resolutions above were duly and unanimously adopted by the Board, at a meeting duly called and held at which all directors of the Company were present. At such meeting, the Board also duly and unanimously adopted resolutions rendering the limitations on business combinations contained in Section 203 of the DGCL inapplicable to the merger, the merger agreement, the other agreements contemplated by the merger agreement and the transactions contemplated thereby, and electing that the merger and the other transactions contemplated by the merger agreement not be subject to any “moratorium,” “control share,” “fair price” or other form of anti-takeover laws and regulations of any jurisdiction that may purport to be applicable to the merger and the other transactions contemplated by the merger agreement.

None of the foregoing resolutions by the Board has been rescinded, modified or withdrawn in any way.

Reasons for the Merger

In the course of reaching its recommendation described above, the Board considered a number of positive factors relating to the merger agreement and the merger, each of which the Board believed supported its decision, including the following:

•

Business Risks Facing the Company. If the Company remained an independent public company, it would be subject to significant strategic, financial and operational risks and uncertainties, including:

•

The Company continuing to confront significant challenges in achieving growth in Adjusted EBITDA, despite the record revenue growth shown by the business in 2020. Driven by the low margins of the Company’s marketplace businesses and the decline in revenue from the Media Group, substantial risk exists that the Company would not meet Wall Street EBITDA expectations in 2021 and beyond. In order for the Company to continue to have material revenue growth in the future, it will need to make substantial investments in its business, which will negatively impact Adjusted EBITDA.

•

Commencing in the second quarter of 2021, Society6 Group, the Company’s largest business, will confront difficult year-over-year comparisons given its performance in 2020 and, consequently, its performance could be below market expectations in the future. While the Company believes that the change in purchasing behavior occasioned by the COVID-19 pandemic will have an enduring positive impact on e-commerce, there is a material risk that the coming end of the pandemic and the termination of shelter-at-home regulations may cause a slowdown and even potentially a reversal of the Society6 Group business as consumers are able to return to work and are more comfortable shopping in physical stores.

•

For the past three quarters, the Company’s Media Group has experienced double digit year-over-year revenue decline, with a revenue decline of 13% for fiscal year 2020; in the fourth quarter of 2020, the year-over-year revenue decline in the Media Group accelerated to a decline of 17% from 10% in the third quarter; site visits to Media Group properties declined by 26% in 2020 (14% excluding assets that were sold in 2020) and have declined every quarter since the third quarter of 2018, with the exception of the third and fourth quarters of 2019. In order to reverse these trends, the Company would need to deploy additional capital and there is risk that such investments will not reverse such trends.

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•

As with the Society6 Group, the Company believes that the Saatchi Art Group business has benefitted from work-from-home and shelter-at-home regulations, and there is material risk that the end of the pandemic will cause a slowdown and even potentially a reversal of the Saatchi Art Group business. Additionally, due to the COVID-19 pandemic, in 2020 the Company had to cancel all of the in-person art fairs run by its The Other Art Fair business, and there remains significant uncertainty as to when the Company will be able to consistently re-initiate and expand its art fair business.

•

All of the Company’s segments are in highly competitive markets, with competitors with far greater resources. In order for the Company to grow and diversify its revenue base it may require substantial capital to support significant organic growth or the Company’s M&A strategy, and the Company has a history of generating negative cash flow from its operations.

•

Best Alternative for Maximizing Stockholder Value. The Board considered that the merger consideration was more favorable to the Company’s stockholders than the potential value that would reasonably be expected to result from other alternatives reasonably available to the Company, including the continued operation of the Company on a standalone basis taking into account its acquisition opportunities, strategic alternatives and financing plans on an ongoing basis. Additionally, the Board considered the anticipated future trading prices of the Company common stock on a standalone basis, as compared to the certainty of realizing a value for the shares of Company common stock in the merger, which was at a premium to its current market price. The Board also considered the uncertainty that trading prices would approach the per share merger consideration in the foreseeable future. In particular, the Board considered the general risks of market conditions that could reduce the Company’s share price, noting that the trading price of the Company’s common stock, which closed as low as $1.05 on April 24, 2020, has been and is likely to continue to be volatile.

•

Costs, Distractions and Uncertainties Related to Stockholder Activism. The Board considered that since January 2019 the Company has been the subject of several different stockholder activist campaigns relating to, among other things, the election of directors, public attacks on management and the Board of Directors and demands that the Company be sold, as described above in greater detail under the heading “— Background to the Merger.” In February 2021, the Second Activist Group nominated candidates for the election of directors at the Company’s 2021 annual meeting of stockholders. These stockholder activism campaigns have been time consuming, caused the Company to incur substantial costs and diverted the attention of management and the Board from executing on the Company’s business plan. The Board also considered the perceived uncertainties as to the Company’s future direction, strategy and leadership created as a consequence of this constant attack by activist stockholders and that this may result in the loss of business opportunities, harm the Company’s ability to attract new investors, customers and employees and materially increase the risk that the Company cannot execute its long term business plan.

•

Merger Consideration. The Board considered that the Company’s stockholders will be entitled to receive merger consideration of $8.50 per share in cash upon the closing of the merger. The Board considered the current and historical market prices of the Company common stock, including the fact that $8.50 per share in cash represented (i) a premium of approximately 21% over the closing price of the Company’s shares of common stock on April 1, 2021, the last trading day prior to execution of the merger agreement, (ii) premiums of approximately 20%, 27% and 35% to the volume-weighted average share prices of the Company’s common stock for the last 30, 60 and 90 trading days prior to the execution of the merger agreement, respectively, (iii) a premium of approximately 102% over the Company’s December 14, 2020 public offering price of $4.20 per share and (iv) a premium of approximately 559% over the closing price of the Company’s shares of common stock on April 3, 2020 of $1.29.

•

Lack of Interest of Other Parties in Acquiring the Company. The Board considered that from April 2019 through May 2020 it had conducted the publicly disclosed 2019 – 20 Strategic Process, and despite reaching out to 160 potential acquirors and entering into 45 confidentiality agreements, the Company did not receive a single offer to acquire the Company. Additionally, the Board considered that, after receiving Parent’s proposal, it contacted ten strategic parties and financial sponsors which the Company and Moorgate considered most likely to be interested in acquiring the Company

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and, despite the strong results of the business since the completion of the 2019 – 20 Strategic Process, no party was interested in acquiring the Company as a whole. The Board also considered the significant risk of conducting a “public” strategic alternatives review process, noting that during the 2019 – 2020 Strategic Process the price of the Company’s common stock had declined from $8.76 to $1.70.

•

Greater Certainty of Value. The Board considered that the merger consideration payable per share is a fixed all cash amount, thereby providing the Company’s stockholders with immediate certainty of value and liquidity for their shares upon the closing of the merger, while eliminating the uncertainty of long-term business and execution risk to stockholders, especially when viewed in light of a number of factors, including the recent increased volatility in equity markets, particularly with respect to comparable companies, and the even greater volatility in the Company’s stock.

•

Receipt of Fairness Opinion from its Financial Advisor Regarding the Merger. The Board considered the financial analyses presented by Canaccord Genuity to the Board and the oral opinion of Canaccord Genuity rendered to the Board, subsequently confirmed by the delivery of a written opinion of Canaccord Genuity, dated April 3, 2021, to the Board, that, as of such date and based upon and subject to the factors and assumptions set forth in its written opinion, the merger consideration to be paid to the holders of the Company’s common stock in the proposed merger was fair, from a financial point of view, to such holders, all as more fully described below in the section of this proxy statement under the heading “— Opinion of the Company’s Financial Advisor.” The full text of the written opinion of Canaccord Genuity, dated April 3, 2021, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement.

•

Likelihood of Completion. The Board considered the likelihood of completion of the merger to be significant, in light of, among other things:

•

the commitment of Parent in the merger agreement to use its reasonable best efforts to take all actions necessary or appropriate for the purpose of consummating and effectuating the merger. Please see the section of this proxy statement titled “The Merger Agreement — Reasonable Best Efforts; Antitrust Filings”;

•

the absence of a financing condition, that Parent will fund the merger consideration with its existing cash and available lines of credit without the need for external financing in connection with the merger, and that as of December 31, 2020, Parent had cash, cash equivalents, and investments in marketable securities of approximately $1.0 billion;

•

the need to make antitrust filings, and obtain antitrust clearance, solely in the United States and not in any foreign jurisdictions;

•

the limited conditions to closing contained in the merger agreement, which the Board believes are reasonable and customary in number and scope, and which, in the case of the condition related to the accuracy of the Company’s representations and warranties, are generally subject to a Company material adverse effect qualification. Please see the section of this proxy statement titled “The Merger Agreement — Conditions of the Merger”;

•

the absence of any requirement for the Company to reimburse any of Parent’s expenses if, upon being put to a vote, the Company’s stockholders do not vote to adopt the merger agreement;

•

the Company’s entitlement, under certain conditions, to seek specific performance of Parent’s obligations under the merger agreement, including Parent’s and the merger subsidiary’s obligation to close the merger when required; and

•

the positive business reputation of Parent, its history of successful acquisitions, its substantial financial resources and its strong strategic interest in the Company and familiarity with the Company and the Company’s products.

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•

Opportunity to Receive Alternative Acquisition Proposals and to Terminate or Change Recommendation in Response to a Superior Proposal or Intervening Event. The Board considered the terms of the merger agreement relating to the Company’s ability to respond to unsolicited acquisition proposals, and the other terms of the merger agreement, including:

•

the Company’s right, subject to certain conditions, to provide information in response to, and to discuss and negotiate with, certain third parties regarding unsolicited acquisition proposals made before obtaining the vote of the Company’s stockholders approving the adoption of the merger agreement. Please see the section of this proxy statement titled “The Merger Agreement — No-Shop; Board Recommendation Change”;

•

the provision of the merger agreement allowing the Company to terminate the merger agreement prior to obtaining the vote of the Company’s stockholders approving the adoption of the merger agreement in order to concurrently enter into an alternative acquisition agreement, subject to Parent’s right to receive payment of a termination fee equal to $12,900,000 (representing approximately 4.0% of the Company’s equity value, based on the aggregate merger consideration), which amount the Board believes to be reasonable under the circumstances given the size of the transaction and taking into account the range of such termination fees in similar transactions and believes not to preclude or substantially impede a possible competing proposal. Please see the sections of this proxy statement titled “The Merger Agreement — No-Shop; Board Recommendation Change — Termination Fees and Expenses”; and

•

the provision of the merger agreement allowing the Board to make a change of recommendation with respect to the merger, prior to obtaining the vote of the Company’s stockholders approving the adoption of the merger agreement, in specified circumstances relating to a superior proposal or intervening event, subject to Parent’s right to terminate the merger agreement and receive payment of the termination fee discussed above equal to $12,900,000. Please see the sections of this proxy statement titled “The Merger Agreement — No-Shop; Board Recommendation Change — Termination Fees and Expenses.”

•

Opportunity for the Company Stockholders to Vote. The Board also considered the fact that the merger would be subject to the approval of the Company’s stockholders, and the Company’s stockholders would be free to evaluate the merger and vote for or against the adoption of the merger agreement at the special meeting.

•

Opportunity for Appraisal of Shares. The Board also considered the fact that the Company’s stockholders who do not vote in favor of the adoption of the merger and are entitled to demand and validly demand appraisal of the fair value of their shares will have the right to such appraisal under Delaware law. Please see the section of this proxy statement titled “Appraisal Rights.”

In the course of reaching its recommendation, the Board also considered certain risks and potentially adverse factors relating to the merger agreement and the merger, including:

•

the risks related to the announcement and pendency of the merger, including the potential impact on the Company’s employees and its relationships with existing and prospective customers, vendors and business partners;

•

the need to make antitrust filings, and obtain antitrust clearance, in the United States;

•

that the Company stockholders will have no ongoing equity participation in the Company following the merger, and that such stockholders will therefore cease to participate in the Company’s future earnings or growth, if any, or to benefit from increases, if any, in the value of the Company common stock following the merger;

•

the provisions of the merger agreement that restrict the Company’s ability to solicit or participate in discussions or negotiations regarding alternative acquisition proposals, subject to certain exceptions, and that restrict the Company from entering into alternative acquisition agreements;

•

the possibility that the merger is not completed in a timely manner or at all for any reason, as well as the risks and costs to the Company if the merger is not completed or if there is uncertainty about the likelihood, timing or effects of completion of the merger, including uncertainty about the effect

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of the merger on the Company’s employees, existing and prospective customers, suppliers, partners and other third parties, which could impair the Company’s ability to attract, retain and motivate key personnel and could cause third parties to seek to terminate, change or not enter into business relationships with the Company, as well as the risk of diverting management and employee attention from ongoing business operations as a result of the merger, and the effect on the trading price of the Company common stock if the merger agreement is terminated or the merger is not completed for any reason;

•

the merger agreement’s customary restrictions on the conduct of the Company’s business before completion of the merger, generally requiring the Company to use commercially reasonable efforts to conduct its business in the ordinary course of business and prohibiting the Company from taking specified actions, which could delay or prevent the Company from undertaking certain business opportunities that arise pending completion of the merger. Please see the section of this proxy statement titled “The Merger Agreement — Covenants Regarding Conduct of Business by the Company Pending the Effective Time”;

•

the possibility that the Company could be required under the terms of the merger agreement to pay a termination fee equal to $12,900,000 under certain circumstances (see the section of this proxy statement titled “The Merger Agreement — Termination Fees and Expenses”), and that such termination fee could discourage other potential bidders from making a competing bid to acquire the Company;

•

the potential risk of losing the opportunity to enter into the merger agreement with Parent in the event the Company continued trying to obtain any additional offers at higher prices;

•

the significant costs involved in connection with entering into the merger agreement and completing the merger (some of which are payable whether or not the merger is consummated), including in connection with any litigation that may result from the announcement or pendency of the merger;

•

that the receipt of cash by the Company stockholders in exchange for their shares of common stock pursuant to the merger will be a taxable transaction to the Company’s stockholders for U.S. federal income tax purposes. Please see the section of this proxy statement titled “The Merger — Material U.S. Federal Income Tax Considerations”; and

•

that some of the Company’s directors and executive officers have interests that may be different from, or in addition to, the interests of the Company stockholders generally. Please see the section of this proxy statement titled “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger.”

The foregoing discussion of the information and factors considered by the Board includes the material factors considered by the Board but is not intended to be exhaustive and does not necessarily include all of the factors considered by the Board. In view of the complexity and variety of factors considered in connection with its evaluation of the merger agreement and the merger, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, in considering the information and factors described above, individual members of the Board each applied his or her own business judgment to the process and may have given different weights to different factors. The above factors are not presented in any order of priority. The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement titled “Cautionary Statement Regarding Forward-Looking Statements.”

Opinion of Leaf Group’s Financial Advisor

Canaccord Genuity is acting as financial advisor to the Company in connection with the merger. At a meeting of the Board held on April 3, 2021 to evaluate the proposed merger, Canaccord Genuity delivered to the Board an oral opinion, which was confirmed by delivery of a written opinion, dated April 3, 2021, to the effect that, as of that date and based upon and subject to certain assumptions, factors and qualifications set forth in the written opinion, the consideration of $8.50 per share in cash to be received by holders of shares of Company common stock (other than Parent and Merger Sub and their respective affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

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The full text of Canaccord Genuity’s written opinion is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference. The description of Canaccord Genuity’s opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. The Company’s stockholders are encouraged to read Canaccord Genuity’s opinion carefully and in its entirety for a description of the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Canaccord Genuity in connection with its opinion. Canaccord Genuity’s opinion was addressed to the Board, was only one of many factors considered by the Board in its evaluation of the merger, and is limited to and addresses only the fairness, from a financial point of view and as of the date of the opinion, to the holders of shares of Company common stock (other than Parent and Merger Sub and their respective affiliates) of the $8.50 per share to be received by such holders pursuant to the merger agreement. Canaccord Genuity’s opinion was directed to and for the information of the Board only (in its capacity as such) in connection with its evaluation of the merger and did not constitute advice or a recommendation to the Board as to how the Board should vote with respect to the merger agreement and does not constitute advice or a recommendation to any stockholder of the Company as to whether such stockholder should vote in favor of the merger proposal, or how such person should otherwise act with respect to the merger or any other matter. Canaccord Genuity’s opinion was rendered on the basis of securities, economic, market and monetary conditions prevailing as of April 3, 2021, the date of its opinion, and on the prospects, financial and otherwise, of the Company known to Canaccord Genuity as of such date. Subsequent developments may affect the conclusions expressed in Canaccord Genuity’s opinion if such opinion were rendered as of a later date. Canaccord Genuity assumes no responsibility for updating, revising or reaffirming its opinion based on circumstances or events occurring after the date of the opinion.

In connection with Canaccord Genuity’s review of the merger and developing its opinion, Canaccord Genuity, among other things:

(i) reviewed certain publicly available business and financial information relating to the Company;

(ii) analyzed certain internal financial statements and other business and financial information, including certain historical and projected financial and operating data concerning the Company provided to Canaccord Genuity by senior management of the Company;

(iii) conducted discussions with members of senior management of the Company regarding past and current operations and financial condition and the prospects of the Company;

(iv) compared the projected results of operations of the Company with those of certain publicly traded companies Canaccord Genuity deemed to be relevant and comparable to the Company;

(v) compared the financial terms of the merger with the financial terms of certain other acquisitions Canaccord Genuity deemed to be relevant and comparable to the merger;

(vi) reviewed the terms of the merger agreement furnished to Canaccord Genuity by the Company; and

(vii) reviewed such other financial studies and analyses, performed such other investigations, and took into account such other matters as Canaccord Genuity deemed necessary, including an assessment of general economic, market and monetary conditions.

In connection with Canaccord Genuity’s review and arriving at its opinion, Canaccord Genuity did not independently verify any of the foregoing information, relied on such information, assumed that all such information is complete and accurate in all material respects, and relied on assurances of the management of the Company that it is not aware of any facts that would make such information misleading. With respect to the internal financial forecasts and other forward-looking financial information provided to Canaccord Genuity by senior management of the Company, Canaccord Genuity assumed, with the Company’s consent, that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such management. Canaccord Genuity also assumed that the merger will be consummated upon the terms set forth in the merger agreement, without waiver, modification or amendment of any material term, condition or agreement therein which would be in any way meaningful to its analysis. Canaccord Genuity also assumed that, in the course of obtaining necessary regulatory and third party approvals and

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consents for the merger, no modification, delay, limitation, restriction or conditions will be imposed that will have an adverse effect on the Company, Parent or the contemplated benefits of the merger in any way meaningful to its analysis.

Canaccord Genuity’s opinion is limited to the fairness, from a financial point of view, to the holders of Company common stock (other than Parent and Merger Sub and their respective affiliates) of the merger consideration, and it expresses no opinion as to the fairness of the merger to the holders of any other class of securities, creditors or other constituencies of the Company. Canaccord Genuity’s opinion does not address the relative merits of the merger as compared to other business strategies or transactions that might be available to the Company, nor does it address the underlying business decision of the Company to proceed with the merger or any view on any other term or aspect of the merger agreement. Canaccord Genuity also notes that it is not a legal, accounting, regulatory or tax expert and that it relied on the assessments made by the Company and its advisors with respect to such matters. Canaccord Genuity did not consider, and it expressed no opinion as to, the fairness of the amount or nature of the compensation to be paid to any of the Company’s officers, directors or employees, or class of such persons, relative to the merger consideration to be paid to the stockholders of the Company in the merger.

Canaccord Genuity was not requested to conduct and did not conduct, nor did Canaccord Genuity rely upon, any independent valuation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance sheet or otherwise) of the Company. Canaccord Genuity also did not evaluate and did not express any opinion as to the solvency of any party to the merger agreement, or the ability of the Company to pay its obligations when they become due, or as to the impact of the merger on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters.

Summary of Financial Analyses

The following is a summary of the material financial analyses performed by Canaccord Genuity in connection with rendering its opinion dated April 3, 2021 described above. The following summary, however, does not purport to be a complete description of the factors considered or financial analyses performed by Canaccord Genuity, nor does the order of analyses described represent relative importance or weight given to those analyses by Canaccord Genuity. Some of these summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Canaccord Genuity’s financial analyses.

Selected Public Companies Analysis. Canaccord Genuity reviewed certain publicly available financial information for selected public companies in the digital media and e-commerce industries that, based on its experience and professional judgment, share similar financial, business or operating characteristics to the Company. No company utilized in the selected public companies analysis is directly comparable to the Company and certain of these companies may have financial, business or operating characteristics that are materially different from those of the Company. However, the companies were selected, among other reasons, because they are publicly-traded companies with businesses that, for purposes of Canaccord Genuity’s analysis, may be considered similar to that of the Company based on industry sector and financial profile.

Using publicly available information obtained from filings with the SEC, the Capital IQ database, and other public sources, Canaccord Genuity calculated for each selected public company the following multiples:

(i) enterprise value (calculated as the market value of common equity determined using the treasury stock method, plus the book value of debt, less cash), as a multiple of calendar year 2020 revenue;

(ii) enterprise value as a multiple of calendar year 2021 estimated revenue;

(iii) enterprise value as a multiple of calendar year 2022 estimated revenue;

(iv) enterprise value as a multiple of calendar year 2020 earnings before interest, taxes, depreciation and amortization and stock-based compensation (referred to as “Adjusted EBITDA”);

(v) enterprise value as a multiple of calendar year 2021 estimated Adjusted EBITDA; and

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(vi) enterprise value as a multiple of calendar year 2022 estimated Adjusted EBITDA.

The selected public companies and their applicable multiples, as well as the corresponding multiples for the Company based on the closing price of Company common stock on April 1, 2021 and information provided by the Company management, were as follows:

Selected Companies

EV /
CY2020A
Revenue

EV /
CY2021E
Revenue

EV /
CY2022E
Revenue

EV /
CY2020A
Adjusted
EBITDA

EV /
CY2021E
Adjusted
EBITDA

EV /
CY2022E
Adjusted
EBITDA

J2 Global, Inc.

4.5x

4.1x

3.8x

10.9x

10.2x

9.5x

Qurate Retail, Inc.

0.9x

5.6x

5.9x

5.8x

1-800-FLOWERS.COM, Inc.

0.9x

0.8x

8.3x

8.4x

Redbubble Limited

2.2x

1.9x

22.2x

18.8x

15.9x

Perion Network Ltd.

1.6x

1.4x

1.3x

16.5x

14.4x

12.6x

Claranova SE

1.1x

0.9x

0.8x

19.1x

12.7x

10.1x

Turtle Beach Corporation

1.1x

1.0x

6.4x

8.8x

7.4x

Digital Media Solutions, Inc.

1.7x

1.4x

1.1x

10.4x

8.0x

6.4x

Blue Apron Holdings, Inc.

0.3x

NM(1)

45.7x

8.6x

The Company: (2)

Stock Price as of April 1, 2020 ($7.03)

1.0x

0.9x

0.7x

NM(1)

15.2x

Merger Consideration ($8.50)

1.3x

1.1x

0.9x

NM(1)

19.1x

(1)

“NM” denotes Adjusted EBITDA multiples that are negative or greater than 50x.

(2)

For the Company, Adjusted EBITDA reflects net loss (income) excluding interest expense, income tax expense, depreciation and amortization, stock-based compensation, non-recurring expenses, activist-related expenses and strategic review expenses as provided by Company management (“Adjusted EBITDA (Excluding Non-Recurring Expenses)”).

Based on this analysis for the selected public companies, Canaccord Genuity selected the following representative multiple ranges based upon the first and third quartile data points and the application of its experience and professional judgment:

Low

High

EV / CY2020A Revenue

0.9x

1.7x

EV / CY2021E Revenue

0.9x

1.4x

EV / CY2022E Revenue

0.8x

1.3x

EV / CY2020A Adjusted EBITDA

7.8x

17.1x

EV / CY2021E Adjusted EBITDA

8.4x

14.4x

EV / CY2022E Adjusted EBITDA

7.4x

10.1x

Based on its analysis and other considerations that Canaccord Genuity deemed relevant in its experience and professional judgment, Canaccord Genuity used these reference ranges of multiples, the revenue of the Company, and the Adjusted EBITDA (Excluding Non-Recurring Expenses) of the Company to derive (i) a range of implied enterprise values for the Company of $186.3 to $419.4 million for revenue and $18.9 to $146.6 million for Adjusted EBITDA (Excluding Non-Recurring Expenses); and (ii) a range of implied equity values for the Company (using estimated cash and debt balances as of February 28, 2021, in each case as provided by Company management) of $231.7 to $464.8 million for revenue and $64.3 to $192.0 million for Adjusted EBITDA (Excluding Non-Recurring Expenses). Canaccord Genuity also derived a range of implied per share equity values for the Company (using the fully-diluted shares of Company common stock

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determined using the treasury stock method, as provided by Company management) which are summarized below, in each case compared to the merger consideration of $8.50 per share:

			Implied Price Per Share
EV / 2020A Revenue			$6.10 – 10.68
EV / 2021E Revenue			$7.09 – 10.94
EV / 2022E Revenue			$7.93 – 12.24
EV / 2020A Adjusted EBITDA (Excluding Non-Recurring Expenses)			$1.83 – 2.59
EV / 2021E Adjusted EBITDA (Excluding Non-Recurring Expenses)			$1.69 – 2.05
EV / 2022E Adjusted EBITDA (Excluding Non-Recurring Expenses)			$4.03 – 5.06

Selected Precedent Transaction Analysis. Canaccord Genuity reviewed certain publicly available financial information for selected transactions that, based on its experience and professional judgment, involved companies in the digital media and e-commerce industries that share similar business characteristics to the Company. No company utilized in the selected transactions analysis is directly comparable to the Company and certain of these companies may have financial, business or operating characteristics that are materially different from those of the Company. However, the transactions were selected, among other reasons, because they involved publicly-traded companies with businesses that, for purposes of Canaccord Genuity’s analysis, may be considered similar to that of the Company based on industry sector and financial profile. Each of these transactions was publicly announced on or after April 10, 2017.

Using publicly available information obtained from filings with the SEC, the Capital IQ database, and other public sources, Canaccord Genuity calculated for each selected transaction the following multiples: (i) enterprise value as a multiple of latest twelve months, or “LTM,” revenue; and (ii) enterprise value as a multiple of LTM Adjusted EBITDA. The selected transactions and their applicable multiples were as follows:

Announcement Date

Acquiror

Target

EV / LTM Revenue

EV / LTM Adjusted EBITDA

03/22/2021

Digital Turbine, Inc.

Fyber N.V.

2.9x

NM(2)

02/26/2021

Digital Turbine, Inc.

AdColony Holding AS

1.0x

47.6x

02/11/2021

Centre Lane Partners, LLC

Synacor, Inc.

1.1x

16.5x

11/19/2020

Experian plc

Tapad Inc.

5.1x

09/29/2020

J2 Global, Inc.

RetailMeNot, Inc.

2.3x

09/14/2020

Red Ventures, LLC

CNET Media Group

NA(1)

08/27/2020

Delivery Hero SE

InstaShop Ltd

08/24/2020

Mohawk Group Holdings, Inc.

Truweo

1.2x

02/18/2020

1-800-FLOWERS.COM, Inc.

PersonalizationMall.com, LLC

02/10/2020

Digital Turbine, Inc.

Mobile Posse, Inc.

1.1x

5.2x

12/20/2019

IAC/InterActiveCorp

Care.com, Inc.

2.4x

17.9x

06/10/2019

Apollo Global Management, LLC

Shutterfly, Inc.

1.3x

7.9x

03/21/2019

Spark Networks SE

Zoosk, Inc.

10/24/2018

Redbubble Limited

TP Apparel LLC / TP Apparel Europe Ltd (TeePublic)

1.6x

12.4x

08/28/2017

Harland Clarke Holdings Corp.

MaxPoint Interactive, Inc.

0.7x

07/18/2017

Sizmek Inc.

Rocket Fuel Inc.

0.4x

18.3x

04/10/2017

Harland Clarke Holdings Corp.

RetailMeNot, Inc.
Proposed Transaction:(3)

1.6x
1.3x

7.3x
NM

(1)

”NA” denotes LTM revenue and LTM Adjusted EBITDA statistics not available.

(2)

”NM” denotes Adjusted EBITDA multiples that are negative or greater than 50x.

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(3)

Calculated based on calendar year 2020 revenue and Adjusted EBITDA (Excluding Non-Recurring Expenses) as provided by management of the Company.

The first and third quartile data points for the precedent transactions were 1.1x to 2.3x for the multiples of implied enterprise value to LTM revenue and 7.8x to 18.0x for the multiples of implied enterprise value to LTM Adjusted EBITDA. Based on its analysis and other considerations that Canaccord Genuity deemed relevant in its experience and professional judgment, Canaccord Genuity used this reference range of multiples, the LTM revenue, and the LTM Adjusted EBITDA (Excluding Non-Recurring Expenses) of the Company (assumed for purposes of this analysis to be the LTM ended December 31, 2020 as provided by Company management) to derive (i) a range of implied enterprise values for the Company of $229.0 to $488.2 million based on LTM revenue and $24.0 to $55.4 million based on LTM Adjusted EBITDA (Excluding Non-Recurring Expenses); and (ii) a range of implied equity values for the Company (using estimated cash and debt balances as of February 28, 2021, in each case as provided by Company management) of $274.4 to $533.6 million based on LTM revenue and $69.3 to $100.8 million based on LTM Adjusted EBITDA (Excluding Non-Recurring Expenses). Canaccord Genuity also derived a range of implied per share equity values for the Company (using the fully-diluted shares of Company common stock determined using the treasury stock method as provided by Company management) of $7.23 to $14.06 based on LTM revenue and $1.83 to $2.66 based on LTM Adjusted EBITDA (Excluding Non-Recurring Expenses), in each case compared to the merger consideration of $8.50 per share.

Discounted Cash Flow Analysis. Canaccord Genuity conducted a discounted cash flow analysis for the Company for the purpose of calculating a range of equity values per share of Company common stock. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future unlevered free cash flows generated by the asset and taking into consideration the time value of money with respect to those future cash flows by calculating their net present value. For purposes of this analysis, Canaccord Genuity utilized the projections to determine the unlevered free cash flows of the Company for calendar years 2021 through 2025. See the section of this proxy statement captioned “Certain Financial Projections by the Management of Leaf Group” for further information regarding the financial projections provided to Canaccord Genuity by Company management. Unlevered free cash flows were calculated by taking operating income / (loss) after tax, adding back depreciation and amortization, adjusting for changes in working capital and subtracting capital expenditures in each case using information provided by Leaf Group.

Canaccord Genuity calculated the net present value of the unlevered free cash flows for the Company for calendar years 2021 through 2025 and calculated terminal values in the year 2025 based on a terminal perpetual growth rate ranging from 2.0% to 3.5%. Canaccord Genuity selected these terminal perpetual growth rates based on the application of its experience and professional judgment. These values were discounted to net present values at a discount rate ranging from 12.5% to 14.0%, which range of discount rates was selected, upon the application of Canaccord Genuity’s experience and professional judgment, to reflect the Company’s estimated range of weighted average cost of capital. Based on this analysis, Canaccord Genuity derived a range of implied enterprise values for the Company of $196.4 to $276.3 million and a range of implied equity values for the Company of $241.8 to $321.7 million. Canaccord Genuity also derived a range of implied per share equity values for the Company (using the fully-diluted shares of Company common stock determined using the treasury stock method as provided by Company management) of $6.37 to $8.47, compared to the merger consideration of $8.50 per share.

Other Information

Canaccord Genuity observed certain additional factors that were not considered part of its financial analyses for purposes of its opinion but were noted to the Board for reference purposes only, including the following:

•

Historical trading prices of shares of Company common stock during the 52-week period ended April 1, 2021, which reflected low to high prices of the shares during such period of $1.03 per share on April 24, 2020 to $8.85 per share on March 24, 2021.

•

The consideration of $8.50 per share of Company common stock represented a premium of:

•

21% to the closing price of $7.03 per share on April 1, 2021;

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•

20% to the volume weighted average trading price (referred to as “VWAP”) per share of $7.07 for the 30 trading days ended on April 1, 2021;

•

27% to the VWAP per share of $6.69 for the 60 trading days ended on April 1, 2021;

•

35% to the VWAP per share of $6.30 for the 90 trading days ended on April 1, 2021;

•

36% to the VWAP per share of $6.26 for the six months ended on April 1, 2021; and

•

59% to the VWAP per share of $5.33 for the twelve months ended on April 1, 2021.

•

Premiums paid in 105 selected transactions with U.S. targets since 2018 with transaction values between $150 million and $500 million, for which premium data was available. The premiums in this analysis were calculated by comparing the per share acquisition price in each transaction to the closing price of the target company’s common stock for the date one day prior to announcement and the VWAP per share of the target’s common stock for the 30, 60 and 90 trading days prior to announcement. This data is set forth below as compared to the implied premium to Company common stock based on the merger consideration of $8.50 per share:

	Premiums to Target Stock Price
	1-Day Prior			30-Day VWAP			60-Day VWAP			90-Day VWAP
Third Quartile			44.4%			49.4%			48.9%			50.7%
Median			27.9%			30.0%			30.6%			32.0%
Mean			37.9%			40.5%			41.2%			41.6%
First Quartile			13.8%			14.9%			15.1%			14.3%
Company Stock Price(1)		$	7.03		$	7.07		$	6.69		$	6.30
Implied Merger Consideration Premium			20.9%			20.2%			27.1%			34.9%

(1)

Stock price and volume weighted average trading prices as of April 1, 2021.

General

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Canaccord Genuity’s opinion. In arriving at its fairness determination, Canaccord Genuity considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Canaccord Genuity made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses, taken as a whole. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or the merger. The reasons for and the circumstances surrounding each of the selected companies and transactions analyzed were diverse and there are inherent differences in the business, operations, financial condition and prospects of the Company and the companies included in those analyses.

Canaccord Genuity prepared these analyses for purposes of providing its opinion to the Board as to the fairness, from a financial point of view and as of the date of the opinion, of the consideration of $8.50 per share in cash to be received by holders of shares of Company common stock (other than Parent and Merger Sub and their respective affiliates) pursuant to the merger agreement. These analyses do not purport to be appraisals, nor do they necessarily reflect the prices at which businesses or securities actually may be sold.

The merger consideration was determined through negotiations between the Company and Parent and was approved by the Board. Canaccord Genuity did not provide advice to the Board during these negotiations and did not recommend any specific amount of consideration to the Company or the Board or that any specific amount of consideration constituted the only appropriate consideration for the merger.

As described above, Canaccord Genuity’s opinion to the Board was one of many factors taken into consideration by the Board in making its determination to approve the merger agreement. The foregoing

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summary does not purport to be a complete description of the factors considered or financial analyses performed by Canaccord Genuity in connection with its opinion and is qualified in its entirety by reference to the full text of the written opinion of Canaccord Genuity attached to this proxy statement as Annex B. The issuance of Canaccord Genuity’s opinion was approved by a fairness committee of Canaccord Genuity.

Canaccord Genuity, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In the ordinary course of business, Canaccord Genuity and its affiliates may acquire, hold or sell, for its and its affiliates’ own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of the Company, Parent or their respective affiliates.

During the two years preceding the date of its opinion, Canaccord Genuity had not received any compensation from Parent or the Company, except that in December 2020, Canaccord Genuity acted as lead underwriter for the Company for a common stock offering for which Canaccord Genuity received compensation of approximately $1.3 million from the Company. Canaccord Genuity may provide investment banking and other services to or with respect to the Company, Parent or their respective affiliates in the future, for which Canaccord Genuity may receive compensation.

Canaccord Genuity acted as financial advisor to the Company in connection with the merger, and was selected as the Company’s financial advisor because of its familiarity with the Company and because it is a nationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement, dated as of March 12, 2021, the Company engaged Canaccord Genuity to act as its financial advisor in connection with the merger and the delivery of a fairness opinion as described above. Pursuant to the terms of such letter agreement, the Company agreed to pay Canaccord Genuity a fee of $650,000 for its services, payable upon delivery by Canaccord Genuity of its opinion and regardless of whether the merger was ultimately approved by the Board or is ultimately consummated. In addition, the Company has agreed to reimburse Canaccord Genuity for certain expenses and to indemnify Canaccord Genuity and related persons for liabilities relating to or arising out of its engagement.

Moorgate Securities LLC

The Company also engaged Moorgate as a financial advisor in connection with the strategic process leading to the entry into the merger agreement. The Company engaged Moorgate because of its longstanding relationship with the Company and because Moorgate also has substantial knowledge of and familiarity with the Company’s business and operations, competitors and the industries in which the Company operates. Moorgate was not asked to, and did not, render to the Company or the Board any fairness opinion in connection with the merger. As compensation for its services in connection with a proposed transaction, the Company has agreed to pay Moorgate a cash fee equal to $5,579,070 contingent upon the consummation of the merger. In addition, the Company has agreed to reimburse Moorgate for certain out-of-pocket expenses and to indemnify Moorgate against certain liabilities arising out of its engagement. During the past two years Moorgate has received compensation of approximately $870,000 from the Company for investment banking and other services to or with respect to the Company. Moorgate has not in the past two years provided investment banking or financial advisory services to Parent or any of its affiliates or portfolio companies for which it has received compensation.

Certain Financial Projections by the Management of Leaf Group

Leaf Group does not, as a matter of course, make public projections as to future performance or earnings beyond the current fiscal year and generally does not make public projections for extended periods due to, among other things, the inherent difficulty of predicting financial performance for future periods and the likelihood that the underlying assumptions and estimates may not be realized. In connection with the evaluation of potential strategic alternatives by the Board, however, our management prepared certain prospective financial information for Leaf Group. The projections were not prepared with a view toward public disclosure and, accordingly, do not necessarily comply with published guidelines of the SEC or established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information or generally accepted accounting principles (referred to as “GAAP”). Our

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independent registered public accounting firm has not compiled, examined, audited or performed any procedures with respect to the projections, and has not expressed any opinion or any other form of assurance regarding this information or its achievability.

The table below under “Summary of Management Projections” presents a summary of the projections for Leaf Group for the period from calendar year 2021 through fiscal year 2025 as prepared by our management to assist the Board in evaluating potential strategic alternatives. The projections were provided to, and confirmed for use by, the Board on February 7, 2021. The projections were also provided to Canaccord Genuity, the Company’s financial advisor, and Leaf Group’s management directed Canaccord Genuity to use and rely upon the projections in connection with their financial analysis and opinion to the Board as described above in the section entitled “— Opinion of the Company’s Financial Advisor.” In addition, at the direction of management, Canaccord Genuity calculated, from the projections, unlevered free cash flow for Leaf Group as set forth below in the table under “Summary of Management Projections.” The projections for revenues and for Adjusted EBITDA (Excl. Non-Recurring Expenses), as defined in the table below, for the period from calendar year 2021 through fiscal year 2025 were also provided to Parent for the purposes of considering and evaluating the merger.

The projections summarized below are included solely to provide Leaf Group’s stockholders access to certain financial projections that were made available to the Board, Canaccord Genuity and Parent in connection with the merger, and are not included in this proxy statement to influence a Leaf Group stockholder’s decision whether to vote for the adoption of the merger agreement or for any other purpose. The projections were prepared solely for internal use and in connection with Leaf Group’s financial advisor’s work and are subjective in many respects.

The projections summarized below, while presented with numerical specificity, were based on numerous variables and assumptions that necessarily involve judgments with respect to, among other things, future economic, competitive, regulatory and financial market conditions, all of which are difficult or impossible to predict and many of which are beyond our control. The projections also reflect assumptions that are subject to change. The projections cover multiple years, and thus, by their nature, become subject to greater uncertainty with each successive year. Important factors that may affect actual results and the achievability of the projections include, but are not limited to, general economic conditions and disruptions in the financial, debt, capital, credit or securities markets, developing industry dynamics, acceptance of our products and services, competition, our ability to obtain financing, and those risks and uncertainties described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. See also the section entitled “Cautionary Statement Concerning Forward-Looking Statements” in this proxy statement.

In addition, the projections reflect assumptions that are subject to change and are susceptible to multiple interpretations and revision based on actual results, revised prospects for our business, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated when the projections were prepared. In addition, the projections may be affected by our ability to achieve strategic goals, objectives and targets over the applicable period. Accordingly, actual results will differ, and may differ materially, from those contained in the projections. In addition, the projections do not take into account any circumstances, transactions or events occurring after the date on which the projections were prepared and do not give effect to any changes or expenses as a result of the merger or any effects of the merger. There can be no assurance that the financial results in the projections will be realized, or that future actual financial results will not materially vary from those estimated in the projections.

Leaf Group uses financial information that has not been prepared in accordance with GAAP, including Adjusted EBITDA, as defined in the table below, and Unlevered Free Cash Flow, as defined in the table below. We use non-GAAP financial measures in analyzing our financial results and believe that they enhance investors’ understanding of our financial performance and the comparability of our results to prior periods, as well as against the performance of other companies. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Leaf Group’s calculation of non-GAAP financial measures may differ from others in its industry and Adjusted EBITDA and Unlevered Free Cash Flow may not necessarily be comparable with similarly titled measures used by other companies.

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Summary of Management Projections

The projections reflect management’s long-term projections for fiscal years 2021 through 2025. The projections were based upon certain financial, operating and commercial assumptions developed solely using the information available to Leaf Group’s management at the time the projections were prepared by Leaf Group’s management.

($ in millions)	2021E			2022E			2023E			2024E			2025E
Revenue		$	255.6		$	315.9		$	381.8		$	458.8		$	550.3
Adjusted EBITDA(1)			0.1			14.5			28.2			45.2			65.4
Adjusted EBITDA (Excl. Non-Recurring Expenses)(2)			2.3			14.5			28.2			45.2			65.4
Operating Income / (Loss)			(18.7)			(4.5)			8.9			25.6			45.4
Less: Taxes			0.0			0.0			0.0			0.0			0.0
Operating Income / (Loss) After Tax			(18.7)			(4.5)			8.9			25.6			45.4
Plus: D&A			9.5			9.5			9.5			9.7			9.9
Less: Change in NWC			(0.3)			(0.4)			(0.4)			(0.4)			(0.4)
Less: Capital Expenditures			(8.3)			(9.4)			(11.2)			(13.5)			(16.2)
Unlevered Free Cash Flow(3)			(17.8)			(4.8)			6.8			21.4			38.8

(1)

Adjusted EBITDA reflects net loss (income) excluding interest expense, income tax expense, and certain other non-cash or non-recurring items impacting net loss from time to time, principally comprised of depreciation and amortization, stock-based compensation, contingent payments to certain key employees/equity holders of acquired businesses and other payments attributable to acquisition, disposition or corporate realignment activities.

(2)

Excludes non-recurring expenses, activist-related expenses and strategic review expenses for fiscal year 2021 in the amount of $2.2 million per Leaf Group’s management.

(3)

Canaccord Genuity calculated unlevered free cash flow by taking operating income / (loss) after tax, adding back depreciation and amortization, adjusting for changes in working capital and subtracting capital expenditures in each case using information provided by Leaf Group.

The inclusion of selected elements of the projections in the tables and accompanying narrative above should not be regarded as an indication that Leaf Group or any of its affiliates, officers, directors, advisors or other representatives consider the projections to be predictive of actual future events, and this information should not be relied upon as such. None of Leaf Group or its affiliates, officers, directors, advisors or other representatives gives any Leaf Group stockholder or any other person any assurance that actual results will not differ materially from the projections and, except as otherwise required by law, Leaf Group or its affiliates, officers, directors, advisors or other representatives undertake no obligation to update or otherwise revise or reconcile the projections to reflect circumstances existing after the date on which the projections were prepared or to reflect the occurrence of future events, even in the event that any or all of the assumptions and estimates underlying the projections are shown to be in error or to not be appropriate, or to reflect changes in general economic or industry conditions, and the projections have not been so updated, revised or reconciled. We have made no representation to Parent or Merger Sub concerning the projections, in the merger agreement or otherwise. We make no representation that the projections are current or that circumstances or assumptions underlying the projections have not changed since the date on which the projections were prepared. By including the projections in this proxy statement, neither Leaf Group nor any of its affiliates, advisors, officers, directors or representatives has made or makes any representation to any security holder regarding the information included in the projections or the ultimate performance of Leaf Group, Parent, the surviving corporation following the merger or any of their affiliates compared to the information contained in the projections. Furthermore, the projections do not take into account the effect of any failure of the merger to be consummated and should not be viewed as accurate or continuing in that context. The information set forth in the projections is not fact and should not be relied upon as being necessarily indicative of actual future results. Neither Leaf Group nor any of its affiliates assumes any responsibility to holders of Leaf Group common stock for the accuracy of this information.

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In light of the foregoing factors and the uncertainties inherent in the forecast, Leaf Group stockholders are cautioned not to place undue reliance on such financial projections.

Certain Effects of the Merger

If the merger proposal is approved and the other conditions to the closing of the merger are either satisfied or waived, the merger subsidiary will be merged with and into the Company upon the terms set forth in the merger agreement. As the surviving corporation in the merger, the Company will continue to exist following the merger as a wholly owned subsidiary of Parent.

Following the merger, all of the common stock will be beneficially owned by Parent and none of the Company’s current stockholders will, by virtue of the merger, have any direct ownership interest in, or be a stockholder of, the Company, the surviving corporation or Parent. As a result, the Company’s current stockholders will no longer have the potential to benefit from any increase in the value, nor will they bear the risk of any decrease in the value, of common stock. Following the merger, Parent will have the potential to benefit from any increase in the Company’s value and also will bear the risk of any decrease in the Company’s value.

At the effective time of the merger, and without any action by any stockholder, each share of common stock that is outstanding immediately prior to the effective time of the merger (other than shares held by the Company as treasury stock, owned by Parent or the merger subsidiary or as to which the holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be entitled to receive the merger consideration. Please see the section of this proxy statement titled “The Merger Agreement — Consideration to be Received in the Merger.”

At the effective time of the merger, by virtue of the merger and without any action on the part of the holders, (i) each Leaf Group Option issued under the Incentive Plan will be cancelled and, in consideration thereof, the holder of such Leaf Group Option will receive the Leaf Group Option Consideration and (ii) each outstanding Leaf Group RSU issued under the Incentive Plan will be cancelled and, in consideration thereof, the holder of such Leaf Group RSU will receive the Leaf Group RSU Consideration. Notwithstanding the foregoing, each outstanding Leaf Group RSU that is not vested immediately prior to the effective time of the merger (or would not become vested by the terms thereof as a result of the merger) will, as of the effective time of the merger, be cancelled and, in consideration thereof, the holder of such unvested Leaf Group RSU will receive the Leaf Group RSU Consideration, subject to and conditioned on the same terms and conditions (including any terms and conditions relating to vesting and acceleration thereof) as applicable to such unvested awards to which such Leaf Group RSU Consideration relates.

Prior to the execution of the merger agreement, all Leaf Group Options held by Company employees were vested according to their terms. Thus, the merger has no effect on the vesting of any outstanding Leaf Group Options held by employees. Leaf Group Options held by the Company’s non-employee directors that are not otherwise vested prior to the effective time of the merger will become automatically vested as of the effective time of the merger, pursuant to their terms. In addition, and for the avoidance of doubt, any Leaf Group Option with an exercise price equal to or greater than the merger consideration will be cancelled for no consideration.

The common stock is currently registered under the Exchange Act and trades on the NYSE under the ticker symbol “LEAF.” Following the consummation of the merger, shares of common stock will be delisted from the NYSE. In addition, the registration of shares of common stock under the Exchange Act will be terminated and the Company will no longer be required to file periodic and other reports with the SEC with respect to the common stock. Termination of registration of the common stock under the Exchange Act will reduce the information required to be furnished by the Company to the Company’s stockholders and the SEC, and will make provisions of the Exchange Act, such as the requirement to file annual and quarterly reports pursuant to Section 13(a) or 15(d) of the Exchange Act, the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement to furnish a proxy statement in connection with stockholders’ meetings pursuant to Section 14(a) of the Exchange Act, no longer applicable to the Company.

Effects on the Company if the Merger Is Not Completed

If the merger proposal is not approved by the Company’s stockholders, or if the merger is not completed for any other reason, the Company’s stockholders will not receive any payment for their shares of common

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stock in connection with the merger. Instead, the Company will remain an independent public company, the common stock will continue to be listed and traded on the NYSE, the common stock will continue to be registered under the Exchange Act and the Company’s stockholders will continue to own their shares of the common stock and will continue to be subject to the same general risks and opportunities as they currently are with respect to ownership of common stock. Under certain circumstances, if the merger agreement is terminated, the Company may be obligated to pay to Parent a termination fee. Please see the section of this proxy statement titled “The Merger Agreement — Termination Fee.”

If the merger is not completed, there is no assurance as to the effect of these risks and opportunities on the future value of your shares of common stock, including the risk that the market price of common stock may decline to the extent that the current market price of the Company’s stock reflects a market assumption that the merger will be completed. If the merger is not completed, there is no assurance that any other transaction acceptable to the Company will be offered or that the business, operations, financial condition, earnings or prospects of the Company will not be adversely affected. Pursuant to the merger agreement, under certain circumstances including payment of a termination fee to Parent, the Company is permitted to terminate the merger agreement in order to enter into an alternative transaction. Please see the section of this proxy statement titled “The Merger Agreement — Termination.”

Financing of the Merger

Parent will fund the merger consideration with its existing cash and available lines of credit without the need for external financing in connection with the merger. As of December 31, 2020, Parent had cash, cash equivalents, and investments in marketable securities of approximately $1.0 billion. The obligation of Parent and the merger subsidiary to consummate the merger is not subject to any financing condition.

Interests of the Company’s Directors and Executive Officers in the Merger

Details of the beneficial ownership of common stock by the Company’s directors and executive officers are set out in the section of this proxy statement titled “Security Ownership of Certain Beneficial Owners and Management.” In addition to their interests in the merger as stockholders, the Company’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of the Company’s stockholders generally. In considering the proposals to be voted on at the special meeting, you should be aware of these interests. The members of the Board were aware of and considered these interests in making the determination to approve the merger agreement and deem the merger agreement, the merger and the other transactions contemplated by the merger agreement to be advisable, fair to and in the best interests of the Company and its stockholders, and in recommending that the holders of common stock vote for the adoption of the merger agreement. These interests include:

•

the Company’s directors and executive officers hold Leaf Group RSUs and Leaf Group Options that will be afforded the treatment described below in “— Treatment of Equity and Equity-Based Awards”;

•

the Company’s executive officers, other than Sean Moriarty, are entitled to a bonus pursuant to the Company’s Retention Program (as defined below); and

•

the Company’s directors and executive officers are entitled to continued indemnification and insurance coverage following the merger under the merger agreement. Please see the section below titled “— Director and Officer Indemnification” and the section of this proxy statement titled “— The Merger Agreement — Indemnification of Directors and Officers and Insurance.”

Certain Assumptions

Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:

•

the relevant price per share of the common stock is $8.50;

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•

each executive officer’s employment is terminated by the Company without “cause” or by the executive officer for “good reason” (as such terms are defined in such officer’s employment agreement), in each case, immediately following the effective time of the merger;

•

each executive officer holds the outstanding equity awards that were held by each executive officer as of April 16, 2021, the latest practicable date before the filing of this proxy statement; and

•

the amounts set forth in the tables below regarding executive officer compensation are based on compensation levels as of April 1, 2021.

The Company’s executive officers for purposes of the discussion below are: Sean Moriarty, Chief Executive Officer; Brian Gephart, Chief Financial Officer; Brian Pike, Chief Operating Officer; and Adam Wergeles, Executive Vice President and General Counsel.

Treatment of Equity and Equity-Based Awards

For additional information regarding beneficial ownership of common stock by each of the Company’s directors and executive officers and beneficial ownership of common stock by all of such directors and executive officers as a group, please see the section of this proxy statement titled “Security Ownership of Certain Beneficial Owners and Management.” Each of the Company’s directors and executive officers will be entitled to receive, for each share of common stock he or she holds as of immediately prior to the effective time of the merger, the same merger consideration in cash in the same manner as other holders of common stock.

At the effective time of the merger, by virtue of the merger and without any action on the part of the holders, (i) each Leaf Group Option issued under the Incentive Plan will be cancelled and, in consideration thereof, the holder of such Leaf Group Option will receive the Leaf Group Option Consideration, (ii) each outstanding Leaf Group RSU issued under the Incentive Plan that is vested immediately prior to the effective time of the merger (or would become vested by the terms thereof as a result of the merger) will be cancelled and, in consideration thereof, the holder of such Leaf Group RSU will receive the Leaf Group RSU Consideration, and (iii) each outstanding Leaf Group RSU that is not vested immediately prior to the effective time of the merger (and would not become vested by the terms thereof as a result of the merger) will, as of the effective time of the merger, be cancelled and, in consideration thereof, the holder of such unvested Leaf Group RSU will receive the Leaf Group RSU Consideration, subject to and conditioned on the same terms and conditions (including any terms and conditions relating to vesting and acceleration thereof) as applicable to such unvested awards to which such Leaf Group RSU Consideration relates.

The terms of the Leaf Group Options and Leaf Group RSUs held by all non-employee members of the Board provide for their automatic vesting upon the consummation of a transaction such as the merger. As a result, all such Leaf Group Options and Leaf Group RSUs held by the non-employee members of the Board as of immediately prior to the effective time of the merger will be cancelled and converted into the right to receive an amount in cash equal to the Leaf Group Option Consideration or the Leaf Group RSU Consideration, as applicable.

In addition, and for the avoidance of doubt, any Leaf Group Option with an exercise price equal to or greater than the merger consideration will be cancelled for no consideration.

The tables below show the number of shares underlying outstanding unvested Leaf Group RSUs estimated to be held by the Company’s executive officers as of April 16, 2021, the latest practicable date before the filing of this proxy statement, and the consideration, in cash, they can expect to receive for the Leaf Group RSUs, assuming, for assumed Leaf Group RSUs, continued employment through both (1) the merger closing date and (2) the earliest of any remaining vesting dates or an earlier qualifying termination.

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Cash Payments to Executive Officers and Directors in Respect of Leaf Group RSUs

Executive Officer	No. of Leaf Group RSUs		Consideration ($)(1)
Sean Moriarty		261,112		2,219,452
Brian Gephart		107,502		913,767
Brian Pike		95,668		813,178
Adam Wergeles		108,334		920,839
Deborah Benton		8,239		70,032
Beverly K. Carmichael		8,040		68,340
Suzanne Hopgood		25,000		212,500
Rob Krolik		18,750		159,375
Harold Logan		14,368		122,128
Jennifer Schulz		7,263		61,736

(1)

The value of Leaf Group RSUs shown in the table is based on the $8.50 per share merger consideration and the number of Leaf Group RSUs unvested as of April 16, 2021.

The tables below show the number of shares underlying outstanding Leaf Group Options estimated to be held by the Company’s executive officers as of April 16, 2021, the latest practicable date before the filing of this proxy statement, and the consideration, in cash, they can expect to receive for the Leaf Group Options, assuming continued employment through the merger closing date or an earlier qualifying termination.

Cash Payments to Executive Officers and Directors in Respect of Leaf Group Options

Executive Officer	No. of Leaf Group Options		Consideration ($)(1)
Sean Moriarty(2)		1,063,123		—
Brian Gephart		—		—
Brian Pike		205,000		572,250
Adam Wergeles		—		—
Deborah Benton		33,894		54,321
Beverly K. Carmichael		37,272		41,782
Suzanne Hopgood		—		—
Rob Krolik		11,063		27,658
Harold Logan		25,371		83,217
Jennifer Schulz		67,909		131,343

(1)

The value of Leaf Group Options shown in the table is based on the $8.50 per share merger consideration and the number of Leaf Group Options outstanding as of April 16, 2021, the latest practicable date before the filing of this proxy statement.

(2)

Sean Moriarty currently holds four outstanding option grants as follows, each with an exercise price that is in excess of the per share merger consideration: (i) an option to acquire 234,538 shares of common stock with an exercise price of $9.77, (ii) an option to acquire 460,325 shares of common stock with an exercise price of $9.77, (iii) an option to acquire 184,130 shares of common stock with an exercise price of $14.66 and (iv) an option to acquire 184,130 shares of common stock with an exercise price of $19.54. All of Mr. Moriarty’s options will be cancelled for no consideration in connection with the merger.

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Severance Entitlements

Each of the Company’s executive officers is a party to an executive agreement effective prior to the execution of the merger agreement (each referred to as an “executive agreement”) that provides for certain severance payments to be payable in the event of a termination of the executive officer’s employment by the Company without “cause” (as defined below) or resignation by the executive officer for “good reason” (as defined below) (each referred to as a “qualifying termination”).

Sean Moriarty

Pursuant to his executive agreement, if Sean Moriarty experiences a qualifying termination, then, in addition to payments of accrued compensation and benefits through the date of termination, he would be entitled to receive the following benefits:

•

continuation payments totaling two times his annual base salary then in effect, payable over the two-year period following the termination of employment (or, in connection with a change in control, as a lump-sum payment);

•

a lump-sum payment in an amount equal to any earned but unpaid bonus for the fiscal year that ends on or before the date of termination, payable on the date on which annual bonuses are paid to the Company’s senior executives generally for such year but no later than March 15 of the calendar year following the calendar year that includes the date of termination;

•

a lump-sum payment in an amount equal to a pro-rata portion of his annual bonus with respect to the fiscal year in which the date of termination occurs (calculated based on the prior year bonus actually paid or, if he elects to forego a bonus in a given fiscal year, a pro-rata portion of the annual bonus amount the Company’s compensation committee determined he was eligible to receive for the prior year), payable on the first payroll date occurring on or after the 30th day following the termination date;

•

Company-paid healthcare continuation coverage for him and his dependents for up to eighteen months after the termination date or cash installments in lieu of such subsidized coverage if the subsidies cannot be provided without adverse legal or tax consequences; and

•

(i) upon a qualifying termination outside the change in control context, accelerated vesting of each then unvested equity award held by him on the termination date with respect to the number of shares underlying each such equity award that would have vested over the one-year period immediately following the termination date had such qualifying termination not occurred or (ii) upon a qualifying termination within 90 days before or 12 months after a change in control, full accelerated vesting of each then-outstanding and unvested equity award held by him on the later of the termination date and the date of such change in control.

All Other Executive Officers

Pursuant to all other executive officers’ executive agreement, if such executive officer experiences a qualifying termination, then, in addition to payments of accrued compensation and benefits through the date of termination, such executive officer would be entitled to receive the following benefits:

•

a lump-sum payment in an amount equal to 12 months of such executive officer’s then-current annual base salary;

•

a lump-sum payment in an amount equal to any earned but unpaid bonus for the fiscal year that ends on or before the date of termination, payable on the date on which annual bonuses are generally paid for such year, but no later than March 15 of the calendar year following the calendar year that includes the date of termination;

•

accelerated vesting of each then unvested outstanding equity award held by the executive officer on his termination date with respect to the number of shares underlying each such equity award that would have vested over the 12-month period immediately following the termination date had such qualifying termination not occurred; and

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•

Company-paid healthcare continuation coverage for such executive and his dependents for up to 12 months after the termination date or cash installments in lieu of such subsidized coverage if the subsidies cannot be provided without adverse legal or tax consequences.

In the event that an executive officer’s employment is terminated by reason of a qualifying termination, in each case within 90 days before or 12 months after a “change in control,” each will also be entitled to:

•

a lump-sum payment equal to the amount of the annual bonus paid to the executive officer during the prior fiscal year pro-rated based upon the length of his employment during the year of termination; and

•

full accelerated vesting of all of the executive officer’s then unvested outstanding equity awards held by the executive officer on his termination date.

Each of the executive agreements also contains what is sometimes referred to as a “best-net” provision. If any amounts or benefits to be paid or provided under the executive agreements or otherwise would subject the executive officer to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (which generally would also cause payments or benefits (or other compensation) to not be fully deductible by the Company for federal income tax purposes because of Section 280G of the Code), such payments and benefits (and other compensation) will be reduced to the extent necessary such that no portion of such payments or benefits (or other compensation) will be subject to the excise tax imposed by Section 4999 of the Code, except that such a reduction will be made only if, by reason of such reduction, the executive officer’s net after-tax benefit exceeds the net after-tax benefit such executive officer would realize of such reduction were not made. To the extent that an independent, nationally recognized accounting firm determines that any such payments or benefits are not parachute payments for purposes of Section 280G of the Code, those payments or benefits will not be reduced.

As a condition of receiving the severance benefits under the executive agreements, the executive officers must execute a release of claims.

We have also entered into confidential information and development agreements with each of our executive officers.

The table below sets forth estimated aggregate severance payments and benefits each executive officer would be entitled to receive assuming each executive officer experiences a qualifying termination as of immediately following the completion of the merger.

Executive Officer	Severance ($)(1)
Sean Moriarty		1,075,771
Brian Gephart		359,806
Brian Pike		419,116
Adam Wergeles		420,417

(1)

These amounts are based only on each executive officer’s base salary in effect as of April 1, 2021, annual bonuses paid for the 2020 fiscal year and monthly benefits continuation amounts. These amounts do not include the value of equity awards that would be accelerated in the event of a qualifying termination.

For purposes of Sean Moriarty’s executive agreement, “cause” means the occurrence of any one or more of the following events: (i) the executive’s unauthorized use or disclosure of confidential information or trade secrets of the Company or any subsidiary, in either case, that results in harm to the Company’s reputation or business, or any other material breach of a written agreement between the executive and the Company, including without limitation a material breach of the executive’s employment agreement or the confidentiality agreement; (ii) the executive’s indictment for, or the entry of a plea of guilty or nolo contendere by the executive to, a felony under the laws of the United States or any state thereof or other foreign jurisdiction or any crime involving material dishonesty or moral turpitude; (iii) the executive’s willful misconduct or the executive’s willful or repeated failure or refusal to substantially perform assigned duties;

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or (iv) any act of fraud, embezzlement, or material misappropriation or material dishonesty committed by the executive against the Company or any subsidiary.

For purposes of all other executive agreements, “cause” means (i) the executive’s unauthorized use or disclosure of confidential information or trade secrets of the Company or any subsidiary or any other material breach of a written agreement between the executive and the Company, including without limitation a material breach of any employment or confidentiality agreement; (ii) the executive’s indictment for, or the entry of a plea of guilty or nolo contendere by the executive to, a felony under the laws of the United States or any state thereof or other foreign jurisdiction or any crime involving dishonesty or moral turpitude; (iii) the executive’s gross negligence or willful misconduct or the executive’s willful or repeated failure or refusal to substantially perform assigned duties; (iv) any act of fraud, embezzlement, material misappropriation or dishonesty committed by the executive against the Company or any subsidiary; or (v) any acts, omissions or statements by an executive which the Company reasonably determines to be materially detrimental or damaging to the reputation, operations, prospects or business relations of the Company or any subsidiary.

For purposes of Sean Moriarty’s executive agreement, “good reason” means the occurrence of any one or more of the following events, in any case, without the executive’s prior written consent, unless the Company fully corrects the circumstances constituting good reason (provided such circumstances are capable of correction) as provided below: (i) any action by the Company that results in a demotion or material diminution of the executive’s position, authority, duties or responsibilities (other than any insubstantial action not taken in bad faith and which is promptly remedied by the Company upon notice by the executive); provided that “good reason” does not include a change in title, authority, duties and/or responsibilities that occurs within ninety (90) days following a Change in Control (as defined in the Company’s 2010 Incentive Award Plan) if (A) the entity surviving such Change in Control (or, if applicable, its parent company if such entity has a parent company) continues to operate the Company’s principal businesses as a separate unit, division or subsidiary or combines the Company’s principal businesses with one of its existing units, divisions or subsidiaries and (B) the executive’s new title is that of the principal executive officer of such unit, division or subsidiary and the executive’s authority, duties and responsibilities are commensurate with such title and are similar in scope (with respect to such unit, division or subsidiary) to the authority, duties and responsibilities of the executive prior to the Change in Control; (ii) a requirement that the executive report to work more than twenty (20) miles from the Company’s Principal Location (as defined in Sean Moriarty’s executive agreement and not including normal business travel required of the executive’s position) or, to the extent such requirement would not constitute a material change in the geographic location at which the executive must perform services under the agreement within the meaning of Section 409A of the Code, such higher number of miles from the Company’s Principal Location (as defined in Sean Moriarty’s agreement) as would constitute a material change in the geographic location at which the executive must perform services under the agreement within the meaning of Section 409A of the Code; or (iii) a material breach by the Company of its obligations under Sean Moriarty’s executive agreement.

For purposes of all other executive agreements, “good reason” has substantially similar meaning, which includes occurrence of any one or more of the following events, in any case, without the executive’s prior written consent, unless the Company fully corrects the circumstances constituting good reason (provided such circumstances are capable of correction): (i) a demotion or material diminution of the executive’s position, authority, duties or responsibilities (other than any insubstantial action not taken in bad faith and which is promptly remedied by the Company upon notice by the executive and, in the case of Brian Pike, excluding a change in his title, authority, duties and/or responsibilities relating to his role as Chief Technology Officer); provided that “good reason” does not include a change in title, authority, duties and/or responsibilities following a Change in Control (as defined in the Company’s 2010 Incentive Award Plan) if (A) the executive’s new title is that of a senior officer of the entity surviving such Change in Control (or, if applicable, its parent company if such entity has a parent company) reporting directly to an executive officer of the entity surviving such Change in Control (or, if applicable, its parent company, if such entity has a parent company), and the executive’s authority, duties and responsibilities are commensurate with such title or (B) (1) the entity surviving such Change in Control (or, if applicable, its parent company if such entity has a parent company) continues to operate the Company’s principal businesses as a separate unit, division or subsidiary or combines the Company’s principal businesses with one of its existing units, divisions or subsidiaries and (2) the executive’s new title is that of a senior officer of such unit, division or subsidiary

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reporting directly to an executive officer of such unit, division or subsidiary (or to an executive officer of the entity surviving the Change in Control or parent company thereof) and (in either case), the executive’s authority, duties and responsibilities are commensurate with such title and similar in scope (with respect to such unit, division or subsidiary) to the authority, duties and responsibilities of the executive prior to the Change in Control; (ii) a requirement that the Executive report to work more than twenty (20) miles (thirty miles, in the case of Adam Wergeles) from the Company’s Principal Location (as defined in the agreement and not including normal business travel required of the executive’s position) or, to the extent such requirement would not constitute a material change in the geographic location at which the executive must perform services under the agreement within the meaning of Section 409A of the Code, such higher number of miles from the Company’s Principal Location as would constitute a material change in the geographic location at which the executive must perform services under the agreement within the meaning of Section 409A of the Code; (iii) a material reduction in the executive’s base salary; or (iv) a material breach by the Company of its material obligations under the relevant executive agreement.

New Management Arrangements

As of the date of this proxy statement, none of the Company, Parent or the merger subsidiary has entered into any employment agreements with the Company’s executive officers in connection with the merger. Following the closing of the merger, however, certain executive officers of the Company may have discussions, or may enter into agreements with, Parent or the merger subsidiary or their respective affiliates regarding employment with, or the right to purchase or participate in the equity of, the surviving corporation or one or more of its affiliates.

Continuing Employee Benefits

The merger agreement provides that, until December 31, 2021 (referred to as the “continuation period”), Parent will, or will cause the surviving corporation to, provide employees of the Company and the Company’s subsidiaries who continue employment with the surviving corporation or one of its affiliates following the closing (referred to as “continuing employees”) with (i) (A) base salary or base hourly wage rate (as applicable) and (B) cash incentive compensation opportunity (including bonuses and commissions), in each case in an amount at least equal to the level that was provided to each such continuing employee immediately prior to the closing of the merger (in each case, to the extent such compensation was disclosed in the disclosure schedules delivered by the Company to Parent concurrently with the entry into the merger agreement) and (ii) other employee benefits that are comparable in the aggregate to either, as determined by Parent in its sole discretion, (x) those provided to each such continuing employee immediately prior to the closing of the merger or (y) those provided to similarly situated employees of Parent or its affiliates.

The foregoing summary is qualified in its entirety by reference to the merger agreement, which is filed as Annex A to this proxy statement and is incorporated herein by reference.

Company Retention Plan

In connection with the execution of the merger agreement, the Company Board approved the Leaf Group Ltd. Retention Plan (the “Retention Program”). Under the Retention Program, the compensation committee of the Board has selected officers who will be eligible to receive certain retention bonuses and the amount of such bonuses and Sean Moriarty has selected other employees who will be eligible to receive certain retention bonuses and the amount of such bonuses. Mr. Moriarty is not eligible to receive any payments under the Retention Program. Brian Gephart and Brian Pike were each granted bonuses of $100,000 and Adam Wergeles was granted a bonus of $150,000 under the Retention Program.

Each Retention Program participant is entitled to a lump sum cash bonus upon the earlier of (i) a Change in Control (as defined in the Retention Program, which would include consummation of the merger) or termination of the merger agreement or (ii) a termination of employment without Cause (as defined in the Retention Program) prior to such Change in Control or termination of the merger agreement. Any bonus payable pursuant to the Retention Program is subject to reduction in the event such bonus, in addition to other payments, would be subject to the excise tax imposed by Section 4999 of the Code, such that the aggregate of all payments would not be subject to such excise tax, but only if, after such reduction, the

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value of the reduced payments exceeds the amount the participant would have received had such payments been subject to such excise tax and all applicable taxes, assuming the highest marginal rate of tax.

Director and Officer Indemnification

Pursuant to the terms of the merger agreement, members of the Board and executive officers of the Company will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies following the merger. For a more detailed description of the provisions of the merger agreement relating to director and officer indemnification, please see the section of this proxy statement titled “The Merger Agreement — Indemnification of Directors and Officers and Insurance.”

Quantification of Payments and Benefits

In accordance with Item 402(t) of Regulation S-K, the table below sets forth for each of the Company’s named executive officers the estimated amount of compensation based on or otherwise related to the merger and that will or may become payable to the named executive officer (i) solely as a result of the completion of the merger (i.e., on a “single-trigger” basis) or (ii) conditioned on a qualifying termination of employment following or in connection with the merger (i.e., on a “double-trigger” basis). The holders of common stock are being asked to approve, on a non-binding, advisory basis, such compensation for the named executive officers. Because the vote to approve such compensation is advisory only, it will not be binding on the Company, Parent or the merger subsidiary. Accordingly, if the proposal to adopt the merger agreement is approved by the holders of common stock and the merger is completed, the compensation will be payable regardless of the outcome of the vote to approve such compensation, subject only to the conditions applicable thereto, which are described in the footnotes to the table below and above under “— Interests of the Company’s Directors and Executive Officers in the Merger.”

The potential payments in the table below are based on the following assumptions:

•

the relevant price per share of common stock is $8.50;

•

the effective time of the merger is June 30, 2021, which is the assumed date of the effectiveness of the merger solely for purposes of this compensation disclosure;

•

each named executive officer’s employment is subject to a qualifying termination immediately following the effective time of the merger, which is assumed, for purposes of this compensation disclosure, to be June 30, 2021;

•

each named executive officer holds the outstanding equity awards that were held by each named executive officer as of April 16, 2021, the latest practicable date before the filing of this proxy statement;

•

the amounts set forth in the tables below regarding named executive officer compensation are based on compensation levels as of April 1, 2021; and

•

the “best-net” provision contained in the executive agreements, described above under “— Severance Entitlements,” will not apply.

The amounts shown are estimates of amounts that would be payable to the named executive officers based on multiple assumptions that may or may not actually occur, including the assumptions described above. Some of the assumptions are based on information not currently available and, as a result, the actual amounts received by a named executive officer may differ materially from the amounts shown in the following table.

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The following table and footnotes describe the benefits each named executive officer is eligible to receive in connection with the completion of the merger.

Potential Payments to Named Executive Officers

Named Executive Officer (1)(2)	Cash ($)		Equity ($)(3)		Perquisites/ Benefits ($)(4)		Total ($)
Sean Moriarty
Single-Trigger		—		—		—		—
Double-Trigger		1,024,306		2,219,452		51,465		3,295,223
Brian Gephart
Single-Trigger		100,000		—		—		100,000
Double-Trigger		459,806		913,767		—		1,373,573
Brian Pike
Single-Trigger		100,000		572,250		—		672,250
Double-Trigger		484,806		1,385,428		34,310		1,904,544

(1)

Except for payments under the Company’s Retention Plan, the payments listed as “double-trigger” are payable in the event of a qualifying termination of employment during the period beginning 90 days before the effective time of the merger and ending 12 months after the effective time of the merger. All payments listed as “single-trigger” are payable in connection with the transaction regardless of whether any other event occurs. Payments under the Company's Retention Plan are also payable in the event of (A) a qualifying termination or (B) termination of the merger agreement, in each case, regardless of whether any other event occurs. Payments under the Company's Retention Plan are included in both the single-trigger and double-trigger rows for illustrative purposes even though only a single trigger is required for the payments.

(2)

Single-trigger payments that represent the amounts payable pursuant to the Company’s Retention Plan. In addition to such amounts, double-trigger payments include cash severance payable pursuant to each named executive officer’s executive agreement. For further information on each the Company’s retention plan or each named executive officer’s severance entitlements, see “— Retention Plan” or “— Severance Entitlements,” above.

The following table quantifies the base salary severance, bonus component of the severance and retention bonus reported in the “Cash” column above.

Name	Base Salary Severance ($)		Bonus Component of Severance ($)		Retention Bonus ($)
Sean Moriarty		900,000		124,306		0
Brian Gephart		325,000		34,806		100,000
Brian Pike		350,000		34,806		100,000

(3)

Single-trigger payments represent the amounts payable with respect to Leaf Group Options, which will be cancelled in exchange for lump sum cash payments in accordance with the terms of the merger agreement. For illustrative purposes, amounts payable with respect to Leaf Group Options are also included in the double-trigger payments. For further information on the treatment of options, see “— Treatment of Equity and Equity-Based Awards” above.

(4)

Consists of payment of Company-paid COBRA continuation coverage for each named executive officer following the date of a qualifying termination. The value is based upon the type of insurance coverage the Company carried for each named executive officer as of April 1, 2021 and is valued at the premiums in effect on such date.

Material U.S. Federal Income Tax Considerations

The following discussion summarizes certain material U.S. federal income tax considerations applicable to holders of common stock who receive cash in exchange for shares of common stock pursuant to the

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merger. This discussion is for general informational purposes only and does not purport to be a complete analysis of all potential tax consequences of the merger. This discussion is based upon the provisions of the Code, the U.S. Treasury Regulations promulgated thereunder and judicial decisions and administrative rulings, all as in effect as of the date of this proxy statement and all of which are subject to change or varying interpretation, possibly with retroactive effect. Any such change or differing interpretation could affect the accuracy of the statements set forth herein. The U.S. federal income tax laws are complex and subject to varying interpretation. We have not sought, and do not intend to seek, any ruling from the Internal Revenue Service (referred to as the “IRS”) regarding any of the tax issues discussed herein. There can be no assurance that the IRS will not challenge one or more of the tax consequences of the merger described herein.

This discussion assumes that holders of common stock hold their shares as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a particular holder of common stock in light of such holder’s individual circumstances, nor does it address U.S. state or local, non-U.S., or estate or gift taxes, the alternative minimum tax and the rules regarding qualified small business stock within the meaning of Section 1202 of the Code. This discussion also does not address tax considerations that may be relevant to holders of common stock subject to special treatment under the U.S. federal income tax laws, such as, for example, financial institutions, brokers or dealers in securities or currencies, real estate investment trusts, regulated investment companies, partnerships or other entities or arrangements classified as partnerships for U.S. federal income tax purposes or other pass-through entities and their partners or members, S corporations, tax-exempt organizations, governmental organizations, retirement or other tax-deferred accounts, insurance companies, traders in securities who elect mark-to-market method of accounting, controlled foreign corporations, passive foreign investment companies, corporations that accumulate earnings to avoid U.S. federal income tax, U.S. expatriates and former citizens or long-term residents of the United States, holders who acquired their common stock through the exercise of Leaf Group Options or otherwise as compensation, holders who hold their common stock as part of a hedge, straddle, constructive sale or conversion transaction, U.S. holders (as defined below) whose functional currency is not the U.S. dollar, except to the extent set forth below under “— Application of Section 304,” persons who own (directly, indirectly or constructively) an equity interest in Parent or the surviving corporation, holders who exercise appraisal rights in connection with the merger under the DGCL, and holders who own or have owned (directly, indirectly or constructively) 5% or more of the Company’s common stock (by vote or value).

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and activities of the partner and the partnership. If you are a partnership holding common stock or a partner of a partnership holding common stock, you are urged to consult your own tax advisor regarding the U.S. federal income tax consequences of the merger relevant to you.

This discussion is for informational purposes only and is not tax advice. Holders of common stock are urged to consult their tax advisors with respect to the U.S. federal income tax consequences of the merger to them in light of their particular circumstances, as well as any tax consequences of the merger arising under the U.S. federal tax laws other than those pertaining to income tax, including estate or gift tax laws, or under any state, local or non-U.S. tax laws or under any applicable income tax treaty.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of common stock that, for U.S. federal income tax purposes, is:

•

an individual who is a citizen or resident of the United States;

•

a domestic corporation;

•

a trust if (1) its administration is subject to the primary supervision of a court within the United States and one or more U.S. persons as described in Section 7701(a)(30) of the Code have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person (within the meaning of the Code); and

•

an estate, the income of which is subject to U.S. federal income tax regardless of its source.

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For purposes of this discussion, a “non-U.S. holder” means a beneficial owner of common stock that is, for U.S. federal income tax purposes, an individual, a corporation, a trust or an estate that is not a U.S. holder.

Application of Section 304

If one or more persons in the aggregate, control (as defined below) both the Company and Parent before the merger, then Section 304 of the Code may apply to treat the receipt of the merger consideration by a holder that owns (actually or constructively) Parent stock as a distribution by Parent in redemption of Parent stock deemed issued in exchange for such holder’s Company common stock. Such distribution will be treated as dividend income if none of the tests under Section 302(b) of the Code apply to such holder and only to the extent of Parent and the Company’s aggregate earnings and profits. “Control,” for this purpose, generally means actual and constructive ownership of more than 50% of the outstanding stock, by vote or by value, aggregating shares of stock held by all holders of shares of stock of the Company and of shares of stock of Parent, regardless of whether such holders are related.

To the knowledge of the Company and Parent, it is not the case that one or more persons control the Company and Parent for purposes of Section 304 of the Code. The discussion below accordingly assumes that Section 304 of the Code does not apply to the merger. Because the Company and Parent do not have sufficient information to definitely determine that Section 304 of the Code will not apply to the merger, however, and, if it applies, the U.S. federal income tax consequences will depend on each holder’s particular circumstances, holders of shares of Company common stock that are also holders of shares of stock of Parent are urged to consult their tax advisors regarding the application of Sections 304 and 302 of the Code, including whether it may be desirable to sell their shares of Company common stock before the merger.

U.S. Holders

The receipt of cash in exchange for shares of common stock pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes.

Subject to the discussion above under “— Application of Section 304,” a U.S. holder generally will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received pursuant to the merger (determined before the deduction of any applicable withholding taxes) and such U.S. holder’s adjusted tax basis in the shares exchanged for cash pursuant to the merger. A U.S. holder’s adjusted tax basis in a share of common stock will generally be equal to the amount the U.S. holder paid for such share. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the U.S. holder’s holding period for such shares exceeds one year as of the date of the closing. Long-term capital gains for certain non-corporate U.S. holders, including individuals, are generally eligible for a reduced rate of federal income taxation. Short-term capital gains are taxed at ordinary income rates. The deductibility of capital losses is subject to limitations. Gain or loss must be calculated separately for each block of common stock (i.e., common stock acquired at the same time and at the same price in a single transaction). U.S. holders who own separate blocks of common stock should consult their own tax advisors with respect to these rules.

Non-corporate U.S. holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally are subject to a Medicare tax at a rate of 3.8% on all or a portion of their “net investment income,” which may include net gain realized on the exchange of shares of common stock for cash pursuant to the merger. A U.S. holder that is an individual, estate or trust should consult its tax advisors regarding the applicability of this Medicare tax to any gain realized on the exchange of shares of common stock for cash pursuant to the merger.

A U.S. holder may, unless an exception applies, be subject to information reporting and backup withholding (currently at a rate of 24%) with respect to the cash received pursuant to the merger, unless such U.S. holder provides its correct taxpayer identification number (referred to as the “TIN”) on IRS Form W-9 (or if appropriate, a substitute or successor form) and certifies under penalties of perjury that such TIN is correct and that such U.S. holder is not subject to backup withholding. Backup withholding is not an additional tax. Rather, any amounts withheld under the backup withholding rules may be refunded or

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credited against a U.S. holder’s U.S. federal income tax liability, if any; provided that such U.S. holder furnishes the required information to the IRS in a timely manner and other requirements are satisfied.

Non-U.S. Holders

Subject to the discussion above under “— Application of Section 304,” any gain recognized on the receipt of cash pursuant to the merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:

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the gain is effectively connected with the conduct of a U.S. trade or business of such non-U.S. holder (and, if required by an applicable income tax treaty, is also attributable to a permanent establishment or, in the case of an individual, a fixed base in the United States maintained by such non-U.S. holder), in which case the non-U.S. holder generally will be subject to tax on such gain in the same manner as a U.S. holder and, if the non-U.S. holder is a foreign corporation, such corporation may be subject to branch profits tax at the rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on after-tax profits effectively connected with a U.S. trade or business to the extent that such after-tax profits are not reinvested and maintained in the business;

•

the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the merger and certain other conditions are met, in which case the non-U.S. holder generally will be subject to a 30% tax (or tax at such lower rate as may be specified under an applicable income tax treaty) on the non-U.S. holder’s net gain realized in the merger, which may be offset by certain U.S. source capital losses of the non-U.S. holder, if any (even though the individual is not considered a resident of the United States), provided that such non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses; or

•

the Company is or has been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of (i) the five-year period ending on the date of the merger and (ii) the non-U.S. holder’s holding period in the common stock, and, at any time during such period, the non-U.S. holder owned (directly, indirectly or constructively) more than 5% of the outstanding common stock. Generally, a corporation is a U.S. real property holding corporation only if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although there can be no assurances in this regard, the Company does not believe that it is or was a “United States real property holding corporation” for U.S. federal income tax purposes during the applicable five-year period.

A non-U.S. holder will be subject to information reporting and, in certain circumstances, backup withholding (currently at a rate of 24%) with respect to the cash received by such non-U.S. holder pursuant to the merger, unless such non-U.S. holder provides the paying agent with an applicable and properly executed IRS Form W-8 certifying under penalties of perjury the holder’s non-U.S. status (and the payor or applicable withholding agent does not have actual knowledge or reason to know that the non-U.S. holder is a U.S. person as defined under the Code) or otherwise establishes an exemption. Copies of information returns that are filed with the IRS may be made available under an applicable tax treaty or information exchange agreement to the tax authorities of the country in which the non-U.S. holder resides or is established. Backup withholding is not an additional tax. Rather, any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any, provided that the non-U.S. holder furnishes the required information to the IRS in a timely manner and other applicable requirements are satisfied. Non-U.S. holders should consult their tax advisors regarding the application of the information reporting and backup withholding rules to them.

Regulatory Approvals Required for the Merger

U.S. Antitrust

Under the HSR Act and the rules and regulations promulgated thereunder, the merger may not be completed until notifications have been filed and certain information has been furnished to FTC and DOJ and the specified waiting period has expired or have been terminated. The Company and Parent each filed or

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caused to be filed the requisite notification forms under the HSR Act with the DOJ and the FTC on April 16, 2021, and both requested “early termination” of the waiting period. The required waiting period is scheduled to expire at 11:59 p.m. Eastern time on May 17, 2021, unless earlier terminated or if the FTC or DOJ extends that period by issuing a request to the parties for additional information. Both before and after the expiration or termination of the applicable waiting period, the FTC and the DOJ retain the authority to challenge the merger on antitrust grounds.

In addition, the merger may be reviewed by the state attorneys general in the various states in which Parent and the Company operate. These authorities may claim that there is authority, under the applicable state and federal antitrust laws and regulations, to investigate and/or seek to prohibit the merger under the circumstances and based on the standards set forth in applicable state laws and regulations. There can be no assurance that one or more state attorneys general will not attempt to file an antitrust action to challenge the merger. As of the date of this document, neither Parent nor the Company has been notified by any state attorney general indicating any plan to review the merger.

Delisting and Deregistration of the Leaf Group Common Stock

If the merger is completed, the shares of common stock will be delisted from the NYSE and deregistered under the Exchange Act, and shares of common stock will no longer be publicly traded.

Litigation Related to the Merger

On April 26, 2021, purported stockholder Shiva Stein filed suit against the Company and each of its directors — Deborah Benton, Sean Moriarty, Jennifer Schultz, Beverly Carmichael, Rob Krolik, Suzanne Hopgood and Harold Logan — in the United States District Court for the Southern District of New York (Stein v. Leaf Group et al, Civil Action No. 1:21-cv-03693 (S.D.N.Y. 2021)). On May 4, 2021, purported stockholder Myrtle Sorenson filed suit against the Company and each of its directors in the United States District Court for the Southern District of New York (Sorenson v. Leaf Group et al, Civil Action No. 1:21-cv-03980 (S.D.N.Y. 2021)).

The complaints in each of the lawsuits allege violations of Sections 14(a) and 20 of the Exchange Act based on supposed material omissions from the preliminary version of this proxy statement filed by Leaf Group on April 23, 2021. Plaintiffs request, among other things, that the court enjoin or, to the extent implemented, rescind the merger or grant rescissory damages, along with other equitable relief; the plaintiffs have not filed a motion for preliminary injunction in either case. The Company believes each of the lawsuits lacks any merit and intends to vigorously defend against the claims made.

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THE MERGER AGREEMENT

The following is a summary of the material provisions of the merger agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated into this proxy statement by reference. We urge you to carefully read this entire proxy statement, including the annexes and the other documents to which we have referred you. You should also review the section titled “Where You Can Find Additional Information.”

The merger agreement has been included for your convenience to provide you with information regarding its terms, and we recommend that you read it in its entirety. The merger agreement is a contractual document that establishes and governs the legal relations between the Company, Parent and the merger subsidiary, and allocates risks among the parties, with respect to the merger, the other agreements contemplated by the merger agreement, and the transactions contemplated by the merger agreement.

The representations and warranties of the Company, Parent and the merger subsidiary contained in the merger agreement have been made solely for the benefit of the parties to the merger agreement. In addition, such representations and warranties (a) have been made only for purposes of the merger agreement and have been qualified by certain documents filed with, or furnished to, the SEC by the Company prior to the date of the merger agreement, (b) are subject to important qualifications, limitations and supplemental information agreed to by the Company, Parent and the merger subsidiary in connection with negotiating the terms of the merger agreement, (c) are subject to materiality qualifications contained in the merger agreement which may differ from what may be viewed as material by investors, (d) were made only as of the date of the merger agreement or such other date as is specified in the merger agreement and (e) have been included in the merger agreement for the purpose of allocating risk between the Company, on the one hand, and Parent and the merger subsidiary, on the other hand, rather than establishing matters as facts. Accordingly, the merger agreement is included with this proxy statement only to provide investors with information regarding the terms of the merger agreement and not to provide investors with any other factual information regarding the Company or Parent or their respective subsidiaries or businesses. Investors should not rely on the representations and warranties or any descriptions thereof as characterization of the actual state of facts or condition of the Company or Parent or their respective subsidiaries or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.

The representations and warranties in the merger agreement and the description of them in this proxy statement should not be read alone but instead should be read in conjunction with the other information contained in the reports, statements and filings the Company publicly files with the SEC. Such information can be found elsewhere in this proxy statement and in the public filings the Company makes with the SEC, as described in the section titled “Where You Can Find Additional Information.”

The Merger

Upon the terms and subject to the conditions of the merger agreement and in accordance with the DGCL, at the effective time of the merger, the merger subsidiary will merge with and into the Company, the separate corporate existence of the merger subsidiary will thereupon cease and the Company will continue as the surviving corporation of the merger as a wholly owned subsidiary of Parent.

Closing and Effective Time of the Merger

The closing of the merger will take place at 8:00 a.m., local time, as soon as practicable, but no later than second business day, after the satisfaction or waiver (to the extent permitted by law) of all of the conditions described in the section below titled “— Conditions to the Merger,” or at such other place or time or on such other date as Parent and the Company may mutually agree in writing.

The merger will become effective at the time a certificate of merger is filed with the Secretary of State of the State of Delaware or at such later time stated in the certificate of merger and agreed to by the parties. The time that the merger becomes effective is referred to as the “effective time” of the merger.

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Certificate of Incorporation and Bylaws; Directors and Officers

At the effective time of the merger, the Company’s certificate of incorporation will be amended and restated to be in the form of Exhibit A to the merger agreement and the Company’s bylaws will be amended and restated to be in the form of Exhibit B to the merger agreement.

Under the merger agreement, the directors of the merger subsidiary immediately prior to the effective time of the merger will be the directors of the surviving corporation immediately after the effective time of the merger. The officers of the Company immediately prior to the effective time of the merger become the officers of the surviving corporation immediately after the effective time of the merger.

Consideration to be Received in the Merger

At the effective time of the merger, each share of common stock that is outstanding immediately prior to the effective time of the merger (other than shares held by the Company as treasury stock, owned by Parent or the merger subsidiary or as to which the holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be automatically converted into the right to receive the merger consideration.

Treatment of Company Stock Awards

At the effective time of the merger, by virtue of the merger and without any action on the part of the holders, (i) each Leaf Group Option issued under the Incentive Plan will be cancelled and, in consideration thereof, the holder of such Leaf Group Option will receive the Leaf Group Option Consideration, (ii) each outstanding Leaf Group RSU issued under the Incentive Plan that is vested immediately prior to the effective time of the merger (or would become vested by the terms thereof as a result of the merger) will be cancelled and, in consideration thereof, the holder of such Leaf Group RSU will receive the Leaf Group RSU Consideration, and (iii) each outstanding Leaf Group RSU that is not vested immediately prior to the effective time of the merger (and would not become vested by the terms thereof as a result of the merger) will, as of the effective time of the merger, be cancelled and, in consideration thereof, the holder of such unvested Leaf Group RSU will receive the Leaf Group RSU Consideration, subject to and conditioned on the same terms and conditions (including any terms and conditions relating to vesting and acceleration thereof) as applicable to such unvested awards to which such Leaf Group RSU Consideration relates.

Leaf Group RSU Consideration with respect to a Leaf Group RSU that is not vested immediately prior to the effective time of the merger (and would not become vested by the terms thereof as a result of the merger) will be paid as soon as reasonably practicable after the final day of the calendar quarter in which the applicable vesting date occurs, but in any event no later than the earlier of (i) the first regular payroll date of the surviving corporation or Parent, or an affiliate thereof, as applicable, that is at least 10 business days following the end of such calendar quarter, and (ii) March 15 of the calendar year immediately after such applicable vesting date.

In addition, and for the avoidance of doubt, any Leaf Group Option with an exercise price equal to or greater than the merger consideration will be cancelled for no consideration.

Treatment of Employee Stock Purchase Plan

As soon as practicable following the date of the merger agreement, the Board (or, if appropriate, any committee administering the ESPP) will adopt resolutions or take other actions to provide that: (a) if the

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current offering period under the ESPP is scheduled to end after the closing date of the merger, (i) the final exercise date for such offering period will be no later than the date that is five days prior to the effective time of the merger, (ii) each ESPP participant’s accumulated contributions under the ESPP will be used to purchase shares of Company common stock in accordance with the terms of the ESPP as of the final exercise date and (iii) the ESPP will terminate on the date immediately prior to the date on which the effective time of the merger occurs and no further rights will be granted or exercised under the ESPP thereafter; (b) if the current offering period is scheduled to end prior to the closing date of the merger, such offering period and the ESPP will be operated in the ordinary course in accordance with the existing terms of the ESPP and such offering period (except as provided in the clause (c) below); and (c) from and after the date of the merger agreement, no new offering periods will commence under the ESPP, no new participants will be entitled to enroll in the ESPP, and no current ESPP participants will be permitted to increase their elections under the ESPP.

Procedure for Receiving Merger Consideration

Prior to the effective time of the merger, Parent will appoint American Stock Transfer & Trust Company LLC, referred to as “paying agent” (or such other institution mutually acceptable to Parent and the Company) to act as paying agent for the payment of merger consideration upon surrender of certificated and uncertificated shares of common stock. Parent will, on the closing date of the merger, provide the paying agent all the cash necessary to pay for the shares of common stock converted into the right to receive cash pursuant to the merger agreement (which is referred to as the “exchange fund”).

Within two (2) business days after the effective time of the merger, Parent will cause the paying agent to mail to each holder of record of common stock a letter of transmittal, a notice advising such holder of the effectiveness of the merger, and instructions for use in effecting the surrender of holder’s certificates or book entry shares in exchange for payment of the merger consideration. Upon surrender to the paying agent of each such certificates or book entry shares, together with a properly executed letter of transmittal and such other documents as may reasonably be required by the paying agent or pursuant to such instructions, the holder will as promptly as practicable receive the amount of cash to which such holder is entitled. In the event of a transfer of ownership of common stock that is not registered in the transfer records of the Company, payment may be made to a person other than the person in whose name the certificate or book entry share so surrendered is registered, subject to endorsement of such certificate and the same being in proper form for transfer, and in which case the person requesting such payment is required to pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such certificate or establish to the satisfaction of Parent that such tax has been paid or is not applicable. Until surrendered or transferred, each certificate shall be deemed at any time after the effective time of the merger to represent only the right to receive upon such surrender merger consideration. No interest will be paid or accrue on any cash payable upon surrender of any certificate or book entry. You should not send in your common stock certificates until you receive a letter of transmittal with instructions from the paying agent. Do not send common stock certificates with your proxy card.

Following the effective time of the merger, each holder of common stock will cease to have any rights with respect to such common stock, except for the right to receive the merger consideration or, in the case of stockholders who have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL, such rights as are provided by Section 262 of the DGCL.

In the event any certificate representing common stock has been lost, stolen or destroyed, the person claiming such certificate to be lost, stolen or destroyed is required to make an affidavit of that fact and, if required by Parent or the paying agent, must post a bond in customary amount and upon such terms as may be required by Parent or the paying agent as indemnity against any claim that may be made against it or the surviving corporation with respect to such certificate. Upon satisfaction of the foregoing, the paying agent will issue in exchange for such lost, stolen or destroyed certificate the merger consideration, without any interest thereon.

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Pursuant to the merger agreement, the paying agent, Parent, the surviving corporation and any other applicable withholding agent may deduct and withhold from any cash amounts payable under the merger agreement any amounts as are required to be deducted or withheld pursuant to applicable tax laws.

Representations and Warranties

In the merger agreement, the Company, Parent and the merger subsidiary made a number of representations and warranties to each other. The parties’ reciprocal representations and warranties relate to, among other things:

•

due organization, valid existence, good standing, qualification to do business and power and authority to enter into the merger agreement and consummate the transactions contemplated thereby;

•

required governmental filings, consent and approval of governmental entities in connection with the merger agreement and the merger;

•

the absence of any violation of or conflict with such party’s organizational documents, applicable laws or material contracts as a result of entering into the merger agreement and consummating the merger;

•

the accuracy of the information supplied by such party for inclusion or incorporation by reference into this proxy statement; and

•

the absence of undisclosed broker’s, finder’s, financial advisor’s or other similar fees or commissions in connection with the transactions contemplated by the merger agreement.

In addition to the foregoing, the merger agreement contains representations and warranties made by the Company to Parent and the merger subsidiary, including regarding:

•

the due incorporation or organization, good standing, power and authority and qualifications of the Company’s subsidiaries;

•

the Company’s and its subsidiaries’ capitalization and capital structure;

•

the authority of the Company to execute and deliver the agreements contemplated by the merger agreement, approval of the merger agreement by the Board and recommendation that the stockholders vote to adopt the merger agreement;

•

internal controls over financial reporting;

•

the accuracy and sufficiency of the reports and financial statements filed with the SEC;

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the absence of certain changes or events;

•

the absence of a Company material adverse effect (as defined below)

•

intellectual property matters;

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IT systems and data privacy;

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real property;

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material contracts;

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certain legal proceedings and government or court orders;

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compliance with applicable laws;

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compliance with trade control and anticorruption laws;

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the possession and validity of permits necessary for the conduct of the Company’s businesses;

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tax matters;

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employee compensation and benefits matters;

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labor and employment matters;

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environmental matters;

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•

insurance;

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the stockholder approvals required to consummate the merger;

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the receipt of Canaccord Genuity’s opinion;

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compliance with the terms of the Company’s PPP loan and other related matters; and

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the inapplicability of anti-takeover provisions to the merger agreement, the other agreements contemplated by the merger agreement and the transactions contemplated thereby.

In addition, the merger agreement contains representations and warranties made by Parent and the merger subsidiary to the Company, including regarding:

•

sufficiency of funds held by Parent and the merger subsidiary to satisfy their obligations under the merger agreement;

•

Parent not being an “interested stockholder” of the Company; and

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the merger subsidiary’s capitalization, capital structure and activities.

Significant portions of the representations and warranties of the Company are qualified as to “materiality,” a “Company material adverse effect” or the “knowledge” of the Company, and certain portions of the representations and warranties of Parent and the merger subsidiary are qualified as to “materiality,” a “Parent material adverse effect” or the “knowledge” of the Parent or the merger subsidiary, as applicable.

Under the merger agreement, a “Company material adverse effect” means any effect, change, event, occurrence, circumstance, condition, state of facts or development that, individually or when taken together with any other effect, change, event, occurrence, circumstance, condition, state of facts or development, (i) does or would reasonably be expected to prevent or materially impair or materially delay the consummation of the merger by the Company prior to the end date or (ii) is or would reasonably be expected to be materially adverse to the business, operations, assets, liabilities, financial condition or results of operations of the Company and its subsidiaries taken as a whole. For purposes of the foregoing clause (ii), the following events, to the extent arising after the date of the merger agreement, will be taken into account in determining whether there is a Company material adverse effect:

•

changes in the Company’s stock price or trading volume, in and of themselves (but not, in each case, the underlying cause of such change, unless such underlying cause would otherwise be excepted from this definition);

•

any failure by the Company to meet, or changes to, published revenue, earnings or other financial projections, or any failure by the Company to meet any internal budgets, plans or forecasts of revenue, earnings or other financial projections, in each case in and of itself (but not, in each case, the underlying cause of such failure, unless such underlying cause would otherwise be excepted from this definition);

•

general business, economic or political conditions in the United States or any other country or region in the world, or changes therein*;

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conditions in the financial, credit, banking, capital or currency markets in the United States or any other country or region in the world, or changes therein, including (1) changes in interest rates in the United States or any other country and changes in exchange rates for the currencies of any countries and (2) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in the United States or any other country or region in the world*;

•

changes in general conditions in an industry in which the Company and its subsidiaries operate*;

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acts of hostilities, war, sabotage or terrorism (including any outbreak, escalation or general worsening of any such acts of hostilities, war, sabotage or terrorism) in the United States or any other country or region in the world*;

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•

earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wildfires or other natural or man-made disasters or acts of God or weather conditions in the United States or any other country or region in the world, or any escalation of the foregoing*;

•

any epidemic, pandemic or other similar outbreak (including continuation or escalation of the COVID-19 pandemic) in the United States or any country or region in the world where the Company and its subsidiaries have material operations, or any escalation of the foregoing*;

•

the execution or announcement of the merger agreement or the pendency or consummation of the merger, including their impact on the relationships, contractual or otherwise, of the Company and its subsidiaries with employees, customers, contractors, lenders, suppliers, vendors or partners, or the identity of Parent or any of its Affiliates as the acquirer of the Company (except that this clause does not apply with respect to any representation or warranty in the merger agreement which addresses the consequences of the execution and delivery of the merger agreement or the consummation of the merger, or the performance of obligations pursuant to the merger agreement);

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any action taken by the Company at the written request of Parent that is not expressly required to be taken by the terms of the merger agreement;

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any action expressly required to be taken by the Company by the terms of the merger agreement and that are necessary for purposes of consummating the merger;

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changes in Law*;

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changes or proposed changes in GAAP or other accounting standards (or the enforcement or interpretation thereof)*; and

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any legal proceeding involving the Company, the Board, any of its committees or any of the Company’s directors or officers, relating to the merger or the merger agreement, or disclosures of a party relating to such transactions (“transaction litigation”).

In the cases above that are marked with an asterisk, such effect, change, event, occurrence, circumstance, condition, state of facts or development may be taken into account in determining if there is a Company material adverse effect, to the extent that the Company and its subsidiaries are materially disproportionally affected relative to other similarly situated companies in the industry in which the Company and its subsidiaries operate, in each case only to the extent of any such incremental disproportionate impact.

Under the merger agreement, a “Parent material adverse effect” means any effect, change, event, occurrence, circumstance, condition, state of facts or development that, individually or when taken together with all other effect, change, event, occurrence, circumstance, condition, state of facts or development, does or would reasonably be expected to prevent or materially impair or materially delay the consummation of the merger by Parent prior to the end date.

The representations and warranties of the Company, Parent and the merger subsidiary will expire upon the effective time of the merger.

Covenants Regarding Interim Operations of the Company Pending the Effective Time

From the date of the merger agreement through the earlier of the effective time of the merger or the date of termination of the merger agreement, the Company and its subsidiaries are required to conduct their business in the ordinary course consistent with past practice and use commercially reasonable efforts to preserve intact their current business organization, keep available the services of their directors, officers, employees and consultants and maintain their existing business relationships and goodwill with those persons having significant business relationships with it.

In addition, during such period, the Company and its subsidiaries are not permitted to take a number of specified material actions, except for certain specified actions previously disclosed to Parent or except with the prior written consent of Parent, as expressly required by the merger agreement or in certain cases as required to comply with laws, orders or directives of governmental entities in connection with or in response to the COVID-19 pandemic. The material actions that the Company and its subsidiaries are not so permitted to take include the following:

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•

amend their organizational documents (whether by merger, consolidation or otherwise);

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declare, set aside or pay dividends on, or make any other distributions in respect of, or enter into any agreement with respect to the voting of securities, other than (i) dividends and distributions by a direct or indirect wholly owned subsidiary of the Company to its equity holders and (ii) distributions directly resulting from the vesting or exercise of Leaf Group Options or Leaf Group RSUs;

•

split, combine or reclassify any capital stock;

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issue or authorize the issuance of any securities;

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purchase, redeem or otherwise acquire any securities of the Company or its subsidiaries, except for acquisitions of shares of common stock in satisfaction of the applicable exercise price or withholding taxes with respect to any Leaf Group Options or Leaf Group RSUs;

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issue, deliver, sell, grant, pledge, transfer, subject to any lien or obligation or dispose of any securities, other than the issuance of shares of common stock upon the exercise or settlement of any Leaf Group Options or Leaf Group RSUs;

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amend any term of any securities of the Company or its subsidiaries or of any award under any employee benefit plan;

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adopt a plan or agreement of, or resolutions providing for or authorizing, complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;

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except to the extent required by the terms of an existing employee benefit plan: (i) increase the salary, wages, benefits, bonuses or other compensation payable to any employee or non-employee service provider, except for increases in cash compensation in the ordinary course of business consistent with past practice; (ii) adopt, enter into, terminate or amend any collective bargaining agreement or benefit plan; (iii) pay to any employee or non-employee service provider any benefit or amount other than regular salary or wages or grant any such person any award under any benefit plan; (iv) take any action to fund or in any other way secure the payment of compensation or benefits under any employee plan or contract; (v) take any action to accelerate the vesting or payment of any compensation or benefit under any benefit plan; (vi) materially change any actuarial or other assumption used to calculate funding obligations with respect to any benefit plan or change the manner in which contributions to any benefit plan are made or the basis on which such contributions are determined; (vii) make any material determination under any benefit plan that is inconsistent with the ordinary course of business consistent with past practice; (viii) hire any employee at the level of senior vice president or above or terminate, other than for cause, the employment of any employee at the level of senior vice president or above; or (ix) induce, or attempt to induce, any employee or non-employee service provider to terminate his or her employment or engagement;

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acquire any business, assets or capital stock of any person or division thereof, other than supplies or inventory in the ordinary course of business consistent with past practice;

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sell, lease, license, pledge, transfer, assign, abandon, allow to lapse or expire, fail to maintain, covenant not to assert, subject to any lien or obligation or otherwise dispose of any patents, trademarks, copyrights, trade secrets, rights of publicity and privacy or other intellectual property rights, or other assets or properties except (i) in the ordinary course of business pursuant to existing contracts, (ii) non-exclusive licenses that are merely incidental to the transaction contemplated by a contract entered into in the ordinary course of business consistent with past practice, (iii) sales of inventory or used equipment in the ordinary course of business consistent with past practice, (iv) permitted liens incurred in the ordinary course of business consistent with past practice;

•

extend, amend, waive, cancel or modify any rights in intellectual property in a manner that is adverse to the Company or its subsidiaries;

•

fail to diligently prosecute any intellectual property application or registration or licensed rights to intellectual property for which the Company or its subsidiaries controls the prosecution thereof, subject to certain limited exceptions applicable to immaterial items;

	AGREEMENTS RELATED TO THE MERGER					85
	Voting Agreement					85
	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT					87
	APPRAISAL RIGHTS					90
	MARKET PRICE AND DIVIDEND INFORMATION					96
	HOUSEHOLDING					97
	STOCKHOLDER PROPOSALS					97
	WHERE YOU CAN FIND ADDITIONAL INFORMATION					98
	Annex A Agreement and Plan of Merger					A-1
	Annex B Opinion of Canaccord Genuity LLC.					B-1
	Annex C Section 262 of the General Corporation Law of the State of Delaware					C-1
	Annex D Form of Voting Agreement					D-1