10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 001-15395

MARTHA STEWART LIVING OMNIMEDIA, INC.

(Exact name of registrant as specified in its charter)

Delaware	52-2187059
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
11 West 42nd Street, New York, NY	10036
(Address of principal executive offices)	(Zip Code)

(Registrant’s telephone number, including area code) (212) 827-8000

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):

Large Accelerated Filer o      Accelerated Filer þ      Non-Accelerated Filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Class	Outstanding as of November 7, 2007
Class A, $0.01 par value		26,779,080
Class B, $0.01 par value		26,722,032
Total		53,501,112

Martha Stewart Living Omnimedia, Inc.

Index to Form 10-Q

	Page
Part I. Financial Information
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3. Quantitative and Qualitative Disclosures About Market Risk		26
Item 4. Controls and Procedures		26
Part II. Other Information
Item 1. Legal Proceedings		27
Item 1A. Risk Factors		27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3. Defaults Upon Senior Securities		30
Item 4. Submission of Matters to a Vote of Security Holders		30
Item 5. Other Information		31
Item 6. Exhibits		31
Signatures		32
EX-10.2: LETTER AGREEMENT
EX-10.3: EMPLOYMENT AGREEMENT
EX-10.4: 2008 EXECUTIVE SEVERENCE PAY PLAN
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

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PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

MARTHA STEWART LIVING OMNIMEDIA, INC.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)

	September 30,			December 31,
	2007			2006
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	24,483		$	28,528
Short-term investments		40,342			35,321
Accounts receivable, net		43,567			70,319
Inventories, net		5,917			4,448
Deferred television production costs		4,499			4,609
Income taxes receivable		482			482
Other current assets		4,116			3,857
Total current assets		123,406			147,564
PROPERTY, PLANT AND EQUIPMENT, net		17,692			19,616
INTANGIBLE ASSETS, net		53,605			53,605
OTHER NONCURRENT ASSETS		18,240			7,262
Total assets	$	212,943		$	228,047
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	23,895		$	28,053
Accrued payroll and related costs		17,312			13,646
Income taxes payable		1,946			1,011
Current portion of deferred subscription revenue		23,256			28,884
Current portion of deferred revenue		2,913			3,159
Total current liabilities		69,322			74,753
DEFERRED SUBSCRIPTION REVENUE		9,563			10,032
DEFERRED REVENUE		12,929			9,845
OTHER NONCURRENT LIABILITIES		2,106			2,460
Total liabilities		93,920			97,090
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Class A common stock, $.01 par value, 350,000 shares authorized; 26,697 and 26,109 shares outstanding at September 30, 2007 and December 31, 2006, respectively		267			261
Class B common stock, $.01 par value, 150,000 shares authorized; 26,722 and 26,791 outstanding at September 30, 2007 and December 31, 2006, respectively		267			268
Capital in excess of par value		268,933			257,014
Accumulated deficit		(149,669	)		(125,811	)
		119,798			131,732
Less: Class A treasury stock - 59 shares at cost		(775	)		(775	)
Total shareholders’ equity		119,023			130,957
Total liabilities and shareholders’ equity	$	212,943		$	228,047

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MARTHA STEWART LIVING OMNIMEDIA, INC.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
REVENUES
Publishing	$	46,215		$	36,258		$	134,311		$	113,433
Merchandising		10,951			11,895			34,904			34,313
Internet		3,270			2,827			11,983			10,409
Broadcasting		8,820			10,070			28,208			33,148
Total revenues		69,256			61,050			209,406			191,303
OPERATING COSTS AND EXPENSES
Production, distribution and editorial		35,057			32,328			113,666			100,575
Selling and promotion		19,800			16,498			62,203			48,279
General and administrative		17,687			17,879			52,926			53,140
Depreciation and amortization		1,623			2,272			5,863			6,716
Total operating costs and expenses		74,167			68,977			234,658			208,710
OPERATING LOSS		(4,911	)		(7,927	)		(25,252	)		(17,407	)
Interest income, net		774			1,192			2,321			3,594
Legal settlement		—			(18,200	)		432			(18,200	)
LOSS BEFORE INCOME TAXES		(4,137	)		(24,935	)		(22,499	)		(32,013	)
Income tax provision		(277	)		(155	)		(520	)		(451	)
LOSS FROM CONTINUING OPERATIONS		(4,414	)		(25,090	)		(23,019	)		(32,464	)
Loss from discontinued operations		—			(123	)		—			(745	)
NET LOSS	$	(4,414	)	$	(25,213	)	$	(23,019	)	$	(33,209	)
LOSS PER SHARE – BASIC AND DILUTED
Loss from continuing operations	$	(0.08	)	$	(0.49	)	$	(0.44	)	$	(0.63	)
Loss from discontinued operations		(0.00	)		(0.00	)		(0.00	)		(0.01	)
Net loss	$	(0.08	)	$	(0.49	)	$	(0.44	)	$	(0.65	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted		52,479			51,220			52,415			51,201
DIVIDENDS PER COMMON SHARE		n/a		$	0.50			n/a		$	0.50

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MARTHA STEWART LIVING OMNIMEDIA, INC.
Consolidated Statement of Shareholders’ Equity
For the Nine Months Ended September 30, 2007
(unaudited, in thousands)

	Class A				Class B						Capital in						Class A
	common stock				common stock						excess of par			Accumulated			treasury stock
	Shares		Amount		Shares			Amount			value			Deficit			Shares			Amount			Total
Balance at January 1, 2007		26,109	$	261		26,791		$	268		$	257,014		$	(125,811	)		(59	)	$	(775	)	$	130,957
Net loss		—		—		—			—			—			(23,019	)		—			—			(23,019	)
Cumulative effect of adoption of FIN 48		—		—		—			—			—			(839	)		—			—			(839	)
Shares returned on a net treasury basis		—		—		(69	)		(1	)		—			—			—			—			(1	)
Issuance of shares in conjunction with stock option exercises		83		1		—			—			304			—			—			—			305
Issuance of shares of stock and restricted stock, net of cancellations and tax liabilities		351		4		—			—			(3,029	)		—			—			—			(3,025	)
Issuance of shares in conjunction with warrant exercise		154		1		—			—			—			—			—			—			1
Equity charge associated with common stock warrant		—		—		—			—			5,529			—			—			—			5,529
Non-cash equity compensation		—		—		—			—			9,115			—			—			—			9,115
Balance at September 30, 2007		26,697	$	267		26,722		$	267		$	268,933		$	(149,669	)		(59	)	$	(775	)	$	119,023

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MARTHA STEWART LIVING OMNIMEDIA, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)

	Nine Months Ended
	September 30,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(23,019	)	$	(33,209	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		5,863			6,716
Non-cash equity compensation		15,441			8,735
Legal Settlement		(432	)		18,200
Changes in operating assets and liabilities		20,269			11,035
Net cash provided by operating activities		18,122			11,477
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(4,254	)		(5,982	)
Purchases of short-term investments		(145,741	)		(133,802	)
Sales of short-term investments		140,720			165,087
Investment in other noncurrent assets		(10,172	)		—
Net cash (used in) provided by investing activities		(19,447	)		25,303
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid		—			(26,104	)
Proceeds received from stock option exercises		305			546
Issuance of stock and restricted stock, net of cancellations and tax liabilities		(3,025	)		11
Net cash used in financing activities		(2,720	)		(25,547	)
Net (decrease) increase in cash		(4,045	)		11,233
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		28,528			20,249
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	24,483		$	31,482

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Martha Stewart Living Omnimedia, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1. General

     Martha Stewart Living Omnimedia, Inc., together with its subsidiaries, is herein referred to as “we,” “our,” or the “Company.”

     The information included in the foregoing interim condensed consolidated financial statements is unaudited. In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods do not necessarily indicate the results to be expected for the entire year. These condensed consolidated financial statements are unaudited and should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) with respect to the Company’s fiscal year ended December 31, 2006.

     The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Management does not expect such differences to have a material effect on the Company’s consolidated financial statements.

     The Company’s “Significant Accounting Policies” are discussed in more detail in the Company’s most recent Annual Report on Form 10-K filed with the SEC on March 14, 2007, especially under the heading “Footnote 2. Summary of Significant Accounting Policies”, which may be accessed through the SEC’s World Wide Web site at http://www.sec.gov.

2. Recent accounting standards

     In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of SFAS 109, Accounting for Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold which a tax position is required to meet before being recognized in the financial statements. It further provides guidance on derecognition and measurement of tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. Accordingly, effective January 1, 2007, we adopted the minimum threshold recognition provisions of FIN 48. See Note 3 for further information on the adoption of FIN 48.

     In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 clarifies the definition of fair value, establishes a framework for measuring fair value, and expands on required disclosures about fair value measurement. SFAS 157 will be effective for the Company on January 1, 2008 and will be applied prospectively. The Company is currently assessing whether adoption of SFAS 157 will have an impact on our financial statements.

     In February 2007, the FASB issued SFAS No. 159, “Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). Under SFAS 159, entities may choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. SFAS 159 also establishes recognition, presentation, and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. SFAS 159 will be effective for the Company beginning January 1, 2008. The Company is currently assessing whether adoption of SFAS 159 will have an impact on our financial statements.

3. Income taxes

     The Company follows SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”). Under the asset and liability method of SFAS 109, deferred assets and liabilities are recognized for the future costs and benefits attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company periodically reviews the requirements for a valuation allowance and makes

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adjustments to such allowances when changes in circumstances result in changes in management’s judgment about the future realization of deferred tax assets. SFAS 109 places more emphasis on historical information, such as the Company’s cumulative operating results and its current year results than it places on estimates of future taxable income. Therefore, the Company has added $14.8 million to its deferred tax asset (“DTA”) and valuation allowance in the first nine months of 2007, resulting in a cumulative balance for both its DTA and valuation allowance of $76.9 million as of September 30, 2007. The DTA balance as of September 30, 2007 primarily consists of the Federal net operating loss (“NOL”), and also includes amounts for state NOLs, accrued compensation, and other DTAs which are not included in the Federal NOL. The Company intends to maintain a valuation allowance until evidence would support the conclusion that it is more likely than not that the DTA could be realized. On a gross basis (before valuation allowances), the Company had Federal NOL carry-forwards totaling $91.8 million as of December 31, 2006, which can be applied to future taxable income. Such loss carry-forwards have remaining lives ranging from 4 to 20 years.

     As of January 1, 2007, the Company adopted the provisions of FIN 48, which establishes guidance on the accounting for uncertain tax positions. FIN 48 provides for a recognition threshold and measurement attribute as part of a two-step tax position evaluation process prescribed in FIN 48. The cumulative effect of $0.8 million for adopting FIN 48 is recorded in retained earnings as an adjustment to accumulated deficit in the opening balance as of January 1, 2007.

     As of September 30, 2007, the Company had a FIN 48 liability balance of $2.0 million. Of this amount, $1.5 million represented unrecognized tax benefits, which if recognized at some point in the future would favorably impact the effective tax rate, and $0.5 million is interest. The Company continues to treat interest and penalties due to a taxing authority on unrecognized tax positions as interest and penalty expense. As of September 30, 2007, the Company recorded $0.5 million of accrued interest and penalties in the statement of financial position. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for the years before 2000 and state examinations for the years before 2003. Accordingly, the Company has made accounting estimates as required by GAAP. The Company anticipates that as a result of audit settlements and statute closures over the next twelve months, the liability will be reduced through cash payments of approximately $1.0 million.

4. Equity compensation

     We currently have several stock incentive plans that permit us to grant various types of share-based incentives to key employees, directors and consultants. The primary types of incentives granted under these plans are stock options and restricted shares of common stock. The Compensation Committee of the Board of Directors may grant up to a maximum of 10,000,000 underlying shares of common stock under the Martha Stewart Living Omnimedia, Inc. Amended and Restated 1999 Stock Incentive Plan (the “1999 Option Plan”), and up to a maximum of 600,000 underlying shares of common stock under the Company’s Non-Employee Director Stock and Option Compensation Plan (the “Non-Employee Director Plan”). In November 1997, the Company established the Martha Stewart Living Omnimedia LLC Nonqualified Class A LLC Unit/Stock Option Plan (the “1997 Option Plan”). The Company has an agreement with Martha Stewart whereby she periodically returns to the Company shares of Class B common stock owned by her or her affiliates in amounts corresponding on a net treasury basis to the number of options exercised under the 1997 Option Plan during the relevant period. Accordingly, options outstanding under this plan are not dilutive. No further awards will be made from this plan.

     Effective January 1, 2006, non-cash compensation expense is measured under SFAS No. 123 (revised 2004) “Share-Based Payment,” (“SFAS 123(R)”) and SEC Staff Accounting Bulletin No. 107, using the modified prospective transition method, and includes non-cash compensation relating to grants issued prior to fiscal 2006.

     In consideration of the execution of a consulting agreement under which Mark Burnett, an influential producer of television programming, agreed to act as an advisor and consultant to the Company with respect to various television matters in September 2004, the Company issued to Mr. Burnett a warrant to purchase 2,500,000 shares of the Company’s Class A common stock at an exercise price of $12.59 per share. Under the initial agreement, the shares covered by the warrant would have vested and become exercisable in three tranches, subject to the achievement of various milestones achieved with respect to certain television programs. The first two tranches representing a total of 1,666,666 shares vested in 2005 and were exercised in 2006. However, under the terms of this warrant, the third tranche (i.e., 833,333 shares) did not vest. No shares remain eligible for issuance under this warrant.

8

     On August 11, 2006, in connection with Mr. Burnett’s continued services as executive producer of the syndicated daytime television show, The Martha Stewart Show, the Company issued an additional warrant to Mr. Burnett to purchase up to 833,333 shares at an exercise price of $12.59 per share, subject to vesting pursuant to certain performance criteria. During the first quarter of 2007, the portion of the warrant related to the clearance of season three of the syndicated show vested and was subsequently exercised. This vesting resulted in a charge of $5.6 million in the first quarter. Mr. Burnett exercised this portion of the warrant on a cashless basis, pursuant to which he acquired 154,112 shares and forfeited 262,555 shares based on the closing price of our Class A common stock of $19.98 the day prior to exercise. The remaining half of this warrant vested in July 2007 when the applicable milestones relating to the production of The Martha Stewart Show were achieved. This warrant will expire on March 17, 2012. For the three and nine month periods ended September 30, 2007, the Company recognized an approximate $0.6 million reduction and an approximate $6.0 million increase, respectively, to non-cash equity compensation related to this warrant. The non-cash equity compensation expense related to the vesting of the first tranche of the warrant was valued using the following average assumptions: risk-free interest rate – 5.06%; dividend yield – zero; expected volatility – 35.41%; contractual life – 5.13 years; average fair market value per option granted – $13.32. The non-cash equity compensation expense related to the amortization of the second tranche of the warrant was valued using the following average assumptions: risk-free interest rate – 4.44%; dividend yield – zero; expected volatility – 32.87%; contractual life – 4.64 years; average fair market value per option granted – $5.37.

5. Other

     Production, distribution and editorial expenses; selling and promotion expenses; and general and administrative expenses are all presented exclusive of depreciation and amortization which is shown separately within “Operating Costs and Expenses.”

6. Newsstand Adjustment

     The Company has historically paid newsstand-related fees based in part on certain estimates provided by our distribution partner. During 2006, we questioned amounts related to a portion of these bills. As a result of our negotiations with our distributor, we reached a settlement agreement pursuant to which we received a one-time refund in the amount of $3.2 million. The refund was recorded in the second quarter of 2006 as a reduction to the Publishing segment’s selling and promotion costs line on our condensed consolidated statements of operations, and accordingly is included in our results for the nine months ended September 30, 2006. We also recorded interest income of $0.3 million related to the settlement in the second quarter of 2006.

7. Inventories

     Inventory is comprised of paper stock. The inventory balance at September 30, 2007 and December 31, 2006 was $5.9 million and $4.4 million, respectively.

8. Investment in Other Noncurrent Assets

     In August 2007, as part of a transaction led by GTCR Golder Rauner, the Company invested $10.2 million ($10 million in cash and $0.2 million in related professional fees) in exchange for Class A Preferred and Common Units in United Craft MS Brands, LLC (“United Craft”). The investment gives the Company a 3.8% ownership interest in the combined crafts entity which owns EK Success, Wilton Industries, and Dimensions Holding.

     At the time of the August investment, and in connection with the acquisition by United Craft of Wilton Industries and Dimensions Holding, the Company modified the terms of its existing agreement with United Craft. In 2006 the Company had entered into a licensing relationship with United Craft and its affiliates, including EK Success, for the creation, marketing and sale of paper-based craft products. In connection with that license, the Company received a deeply subordinated equity interest in United Craft represented by Class M Common Units. The Company’s ability to realize value from that subordinated equity interest was contingent on, among other matters, majority stockholders receiving a specified rate of return in respect of their senior securities. Pursuant to the August amendment to the existing agreement, the proportionate size of the Company’s subordinated interest in the equity of United Craft was reduced and the requisite hurdle rate for the senior equity was reduced as well. Consistent with the accounting treatment of the original subordinated equity interest in United Craft, the Company will value the Class M Common Units and record the amount as deferred revenue in the Merchandising segment. The Company has

9

engaged an external valuation services firm to value the investment, and will finalize fair value of the Class M Common Units based upon receipt of the pending valuation. The estimated fair value was immaterial in the current period.

9. Industry segments

     The Company is a leading creator of original how-to content and related products for homemakers and other consumers. The Company’s business segments are Publishing, Merchandising, Internet and Broadcasting. The Publishing segment primarily consists of the Company’s magazine operations, and also those related to its book operations. The Merchandising segment primarily consists of the Company’s operations related to the design of merchandise and related promotional and packaging materials that are distributed by its retail and manufacturing licensees in exchange for royalty income. The Internet segment consists of the advertising-supported website marthastewart.com, operations relating to direct-to-consumer floral business and sales of digital photo products. The Broadcasting segment primarily consists of the Company’s television production operations which produce television programming that airs in syndication and on cable, as well as the Company’s radio operations.

10. Related Party Transactions

     The Company currently has a consulting agreement with CAK Entertainment, Inc. (“CAK Entertainment”), an entity for which Mr. Charles Koppelman serves as Chairman and Chief Executive Officer. Mr. Koppelman was Chairman of the Board and a Director of the Company at the time of the agreement and thereafter. This October 2005 agreement superseded a previous consulting agreement with him, which was entered into while Mr. Koppelman was Vice Chairman and a Director of the Company. During the second quarter of 2007, the Company and Mr. Koppelman agreed to amend the vesting conditions for a portion of the bonus compensation potentially payable to Mr. Koppelman and CAK Entertainment pursuant to the Company’s consulting agreement with CAK Entertainment. The amendment, which was filed with the SEC as Exhibit 10.2 to our Quarterly Report on Form 10-Q for the period ended June 30, 2007, replaced a performance trigger tied to revenue goals with new performance criteria relating to adjusted EBITDA, as defined in the agreement, and acquisition goals. Mr. Koppelman’s vesting is determined by the Compensation Committee which meets periodically throughout the year but not necessarily at the end of the quarter. As of September 30, 2007, the Compensation Committee has vested Mr. Koppelman in 38% of the potential bonus compensation of this consulting agreement. Additional details of the January 2005 and October 2005 agreements and a description of other related party transactions are included in the Company’s Annual Report on Form 10-K filed with the SEC with respect to its fiscal year ended December 31, 2006.

11. Discontinued Operations

     In June 2002, the Company decided to exit The Wedding List, a wedding registry and gift business that was reported within the Internet business segment. In the second quarter of 2006, a review of the accrual of future lease commitments, net of anticipated sublease rental income, resulted in a charge of $0.4 million. The anticipated sublease income was determined by estimating future cash flows based upon current market conditions. In the third quarter of 2006, the Company signed a sublease. Based on the sublease agreement, as well as the additional reserve taken in the second quarter of 2006, we do not anticipate any further losses from discontinued operations. The loss from operations, which is generated primarily from facility related expenses, was as follows (in thousands):

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2007		2006			2007		2006
Loss from operations		—	$	(123	)		—	$	(745	)

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

In this report, the terms “we,” “us,” “our” and the “Company” refer to Martha Stewart Living Omnimedia, Inc., and its subsidiaries.

EXECUTIVE SUMMARY

     We are an integrated media and merchandising company devoted to enriching the changing lives of today’s women. Our Company is organized into four business segments: Publishing, Merchandising, Internet and Broadcasting.

Publishing Update. In the third quarter of 2007, we continued to benefit from an increase in advertising rates and pages across our magazines and, based on current trends, we expect to see continued year-over-year growth in this regard in the near-term.

Merchandising Update. The Martha Stewart Collection launched exclusively at Macy’s and macys.com in September 2007. The line consists of a broad range of home goods, including bed and bath textiles, housewares, casual dinnerware, flatware and glassware, cookware, holiday decorating, and tree-trimming items. Also, we expanded our distribution of the Martha Stewart Crafts line to independent craft retailers in addition to sales at Michaels arts and crafts stores and at marthastewartcrafts.com.

     In the third quarter, we invested $10.2 million in an entity primarily funded by GTCR Golder Rauner, LLC that acquired Wilton Industries, Inc. and Dimensions Holdings, LLC. This entity, United Craft, already owns EK Success. In connection with our investment in United Craft, we renegotiated the terms of our prior equity interest and extended our license into the area of crafting associated with Wilton Industries, namely food crafts (such as cake decoration), party favors and celebrations.

     In the third quarter of 2007, we announced our plan to launch a new co-branded flowers program with 1-800-FLOWERS.COM in the first half of 2008. This new program will feature flower arrangements, plants and gift baskets and will offer any-day and same-day delivery. Revenue related to this new agreement will be recorded in the Merchandising segment. Our existing flower business, marthastewartflowers.com, is expected to continue providing consumers flowers direct from growers’ farms through the Valentine’s Day selling season. Revenue related to this existing program will remain in the Internet segment in 2008 through the selling period.

Kmart Agreement. The Company’s agreement with Kmart provides for certain minimum guaranteed royalty payments. The minimum guarantees have and are expected to exceed actual royalties earned from retail sales through January 31, 2008 due to store closings, lower same-store sales trends and decreased assortment of product categories. For the contract years ending January 31, 2009 and 2010, the minimum guarantees will be substantially lower than in prior years. The specific computation is discussed in the paragraph below. The following are the minimum guaranteed royalty payments (in millions) over the term of the agreement:

	1/31/02		1/31/03		1/31/04		1/31/05		1/31/06		1/31/07		1/31/08		1/31/09		1/31/10
Minimum Royalty Amounts	$	15.3	$	40.4	$	47.5	$	49.0	$	54.0	$	59.0	$	65.0	$	20.0	$	15.0

     For the year ending January 31, 2009, the minimum royalty amount is the greater of $20 million or 50% of the earned royalty for the year ending January 31, 2008. For the year ending January 31, 2010, the minimum royalty amount is the greater of $15 million or 50% of the earned royalty for the year ending January 31, 2009.

     For the year ended January 31, 2007, our earned royalty based on retail sales was $29.5 million. Furthermore, $10.0 million of royalties previously paid have been deferred and are subject to recoupment in the periods ending January 31, 2009 and January 31, 2010.

11

Internet Update. In the third quarter of 2007, we continued to add content to and optimize our re-designed website, marthastewart.com, as part of our efforts to grow our online audience and share of the online advertising market.

Broadcasting Update. Season 3 of The Martha Stewart Show began in September 2007 and is being broadcast in approximately 95% of markets nationwide. The Company recently announced several new initiatives, including a licensing deal with Fine Living TV Network to air season 3 of the show in primetime on a day delay as well as a half-hour series on the DIY Network called Martha Stewart Crafts which is a compilation of crafts-themed segments from the original Martha Stewart Living show. Additionally, the Company launched Martha Stewart On Demand, a new video-on-demand service available to Comcast and Cox digital cable customers.

12

Results of Operations

Comparison of Three Months Ended September 30, 2007 to Three Months Ended September 30, 2006

PUBLISHING SEGMENT
(in thousands)

	Three Months Ended September 30,
	2007		2006
	(unaudited)		(unaudited)		Variance
Publishing Revenue
Advertising	$	26,394	$	18,910	$	7,484
Circulation		17,138		15,827		1,311
Other		2,683		1,521		1,162
Total Publishing Revenue		46,215		36,258		9,957
Publishing Operating Costs and Expenses
Production, distribution and editorial		22,928		19,594		(3,334	)
Selling and promotion		15,015		13,617		(1,398	)
General and administrative		1,728		689		(1,039	)
Depreciation and amortization		298		139		(159	)
Total Publishing Operating Costs and Expenses		39,969		34,039		(5,930	)
Publishing Operating Income	$	6,246	$	2,219	$	4,027

     Publishing revenues increased $10.0 million, or 27%, to $46.2 million for the three months ended September 30, 2007, from $36.3 million for the three months ended September 30, 2006. Advertising revenue increased $7.5 million, primarily due to an increase in both advertising rates and pages in Martha Stewart Living magazine, which accounted for $5.2 million of the increase. Everyday Food and Body + Soul also contributed $1.4 million of the increase to advertising revenue due to increased rates and pages. Circulation revenue increased $1.3 million primarily due to the increase in frequency of Special Interest Publications which included three issues in 2007 compared to one issue in 2006. The increase in frequency of Blueprint issues also contributed to higher circulation and advertising revenue with the publication of two issues in 2007 compared to one test issue in 2006. Other revenue increased $1.2 million primarily due to the delivery of two additional books in the quarter related to the new 10-book agreement with Clarkson Potter/Publishers.

Magazine Publication Schedule

	Third Quarter 2007	Third Quarter 2006
Martha Stewart Living	Three Issues	Three Issues
Everyday Food	Two Issues	Two Issues
Blueprint	Two Issues	One Issue
Body + Soul	Two Issues	Two Issues
Dr. Andrew Weil’s Self Healing Newsletter	Three Issues	Three Issues
Special Interest Publications	Three Issues	One Issue

     Production, distribution and editorial expenses increased $3.3 million, primarily reflecting the higher physical costs associated with the increase in advertising pages and circulation of Martha Stewart Living as well as the costs associated with publishing two additional Special Interest Publications and one additional Blueprint issue compared to the prior year quarter. Selling and promotion expenses increased $1.4 million due to higher compensation costs as well as higher marketing costs associated with Everyday Food. General and administrative expenses increased $1.0 million primarily due to higher compensation costs. Included within the Publishing segment is a $1.7 million investment in Blueprint compared to an investment of $1.2 million in the prior year quarter.

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MERCHANDISING SEGMENT
(in thousands)

	Three Months Ended September 30,
	2007		2006
	(unaudited)		(unaudited)		Variance
Merchandising Revenue
Kmart earned royalty	$	5,231	$	6,062	$	(831	)
Other		5,720		5,833		(113	)
Total Merchandising Revenue		10,951		11,895		(944	)
Merchandising Operating Costs and Expenses
Production, distribution and editorial		3,512		3,137		(375	)
Selling and promotion		1,625		839		(786	)
General and administrative		2,144		1,995		(149	)
Depreciation and amortization		92		256		164
Total Merchandising Operating Costs and Expenses		7,373		6,227		(1,146	)
Merchandising Operating Income	$	3,578	$	5,668	$	(2,090	)

     Merchandising revenues decreased $0.9 million, or 8%, to $11.0 million for the three months ended September 30, 2007 compared to $11.9 million for the three months ended September 30, 2006. Retail sales of our product at Kmart declined 14% on a comparable store basis and 15% on a total store basis. The royalty rate under our agreement with Kmart increased approximately 3% on February 1, 2007. We expect the minimum guarantees will exceed actual royalties earned from retail sales through January 31, 2008 due to store closings, lower same-store sales trends and decreased assortment of product categories. For the contract years ending January 31, 2009 and 2010, the minimum guarantees will be substantially lower than prior years. Other revenue decreased due to a 2006 favorable dispute resolution with a former merchandising licensee of $3.0 million. This decrease was largely offset by the 2007 launch of the Martha Stewart Collection at Macy’s and macys.com as well as sales from other new initiatives such as Martha Stewart Crafts. Additionally, the decrease in other revenue was offset by services we provided to our partners for creative services projects including KB Home model merchandising and other related projects.

     Production, distribution and editorial expenses increased $0.4 million primarily due to higher allocated compensation costs. Selling and promotion expenses increased $0.8 million primarily due to services we provided to our partners for creative services projects including KB Home model merchandising and other related projects.

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INTERNET SEGMENT
(in thousands)

	Three Months Ended September 30,
	2007			2006
	(unaudited)			(unaudited)			Variance
Internet
Advertising	$	2,237		$	1,494		$	743
Product		1,033			1,333			(300	)
Total Internet Revenue		3,270			2,827			443
Internet Operating Costs and Expenses
Production, distribution and editorial		2,731			2,214			(517	)
Selling and promotion		1,402			580			(822	)
General and administrative		942			713			(229	)
Depreciation and amortization		342			73			(269	)
Total Internet Operating Costs and Expenses		5,417			3,580			(1,837	)
Internet Operating Loss	$	(2,147	)	$	(753	)	$	(1,394	)

     Internet revenues increased $0.4 million, or 16%, to $3.3 million for the three months ended September 30, 2007, from $2.8 million for the three months ended September 30, 2006. Advertising revenue increased $0.7 million due to higher advertising rates. Product revenue decreased $0.3 million due to actual earned royalties in 2007 which were lower than the minimum guarantees recognized in 2006. The decrease is partially offset by our direct-to-consumer floral business.

     Production, distribution and editorial costs increased $0.5 million due primarily to higher staffing associated with our new advertising-based website. Selling and promotion expense increased $0.8 million due to higher compensation costs and higher expenses associated with attracting new users to the website. General and administrative expenses increased $0.2 million due to increases in facilities allocations. Depreciation and amortization expenses increased $0.3 million due to the 2007 launch of the redesigned website and the related depreciation costs.

15

BROADCASTING SEGMENT
(in thousands)

	Three Months Ended September 30,
	2007			2006
	(unaudited)			(unaudited)			Variance
Broadcasting Revenue
Advertising	$	3,940		$	3,677		$	263
Radio		1,875			1,877			(2	)
Licensing and other		3,005			4,516			(1,511	)
Total Broadcasting Revenue		8,820			10,070			(1,250	)
Broadcasting Operating Costs and Expenses
Production, distribution and editorial		5,886			7,383			1,497
Selling and promotion		1,758			1,462			(296	)
General and administrative		1,778			2,236			458
Depreciation and amortization		248			758			510
Total Broadcasting Operating Costs and Expenses		9,670			11,839			2,169
Broadcasting Operating Loss	$	(850	)	$	(1,769	)	$	919

     Broadcasting revenues decreased $1.3 million, or 12%, to $8.8 million for the three months ended September 30, 2007, from $10.1 million for the three months ended September 30, 2006. Advertising revenue increased $0.3 million due to the increase in product integration revenue, advertising rates and advertising inventory (related to our revised season 3 distribution agreement), partially offset by a decline in ratings. Licensing revenue decreased $1.5 million primarily due to the lack of distribution in the secondary cable market for season 2 of The Martha Stewart Show and lower season 2 license fees from stations compared to season 1. Season 3 of The Martha Stewart Show benefits from a new distribution agreement in the secondary cable market with the Fine Living channel. Also, in exchange for season 3 license fees, the Company gained additional advertising inventory for the new season. The impact of these season 3 changes was minimal in the third quarter because the new season launched in the middle of September 2007.

     Production, distribution and editorial expenses decreased $1.5 million due to lower production costs for season 2 of The Martha Stewart Show compared to season 1. The Company expects to have continued production cost savings for season 3. Additionally, there was a favorable 2007 adjustment of $0.6 million in non-cash compensation associated with the vesting of a portion of a warrant granted in connection with the production of the syndicated TV program. Selling and promotion expenses increased due to the timing of marketing costs for the launch of season 3 compared to the season 2 launch. General and administrative expenses decreased $0.5 million due to lower compensation costs. Depreciation and amortization decreased $0.5 million as the result of full depreciation of The Martha Stewart Show set in the second quarter of 2007.

16

CORPORATE
(in thousands)

	Three Months Ended September 30,
	2007			2006
	(unaudited)			(unaudited)			Variance
Corporate Operating Costs and Expenses
General and administrative	$	11,095		$	12,246			1,151
Depreciation and amortization		643			1,046			403
Total Corporate Operating Costs and Expenses		11,738			13,292			1,554
Corporate Operating Loss	$	(11,738	)	$	(13,292	)	$	1,554

     Corporate operating costs and expenses decreased $1.6 million, to $11.7 million for the three months ended September 30, 2007, from $13.3 million for the three months ended September 30, 2006. General and administrative expenses decreased $1.2 million primarily due to lower non-cash compensation costs as well as a one-time favorable real estate tax credit. Depreciation and amortization expenses decreased $0.4 million as certain computer software assets are now fully depreciated.

OTHER ITEMS

Interest income, net. Interest income, net, was $0.8 million for the quarter ended September 30, 2007, compared to $1.2 million for the prior year quarter. The decrease was attributable primarily to lower average balances of cash, cash equivalents and short-term investment balances as compared to the prior year quarter.

Legal settlement. In the prior year quarter ended September 30, 2006, the Company recorded a litigation reserve of $18.2 million associated with the estimated settlement of the class action lawsuit known as In re Martha Stewart Living Omnimedia, Inc. Securities Litigation. In the second quarter of 2007, the settlement received Court approval and the related reserve was adjusted to reflect the final settlement. There was no charge in the current quarter ended September 30, 2007 related to this settlement.

Income tax expense. Income tax expense for the quarter ended September 30, 2007 was $0.3 million, compared to $0.2 million for the quarter ended September 30, 2006.

Loss from discontinued operations. The Company had no loss from discontinued operations in the current period compared to a loss of $(0.1) million for the quarter ended September 30, 2006. Discontinued operations represent the operations of The Wedding List, which the Company decided to discontinue in 2002. The prior year expenses are related primarily to facilities.

Net loss. Net loss was $(4.4) million for the quarter ended September 30, 2007, compared to a net loss of $(25.2) million for the quarter ended September 30, 2006, as a result of the factors described above.

17

Comparison of Nine Months Ended September 30, 2007 to Nine Months Ended September 30, 2006

PUBLISHING SEGMENT
(in thousands)

	Nine Months Ended September 30,
	2007		2006
	(unaudited)		(unaudited)		Variance
Publishing Revenue
Advertising	$	75,603	$	59,370	$	16,233
Circulation		53,560		51,267		2,293
Other		5,148		2,796		2,352
Total Publishing Revenue		134,311		113,433		20,878
Publishing Operating Costs and Expenses
Production, distribution and editorial		67,917		61,608		(6,309	)
Selling and promotion		49,420		40,989		(8,431	)
General and administrative		3,491		2,150		(1,341	)
Depreciation and amortization		886		458		(428	)
Total Publishing Operating Costs and Expenses		121,714		105,205		(16,509	)
Publishing Operating Income	$	12,597	$	8,228	$	4,369

     Publishing revenues increased $20.9 million, or 18%, to $134.3 million for the nine months ended September 30, 2007, from $113.4 million for the nine months ended September 30, 2006. Advertising revenue increased $16.2 million, primarily due to an increase in both advertising rates and pages in Martha Stewart Living magazine, which accounted for $10.5 million of the increase. Everyday Food and Body + Soul also contributed $4.2 million of the increase to advertising revenue due to increased pages and rate. Circulation revenue increased $2.3 million primarily due to the increase in frequency of Special Interest Publications which included five issues in 2007 compared to three issues in 2006. Circulation revenue also increased due to the publication of four Blueprint issues in 2007 compared to two test issues in 2006 as well as a special issue of Martha Stewart Weddings published in 2007, with no comparable 2006 issue. Other revenue increased $2.4 million primarily due to the delivery of three books in 2007 related to the new 10-book agreement with Clarkson Potter/Publishers as well as the release of the book, Everyday Food: Great Food Fast.

Magazine Publication Schedule

	Nine months ended September 2007	Nine months ended September 2006
Martha Stewart Living	Nine Issues	Nine Issues
Everyday Food	Eight Issues	Eight Issues
Martha Stewart Weddings	Three Issues	Two Issues
Blueprint	Four Issues	Two Issues
Body + Soul	Six Issues	Six Issues
Dr. Andrew Weil’s Self Healing Newsletter	Nine Issues	Nine Issues
Special Interest Publications	Five Issues	Three Issues

     Production, distribution and editorial expenses increased $6.3 million, primarily reflecting the higher physical costs associated with the increase in advertising pages and circulation of Martha Stewart Living as well as the costs associated with publishing two additional issues of Blueprint in 2007. Selling and promotion expenses increased $8.4 million, primarily due to a favorable 2006 one-time newsstand expense reduction adjustment of $3.2 million related to the settlement of certain newsstand-related fees. Additionally, selling and promotion expenses increased due to a 2007 non-recurring, employee-related separation charge, higher compensation costs, an increase in newsstand distribution of Martha Stewart Living and higher marketing costs associated with Everyday Food. General and administrative expenses increased $1.3 million primarily due to higher compensation costs. Included within the Publishing segment is a $5.5 million investment in Blueprint compared to an investment of $4.0 million for the nine months ended September 30, 2006.

18

MERCHANDISING SEGMENT
(in thousands)

	Nine Months Ended September 30,
	2007		2006
	(unaudited)		(unaudited)		Variance
Merchandising Revenue
Kmart earned royalty	$	17,977	$	21,218	$	(3,241	)
Kmart minimum true-up		2,648		2,107		541
Other		14,279		10,988		3,291
Total Merchandising Revenue		34,904		34,313		591
Merchandising Operating Costs and Expenses
Production, distribution and editorial		9,897		9,180		(717	)
Selling and promotion		5,232		1,987		(3,245	)
General and administrative		5,685		5,402		(283	)
Depreciation and amortization		285		764		479
Total Merchandising Operating Costs and Expenses		21,099		17,333		(3,766	)
Merchandising Operating Income	$	13,805	$	16,980	$	(3,175	)

     Merchandising revenues increased $0.6 million, or 2%, to $34.9 million for the nine months ended September 30, 2007, from $34.3 million for the nine months ended September 30, 2006. Actual retail sales of our product at Kmart declined 17% on a comparable store basis and 18% on a total store basis. The royalty rate under our agreement with Kmart increased approximately 3% on February 1, 2007. The pro-rata portion of revenue related to the contractual minimum amounts covering the current period, net of amounts subject to recoupment, is listed separately above. For the contract years ending January 31, 2009 and 2010, the minimum guarantees will be substantially lower than prior years. We expect the minimum guarantees will exceed actual royalties earned from retail sales through January 31, 2008 primarily due to store closings, lower same-store sales trends and decreased assortment of product categories. Other revenue increased largely due to services we provided to our partners for creative services projects including KB Home model merchandising and other related projects. In addition, other revenue increased due to the execution of the endorsement and promotional agreement with U.S. affiliates of SVP Worldwide, makers of Singer, Husqvarna Viking and Pfaff sewing machines. The launch of the Martha Stewart Collection at Macy’s and macys.com contributed to the increase in other revenue as well as sales from other new initiatives including Martha Stewart Crafts. These increases in other revenue are partially offset by a 2006 favorable dispute resolution with a former merchandising licensee of $3.0 million.

     Production, distribution and editorial expenses increased $0.7 million primarily due to higher allocated compensation costs. Selling and promotion expenses increased $3.2 million primarily due to services we provided to our partners for creative services projects including KB Home model merchandising and other related projects.

19

INTERNET SEGMENT
(in thousands)

	Nine Months Ended September 30,
	2007			2006
	(unaudited)			(unaudited)			Variance
Internet
Advertising	$	6,483		$	4,895		$	1,588
Product		5,500			5,514			(14	)
Total Internet Revenue		11,983			10,409			1,574
Internet Operating Costs and Expenses
Production, distribution and editorial		10,592			7,240			(3,352	)
Selling and promotion		4,408			2,157			(2,251	)
General and administrative		2,930			1,586			(1,344	)
Depreciation and amortization		847			176			(671	)
Total Internet Operating Costs and Expenses		18,777			11,159			(7,618	)
Internet Operating Loss	$	(6,794	)	$	(750	)	$	(6,044	)

     Internet revenues increased $1.6 million, or 15%, to $12.0 million for the nine months ended September 30, 2007, from $10.4 million for the nine months ended September 30, 2006. Advertising revenue increased $1.6 million due to higher advertising rates and higher sales of advertising inventory.

     Production, distribution and editorial costs increased $3.4 million due primarily to higher staffing and technology expenses associated with our new advertising-based website. Selling and promotion expense increased $2.3 million due to higher compensation expenses associated with developing an internet advertising sales force and higher costs associated with attracting new users to the website. General and administrative expenses increased $1.3 million due to increases in personnel and facilities allocations. Depreciation and amortization expenses increased $0.7 million due to the 2007 launch of the redesigned website and the related depreciation costs.

20

BROADCASTING SEGMENT
(in thousands)

	Nine Months Ended September 30,
	2007			2006
	(unaudited)			(unaudited)			Variance
Broadcasting Revenue
Advertising	$	11,291		$	11,978		$	(687	)
Radio		5,625			5,629			(4	)
Licensing and other		11,292			15,541			(4,249	)
Total Broadcasting Revenue		28,208			33,148			(4,940	)
Broadcasting Operating Costs and Expenses
Production, distribution and editorial		25,260			22,547			(2,713	)
Selling and promotion		3,143			3,146			3
General and administrative		5,677			6,860			1,183
Depreciation and amortization		1,947			2,257			310
Total Broadcasting Operating Costs and Expenses		36,027			34,810			(1,217	)
Broadcasting Operating Loss	$	(7,819	)	$	(1,662	)	$	(6,157	)

     Broadcasting revenues decreased $4.9 million, or 15%, to $28.2 million for the nine months ended September 30, 2007, from $33.1 million for the nine months ended September 30, 2006. Advertising revenue decreased slightly due to a decline in ratings partially offset by the increase in product integration revenue, advertising rates and advertising inventory (related to our revised season 3 distribution agreement). Licensing revenue decreased primarily due to the lack of distribution in the secondary cable market for season 2 of The Martha Stewart Show and lower license fees from stations for season 2 compared to season 1. Season 3 of The Martha Stewart Show includes a new distribution agreement in the secondary cable market with the Fine Living channel. Also, in exchange for season 3 license fees, the Company gained additional advertising inventory for the new season. The impact of these season 3 changes was minimal in the period because the new season launched in the middle of September 2007.

     Production, distribution and editorial expenses increased $2.7 million due principally to a non-cash charge of $7.7 million associated with the vesting of a portion of a warrant granted in connection with the production of the syndicated TV program. These costs were partially offset by lower production costs for The Martha Stewart Show which were approximately $1.7 million less for season 2 compared to season 1. Production costs are expected to continue to decrease for the new season 3 of the syndicated show. General and administrative expenses decreased $1.2 million due to a 2006 asset write-down, the reduction of 2007 facility expenses due to the shutdown of the Connecticut television studios in the prior year and lower compensation costs.

21

CORPORATE
(in thousands)

	Nine Months Ended September 30,
	2007			2006
	(unaudited)			(unaudited)			Variance
Corporate Operating Costs and Expenses
General and administrative	$	35,143		$	37,142			1,999
Depreciation and amortization		1,898			3,061			1,163
Total Corporate Operating Costs and Expenses		37,041			40,203			3,162
Corporate Operating Loss	$	(37,041	)	$	(40,203	)	$	3,162

     Corporate operating costs and expenses decreased $3.2 million, to $37.0 million for the nine months ended September 30, 2007, from $40.2 million for the nine months ended September 30, 2006. General and administrative expenses decreased $2.0 million principally due to lower non-cash compensation costs and a one-time favorable real estate tax credit partially offset by non-recurring, employee-related separation costs. Depreciation and amortization expenses decreased $1.2 million as certain computer software assets are now fully depreciated.

OTHER ITEMS

Interest income, net. Interest income, net, was $2.3 million for the nine months ended September 30, 2007, compared to $3.6 million for the prior year period. The decrease was attributable primarily to lower average balances of cash, cash equivalents and short-term investment balances as compared to the prior year period partially offset by higher average interest rates.

Legal settlement. In the prior year period ended September 30, 2006, the Company recorded a litigation reserve of $18.2 million associated with the estimated settlement of the class action lawsuit known as In re Martha Stewart Living Omnimedia, Inc. Securities Litigation. In the second quarter of 2007, the settlement received Court approval and the related reserve was adjusted to reflect the final settlement.

Income tax expense. Income tax expense was $0.5 million for the nine months ended September 30, 2007 and September 30, 2006, respectively.

Loss from discontinued operations. The Company had no loss from discontinued operations in the current period compared to loss of $(0.7) million for the nine months ended September 30, 2006. Discontinued operations represent the operations of The Wedding List, which the Company decided to discontinue in 2002. The prior year expenses are related primarily to facilities.

Net loss. Net loss was $(23.0) million for the nine months ended September 30, 2007, compared to a net loss of $(33.2) million for the nine months ended September 30, 2006, as a result of the factors described above.

22

Liquidity and Capital Resources

Overview

     During the third quarter of 2007, our overall cash and cash equivalents decreased $4.0 million from the beginning of the year principally due to our investment in United Craft as described above. The cash outflow due to the investment was partially offset by positive cash flow from operations which benefited from the satisfaction of a year-end receivable due from Kmart. Cash, cash equivalents and short-term investments were $64.8 million and $63.8 million at September 30, 2007 and December 31, 2006, respectively. We believe, as described further below, that our available cash balances and short-term investments together with continued positive cash flow from operations will be sufficient to meet our operating and recurring cash needs for the remainder of 2007.

Cash Flows from Operating Activities

     Cash flows provided by operating activities were $18.1 million and $11.5 million for the nine months ended September 30, 2007 and 2006, respectively. In 2007, cash flow from operations was primarily due to the changes in operating assets and liabilities of $20.3 million, the majority of which was the result of the satisfaction of a year-end receivable due from Kmart. Operating assets and liabilities also benefited from an increase in accrued employee separation charges and accrued bonuses and an increase in deferred revenue as certain of our media deals have been pre-paid. These increases were partially offset by lower deferred subscription income and higher Publishing accounts receivable due to an increase in advertising sales across our publications.

Cash Flows from Investing Activities

     Cash flows (used in) provided by investing activities were $(19.4) million and $25.3 million for the nine months ended September 30, 2007 and 2006, respectively. Cash flows used in investing activities in the third quarter of 2007 resulted from purchases of short-term investments of $(145.7) million, an investment in United Craft of $(10.2) million and capital expenditures of $(4.3) million partially offset by sales of short-term investments of $140.7 million. Cash used for capital expenditures was due to the addition of a fractional ownership interest in a corporate aircraft, the continued investment in the website marthastewart.com and computer hardware for employees.

Cash Flows from Financing Activities

     Cash flows used in financing activities were $(2.7) million and $(25.5) million for the nine months ended September 30, 2007 and 2006, respectively. Cash flows used in financing activities due to the cash costs associated with remitting payroll related tax obligations associated with the vesting of certain restricted stock grants partially offset by proceeds received from exercise of stock options. Prior year cash flows included a special one-time dividend payment of $(26.1) million.

Other

     We have a line of credit with Bank of America in the amount of $5.0 million, which is generally used to secure outstanding letters of credit. Under the terms of the credit agreement, the Company is required to satisfy certain debt covenants, with which we were compliant as of September 30, 2007. We had no outstanding borrowings under this facility as of September 30, 2007. Of a total line of $5.0 million, we currently have letters of credit drawn on $3.3 million.

Seasonality and Quarterly Fluctuations

     Several of our businesses can experience fluctuations in quarterly performance. Our Publishing segment results can vary from quarter to quarter due to publication schedules and seasonality of certain types of advertising. Revenues from our Merchandising segment can vary significantly from quarter to quarter due to new product launches and the seasonality of certain product lines. In addition, we recognize a substantial portion of the revenue resulting from the difference between the minimum royalty amount under the Kmart contract and royalties paid on actual sales in the fourth quarter of each year, when the amount can be determined. In our Internet segment, revenue from marthastewartflowers.com is tied to key holidays during the year, while advertising revenue on

23

marthastewart.com is tied to traffic among other key factors and is typically highest in the fourth quarter of the year. Advertising revenue from our Broadcasting segment is highly dependent on ratings which fluctuate throughout the television season following general viewer trends. Ratings tend to be highest during the fourth quarter and lowest in the summer months.

Off-Balance Sheet Arrangements

     We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

General

     Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, deferred production costs, long-lived assets and accrued losses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     We believe that, of our significant accounting policies, the following may involve the highest degree of judgment and complexity.

Revenue Recognition

     We recognize revenues when realized or realizable and earned. Revenues and associated accounts receivable are recorded net of provisions for estimated future returns, doubtful accounts and other allowances.

     The Emerging Issues Task Force reached a consensus in May 2003 on Issue No. 0021, “Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”) which became effective for revenue arrangements entered into in the third quarter of 2003. In an arrangement with multiple deliverables, EITF 00-21 provides guidance to determine a) how the arrangement consideration should be measured, b) whether the arrangement should be divided into separate units of accounting, and c) how the arrangement consideration should be allocated among the separate units of accounting. The Company has applied the guidance included in EITF 00-21 in establishing revenue recognition policies for its arrangements with multiple deliverables. For agreements with multiple deliverables, if the Company is unable to put forth vendor specific objective evidence required under EITF 00-21 to determine the fair value of each deliverable, then the Company will account for the deliverables as a combined unit of accounting rather than separate units of accounting.

     Publishing advertising revenue is recorded upon release of magazines for sale to consumers and is stated net of agency commissions and cash and sales discounts. Subscription revenue is recognized on a straight-line basis over the life of the subscription as issues are delivered. Newsstand revenue in our Publishing segment is recognized based upon assumptions with respect to future returns and net of brokerage and newsstand-related fees. We base our estimates on our historical experience and current market conditions. Reserves are adjusted regularly based upon actual results. We maintain allowance for doubtful accounts for estimated losses resulting from the inability of our customers or licensing counterparties to make required payments. If the financial condition of our customers or licensing counterparties were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances might be required. Licensing based revenue, most of which is in our Merchandising segment, is accrued on a monthly basis based on the specific terms of each contract. Under certain agreements, revenue is accrued based on actual sales while others contain minimum guarantees that are earned evenly over the fiscal year. Revenue related to our agreement with Kmart is recorded on a monthly basis based on actual retail sales, until the last period of the year, when we recognize a substantial majority of the true-up between the minimum royalty amount and royalties paid on actual sales, when such amounts are determinable. Payments are generally made by our partners on a quarterly basis. Internet advertising revenue is generally based on the sale of impression-based advertisements, which is recorded in the period in which the advertisements are delivered. Television advertising revenue is recorded when the related commercial is aired and is recorded net of agency commission, estimated reserves for television

24

audience underdelivery and distribution fees. Television royalties are recorded as earned in accordance with specific terms of each agreement.

Television production costs

     Television production costs are capitalized and amortized based upon estimates of future revenues to be received and future costs to be incurred for the applicable television product. The Company bases its estimates on existing contracts for programs, historical advertising rates and ratings as well as market conditions. Estimated future revenues and costs are adjusted regularly based upon actual results and changes in market and other conditions.

Intangible assets

     We are required to analyze our goodwill on an annual basis as well as when events and circumstances indicate an impairment may have occurred. Unforeseen events and changes in circumstances and market conditions and material differences in the value of long-lived assets due to changes in estimates of future cash flows could negatively affect the fair value of our assets and result in an impairment charge. In estimating fair value, we must make assumptions and projections regarding items such as future cash flows, future revenues, future earnings, and other factors. The assumptions used in the estimate of fair value are generally consistent with the past performance of each reporting unit and are also consistent with the projections and assumptions that are used in current operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions. If these estimates or their related assumptions change in the future, we may be required to record an impairment loss for any of our intangible assets. The recording of any resulting impairment loss could have a material adverse effect on the Company’s financial statements.

Deferred Income Tax Asset Valuation Allowance

     We record a valuation allowance to reduce our deferred income tax assets to the amount that is more likely than not to be realized. In evaluating our ability to recover our deferred income tax assets, we consider all available positive and negative evidence, including our operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction by jurisdiction basis. Our cumulative pre-tax loss in the three most recent fiscal years represents sufficient negative evidence for us to determine that the establishment of a full valuation allowance against the deferred tax asset is appropriate. This valuation allowance offsets deferred tax assets associated with future tax deductions as well as carryforward items. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes. See Note 3 in the unaudited condensed consolidated financial statements for additional information.

Non-cash Equity Compensation

     We currently have several stock incentive plans that permit us to grant various types of share-based incentives to key employees, directors and consultants. The primary types of incentives granted under these plans are restricted shares of common stock and stock options. Restricted shares are valued at the market value of traded shares on the date of grant, while stock options are valued using a Black-Scholes option pricing model. The Black-Scholes option pricing model requires numerous assumptions, including expected volatility of our stock price and expected life of the option.

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Forward-looking Statements and Risk Factors

     Except for historical information contained in this Quarterly Report, the statements in this Quarterly report are “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts but instead represent only our current beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. These statements often can be identified by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “potential” or “continue” or the negative of these terms or other comparable terminology. The Company’s actual results may differ materially from those projected in these statements, and factors that could cause such differences include the following among others:

o adverse reactions to publicity relating to Martha Stewart by consumers, advertisers and business partners;

o a loss of the services of Ms. Stewart;

o a loss of the services of other key personnel;

o loss or failure of merchandising and licensing programs;

o failure to protect our intellectual property;

o a softening of the domestic advertising market;

o downturns in national or local economies;

o changes in consumer reading, purchasing, Internet and/or television viewing patterns;

o unanticipated increases in paper, postage or printing costs;

o operational or financial problems at any of our contractual business partners;

o the receptivity of consumers to our new product introductions;

o failure to predict, respond to and influence trends in consumer taste; and

o changes in government regulations affecting the Company’s industries.

These and other factors are discussed in more detail in this Quarterly Report on Form 10-Q under the heading “Part II. Other Information, Item 1A. Risk Factors.” The Company cautions you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. The Company undertakes no obligation to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

None.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

         Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we record, process, summarize and report the information we must disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, within the time periods specified in the SEC’s rules and forms.

Evaluation of Changes in Internal Control over Financial Reporting

          Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have determined that, during the third quarter of fiscal 2007, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     There have been no material changes from legal proceedings as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 other than the settlement agreement related to the class action lawsuit previously reported in “Item 3. Legal Proceedings” of our Annual Report on Form 10-K for the year ended December 31, 2006, which was approved by the court on May 29, 2007.

ITEM 1A. RISK FACTORS

     A wide range of factors could materially affect our performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in this report, the following factors, among others, could adversely affect our operations:

     Our success depends in part on the popularity of our brand and the reputation and popularity of our founder, Martha Stewart, and any adverse reactions to publicity relating to Ms. Stewart, or the loss of her services, could adversely affect our revenues, results of operations and our ability to maintain or generate a consumer base.

     While we believe there has been significant consumer acceptance for our products as a stand-alone brand, the image, reputation, popularity and talent of Martha Stewart remain important factors. Ms. Stewart’s efforts, personality and leadership have been, and continue to be, critical to our success. While the Company has managed its business without her daily participation, for example, during the period of her incarceration resulting from a personal legal matter, the repeated diminution or loss of her services due to disability, death or some other cause, or any repeated or sustained shifts in public or industry perceptions of her, could have a material adverse effect on our business. In addition, our business may be adversely affected by Ms. Stewart’s 2006 settlement with the SEC, which bars her until August 2011 from serving at the Company as a director, or as an officer with financial responsibilities.

     Our Merchandising business currently relies heavily on revenue from a single source.

     In 2006, we received approximately 82% of our merchandising revenues from our licensing agreement with Kmart. For the annual period ending January 31, 2007, we received guaranteed minimum royalty payments of $59.0 million from Kmart; the guaranteed minimum royalty for the period ending January 31, 2008 is $65.0 million. For the contract years ending January 31, 2009 and January 31, 2010 (the final two years of the contract), the minimum guarantees are substantially lower than in prior years. If in future periods we are unable to earn revenue in excess of the lower guarantees from our Kmart contract, and/or are unable to generate additional revenues from other merchandising initiatives, our operating results and business may be adversely affected.

     We are expanding our merchandising and licensing programs into new areas and products, the failure of any of which could diminish the perceived value of our brand, impair our ability to grow and adversely affect our prospects.

     Our growth depends to a significant degree upon our ability to develop new or expand existing retail merchandising programs. We have entered into several new merchandising and licensing agreements. Some of these agreements are exclusive and have a duration of many years. While we require that our licensees maintain the quality of our brands through specific contractual provisions, we cannot be certain that our licensees, or their manufacturers and distributors, will honor their contractual obligations or that they will not take other actions that will diminish the value of our brand name. There is also a risk that the extension of our brand into new business areas will meet with disapproval from consumers. We have limited experience in merchandising in some of these business areas. We cannot guarantee that these programs will be fully implemented, or if they will be successful when they are in place. If the licensing or merchandising programs do not succeed, we may be prohibited from seeking different channels for our products due to the exclusive nature and multi-year terms of these agreements. Disputes with new or

27

existing licensees may arise which could hinder our ability to grow or expand our product lines. Such disputes also could prevent or delay our ability to collect licensing revenue we expect in connection with such products. If such developments occur or our merchandising programs are otherwise not successful, our brand recognition, business, financial condition and prospects could be materially adversely affected.

     Our Merchandising business and licensing programs may suffer from downturns in the health and stability of the general economy or housing market.

     Reduction in the availability of credit, increased heating and gas expenses, slowing housing turnover or a downturn in the housing market could limit consumers’ discretionary spending or affect their confidence. These and other adverse consumer trends may lead to reduced spending on general merchandise, homes and home improvement projects, categories in which we license our brand. A downturn in consumer spending would adversely impact consumer sales generally, resulting in weaker revenues from our licensed products. Such a trend would adversely impact our business, financial condition and prospects.

     If The Martha Stewart Show fails to maintain a sufficient audience, if adverse trends develop in the television production business generally, or if Martha Stewart were to cease to be able to devote substantial time to our television business, that business would be adversely affected.

     Our television production business is subject to a number of uncertainties. Our business and financial condition could be adversely affected by:

     Failure of our television programming to maintain a sufficient audience

     Television production is a speculative business because revenues derived from television depend primarily upon the continued acceptance of that programming by the public, which is difficult to predict. Public acceptance of particular programming depends upon, among other things, the quality of that programming, the strength of stations on which that programming is broadcast, promotion of that programming, the quality and acceptance of competing television programming and other sources of entertainment and information. The Martha Stewart Show television program has experienced a decline in ratings consistent with the general decline in daytime broadcast television viewers discussed in the paragraph below and due, in part, to a decision by many stations to shift the airing of the show to a less favorable time. These developments have negatively impacted our television advertising revenues. If ratings for the show were to further decline, it would adversely affect the advertising revenues we derive from television and may result in the television program being broadcast on fewer stations. A further ratings decline could make it economically inefficient to continue production of the program in the daily one-hour format or otherwise. If production of the television program were to cease, it would result in the loss of a significant marketing platform for the Company and its products as well as a writedown of our capitalized programming costs. The amount of any writedown would vary depending on a number of factors, including when production ceased and the extent to which we continued to generate revenues from the use of our existing program library.

     Adverse trends in the television production business generally

     Television revenues may also be affected by a number of other factors, most of which are not within our control. These factors include a general decline in daytime broadcast television viewers, pricing pressure in the television advertising industry, strength of the stations on which our programming is broadcast, general economic conditions, increases in production costs, availability of other forms of entertainment and leisure time activities and other factors. All of these factors may quickly change, and these changes cannot be predicted with certainty. While we currently benefit from our ability to sell advertising on our television programs, if these changes occur, we can make no assurance that we will continue to be able to sell this advertising or that our advertising rates can be maintained. Accordingly, if any of these changes were to occur, the revenues we generate from television programming could decline.

     We have placed emphasis on building our Internet community. Failure to fulfill these undertakings would adversely affect our brand and business prospects.

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     Our growth depends to a significant degree upon the development of our Internet business. We have had failures with direct commerce in the past, and only limited experience in building an Internet-based community. In response to initial results from the relaunch of the marthastewart.com site in the second quarter, which were below expectations, we made changes to the site. Although key metrics increased in October, we cannot make assurances that those changes will enable us to sustain growth for our site in the long term. In order for our Internet business to succeed, we must, among other things:

• significantly increase our online traffic and revenue;

• attract and retain a base of frequent visitors to our website;

• expand the content, products and tools we offer over our website;

• respond to competitive developments while maintaining a distinct brand identity;

• attract and retain talent for critical positions;

• maintain and form relationships with strategic partners to attract more consumers;

• continue to develop and upgrade our technologies; and

• bring new product features to market in a timely manner.

     We cannot assure that we will be successful in achieving these and other necessary objectives or that our Internet business will be profitable. If we are not successful in achieving these objectives, our business, financial condition and prospects could be materially adversely affected.

     If we are unable to predict, respond to and influence trends in what the public finds appealing, our business will be adversely affected.

     Our continued success depends on our ability to provide creative, useful and attractive ideas, information, concepts, programming and products, which strongly appeal to a large number of homemakers and other consumers. In order to accomplish this, we must be able to respond quickly and effectively to changes in consumer tastes for ideas, information, concepts and products. The strength of our brand name and our business units depends in part on our ability to influence these tastes through broadcasting, publishing, merchandising and the Internet. We cannot be sure that our new ideas and content will have the appeal and garner the acceptance that they have in the past, or that we will be able to respond quickly to changes in the tastes of homemakers and other consumers. In addition, we cannot be sure that our existing ideas and content will continue to appeal to the public.

     Martha Stewart controls our company through her stock ownership, enabling her to elect who sits on our board of directors, and potentially to block matters requiring stockholder approval, including any potential changes of control.

     Ms. Stewart controls all of our outstanding shares of Class B common stock, representing approximately 92% of our voting power. The Class B common stock has ten votes per share, while Class A common stock, which is the stock available to the public, has one vote per share. Because of this dual-class structure, Ms. Stewart has a disproportionately influential vote. As a result, Ms. Stewart has the ability to control unilaterally the outcome of all matters requiring stockholder approval, including the election and removal of our entire board of directors and any merger, consolidation or sale of all or substantially all of our assets, and the ability to control our management and affairs. While her recent settlement with the SEC bars Ms. Stewart for the five-year period ending in August 2011 from serving at the Company as a director, or as an officer with financial responsibilities, her concentrated control could, among other things, discourage others from initiating any potential merger, takeover or other change of control transaction that may otherwise be beneficial to our businesses and stockholders.

     Our intellectual property may be infringed upon or others may accuse us of infringing on their intellectual property, either of which could adversely affect our business and result in costly litigation.

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     Our business is highly dependent upon our creativity and resulting intellectual property. We are also susceptible to others imitating our products and infringing our intellectual property rights. We may not be able to successfully protect our intellectual property rights, upon which we are materially dependent. In addition, the laws of many foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Imitation of our products or infringement of our intellectual property rights could diminish the value of our brands or otherwise adversely affect our revenues. If we are alleged to have infringed the intellectual property rights of another party, any resulting litigation could be costly, affecting our finances and our reputation. Litigation also diverts the time and resources of management, regardless of the merits of the claim. There can be no assurance that we would prevail in any litigation relating to our intellectual property. If we were to lose such a case, and be required to cease the sale of certain products or the use of certain technology or were forced to pay monetary damages, the results could adversely affect our business.

     Our business is largely dependent on advertising revenues in our publications, online operations and broadcasts and failure to attract or retain these advertisers would have a material adverse effect on our business.

     We depend on advertising revenue in our Publishing, Broadcasting and Internet businesses. We cannot control how much or where companies choose to advertise. If advertisers decide to spend less money, or if they advertise elsewhere in lieu of our publications or broadcasts, our revenues and business would be materially adversely affected.

     A loss of the services of other key personnel could have a material adverse effect on our business.

     Our continued success depends upon our ability to attract and retain key management executives, as well as upon a number of key members of our creative staff. The loss of some of our senior executives or key members of our creative staff, or an inability to attract or retain other key individuals, could materially adversely affect us. Continued growth and success in our business depends, to a large degree, on our ability to retain and attract such employees.

     We operate in four highly competitive businesses: Publishing, Merchandising, Internet and Broadcasting each of which subjects us to competitive pressures.

     We face intense competitive pressures and uncertainties in each of our four businesses: Publishing, Merchandising, Internet and Broadcasting. We have described these competitive pressures in each of the pertinent business descriptions in our most recent Annual Report on Form 10-K filed with the SEC on March 14, 2007. Please see “Business — Publishing—Competition,” “Business — Merchandising—Competition,” “Business — Internet—Competition” and “Business — Broadcasting—Competition,” in the Annual Report for a description of our competitive risks in the applicable business line.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table provides information about the Company’s purchases of its common stock during each month of the quarter ended September 30, 2007:

	(a)		(b)		(c)	(d)
						Maximum Number (or
					Total Number of	Approximate Dollar
					Shares (or Units)	Value) of Shares (or
	Total Number of				Purchased as Part of	Units) that may yet be
	Shares (or Units)		Average Price Paid		Publicly Announced	Purchased under the
Period	Purchased		per Share (or Unit)		Plans or Programs	Plans or Programs
July 2007(1)		21,001	$	16.04	Not applicable	Not applicable
August 2007(1)		22,739		12.98	Not applicable	Not applicable
September 2007(1)		4,079		11.84	Not applicable	Not applicable
Total for quarter ended Sept 30, 2007		47,819	$	13.94	Not applicable	Not applicable

(1) Represents shares withheld by, or delivered to, the Company pursuant to provisions in agreements with recipients of restricted stock granted under the Company’s stock incentive plan allowing the Company to withhold, or the recipient to deliver to the Company, the number of shares having the fair value equal to tax withholding due.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

During the third quarter of 2007, no matters were submitted to a vote of security holders.

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ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

(a) Exhibits

The following exhibits are filed as part of this report:

Exhibit
Number	Exhibit Title
3.1	Martha Stewart Living Omnimedia, Inc.’s Certificate of Incorporation (incorporated by reference to our Registration Statement on Form S-1, File Number 333-84001 (the “Registration Statement”)).
3.2	Martha Stewart Living Omnimedia, Inc.’s By-Laws (incorporated by reference to the Registration Statement).
10.1	Letter Agreement between Martha Stewart Living Omnimedia, Inc. and CAK Entertainment, dated as of July 19, 2007, amending the Consulting Agreement dated October 21, 2005 between the parties (incorporated by reference to Exhibit 10.2 to our quarterly report on Form 10-Q for the three months ended June 30, 2007).
10.2	Letter Agreement between Martha Stewart Living Omnimedia, Inc. and Martha Stewart extending that certain Location Rental Agreement, dated as of September 17, 2004, between the parties.*
10.3	Employment Agreement dated as June 25, 2007 between Martha Stewart Living Omnimedia, Inc. and Wenda Harris Millard.*
10.4	2008 Executive Severance Pay Plan*
31.1	Certification of Chief Executive Officer*
31.2	Certification of Chief Financial Officer*
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)*

* filed herewith

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MARTHA STEWART LIVING OMNIMEDIA, INC.
Date:	November 9, 2007
	/s/ Howard Hochhauser
Name:	Howard Hochhauser
Title:	Chief Financial Officer
	(Principal Financial Officer and duly authorized officer)

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EX-10.2

EXHIBIT 10.2

Extension of Location Rental Agreement

Dear Martha:

We write with respect to that certain Location Rental Agreement (the “Agreement”) by and between Martha Stewart Living Omnimedia, Inc. (“MSLO”), a Delaware corporation, and you, entered into as of September 17, 2004.

We acknowledge that the Agreement is scheduled to expire by its terms on September 17, 2007. We also acknowledge that the Agreement will be replaced by an Intangible Asset License Agreement. Notwithstanding the expiration of the Agreement and pending the negotiation of the Intangible Asset License Agreement, MSLO agrees to pay you the Enhanced Payment Amount, described in the second-numbered paragraph of the Agreement, on September 17, 2007 (the “Payment”) in order to continue to have access to the Real Property. MSLO’s use of the Real Property following the term will be consistent with the historic practices between you, your company, MSRE, and MSLO.

MSLO looks forward to good faith negotiations with you regarding the Intangible Asset License Agreement, beginning promptly. MSLO considers the Payment a payment to allow for continued access to the Real Property pending the finalization and execution of the new agreement. The Payment shall not be construed as the satisfaction of any other obligations MSLO has to you under any other agreement or arrangement. Nothing contained herein shall in any way compromise the rights of the parties with respect to future negotiations and/or prior agreements or arrangements.

Please acknowledge your understanding and acceptance of these terms by executing below where indicated and returning a copy to us.

Best regards,

/s/ Howard Hochhauser

Howard Hochhauser
Chief Financial Officer

Agreed to, acknowledged and accepted:

/s/ Martha Stewart

Martha Stewart

EX-10.3

EXHIBIT 10.3

Employment Agreement

     THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of June 25, 2007, by and between Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”), and Wenda Harris Millard (the “Executive”).

     WHEREAS, the Executive is currently a member of the Board of Directors of the Company (the “Board”); and

     WHEREAS, the Company desires that the Executive serve as its President — Media following the Effective Date, and the Executive is willing to be so employed, in each case on the terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of the mutual covenants contained herein, the sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

     1. Employment Term. Subject to the provisions of Section 7 of this Agreement, the Company hereby agrees to employ the Executive hereunder, and the Executive hereby agrees to be employed by the Company hereunder, in each case subject to the terms and conditions of this Agreement, for the period commencing on July 16, 2007 (the “Effective Date”) and ending on December 31, 2011 (such period, as it may be extended in accordance with the terms of the following sentence, the “Employment Term”). Unless the Company or the Executive has theretofore provided notice in writing to the other party of its intention not to extend the Employment Term, on June 30, 2011 and on each succeeding June 30, this Agreement shall automatically be extended for an additional 12 months from the then scheduled expiration date.

     2. Duties.

               (a) During the Employment Term, the Executive shall serve as the President — Media of the Company. The Executive shall have the duties and responsibilities customarily exercised by an individual serving in such a position in a corporation of the size and nature of the Company. In her capacity as President — Media, the Executive shall use her best energies and abilities in the performance of her duties, services and responsibilities for the Company as further detailed by the Chief Executive Officer (the “CEO”) and the Board of Directors (the “Board”). In performing such duties, services and responsibilities, the Executive will report directly to the CEO.

               (b) During the Employment Term, the Executive shall devote substantially all of her business time and attention to the businesses of the Company and its subsidiaries and affiliates and shall not engage in any activity inconsistent with the foregoing, whether or not such activity shall be engaged in for pecuniary profit, unless approved by the CEO or the Board; provided, however, that, to the extent such activities do not violate, or interfere with her performance of her duties, services and responsibilities under, this Agreement, the Executive shall be permitted to manage her personal, financial and legal affairs and serve on civic or charitable boards and committees of such boards, it being agreed that the Executive shall resign from the Board. During the Employment Term, the Executive’s principal location of employment shall be at the Company’s executive offices in New York City, New York, except for customary business travel on behalf of the Company and its subsidiaries and affiliates.

               (c) Upon any termination of the Executive’s employment with the Company, the Executive shall be deemed to have resigned from all other positions she then holds as an employee or director or other independent contractor of the Company or any of its subsidiaries or affiliates, unless otherwise agreed by the Company and the Executive.

     3. Base Salary; Bonus.

               (a) During the Employment Term, in consideration of the performance by the Executive of the Executive’s obligations during the Employment Term (including any service in any position with any subsidiary or affiliate of the Company), the Company shall pay the Executive a base salary (the “Base Salary”) at an annual rate of $550,000, subject to increase but not decrease in the discretion of the Board, payable in accordance with the normal payroll practices of the Company in effect from time to time.

               (b) During the Employment Term, in addition to the payments of the Base Salary set forth above, the Executive shall be eligible to receive, in respect of each calendar year during which the Employment Term is in effect, a performance-based cash bonus of 80% of Base Salary at target. With respect to calendar 2007, the Company shall guarantee and pay the Executive, subject to the other terms of this Agreement, 100% of her target bonus as if she were employed for the entire calendar year ($440,000), which amount shall be paid at the time the Company pays bonuses to other employees for the 2007 calendar year.

               (c) Concurrently with the execution of this Agreement, the Company shall pay to the Executive in cash the sum of $450,000 as an incentive to join the Company; provided, however, that the Executive agrees to immediately pay back to the Company in cash (i) $300,000 in the event she leaves the Company on or before the first anniversary of the Effective Date or (ii) $150,000 in the event she leaves the Company before the third anniversary of the Effective Date.

               (d) The Company shall reimburse Executive for reasonable legal fees in connection with the negotiation and execution of this Agreement in an amount not to exceed $25,000.

     4. Benefits.

               (a) During the Employment Term, the Executive shall be entitled to participate in the employee benefit plans, policies, programs and arrangements, as may be amended from time to time, that are provided generally to similarly situated employees of the Company (excluding for this purpose the Chief Executive Officer and Martha Stewart) to the extent the Executive meets the eligibility requirements for any such plan, policy, program, perquisite or arrangement.

               (b) The Company shall reimburse the Executive for all reasonable business expenses incurred by the Executive in carrying out the Executive’s duties, services and responsibilities under this Agreement during the Employment Term in accordance with Company policies relating to such expenses; it being understood that Executive shall be entitled to first-class air travel for long-haul international or transcontinental flights as necessary. The Executive shall comply with generally applicable policies, practices and procedures of the Company with respect to reimbursement for, and submission of expense reports, receipts or similar documentation of, such expenses.

     5. Vacations. During each calendar year of the Employment Term (pro rata for partial calendar years), the Executive shall be entitled to four weeks of paid vacation to be taken in accordance with the applicable policy of the Company.

     6. Equity Compensation.

               (a) Contemporaneously with the execution and delivery of this Agreement by the parties, the Company shall grant the Executive that number of shares of restricted Class A common stock, par value $0.01 per share (the “Stock”) of the Company equal to $1.5 million of value as determined by the closing price of the Stock on the Effective Date (the “Stock Grant”). The Stock Grant shall vest in three equal tranches on the first, second and third anniversaries of the Effective Date pursuant to the Restricted Stock Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”). In addition, the Executive will participate in the Company’s annual stock incentive program, receiving awards as determined by the Compensation Committee from time to time.

               (b) Upon a Change in Control of the Company, all unvested equity awards held by the Executive shall become fully vested.

     7. Termination of the Employment Term.

               (a) The Executive’s employment with the Company and the Employment Term shall terminate upon the earliest to occur of:

     (i) the death of the Executive;

     (ii) the termination of the Executive’s employment by the Company by reason of the Executive’s Disability;

     (iii) the termination of the Executive’s employment by the Company for Cause or without Cause;

     (iv) the termination of the Executive’s employment by the Executive for Good Reason or without Good Reason; and

     (v) the expiration of the Employment Term.

               (b) For purposes of this Agreement, the following terms shall have the following meanings:

     (i) “Cause” shall mean that the Board has made a good faith determination, after providing the Executive with reasonably detailed written notice and a reasonable opportunity to be heard on the issues at a Board meeting, that any of the following has occurred:

     (1) the willful and continued failure by the Executive to substantially perform her material duties to the Company (other than due to mental or physical disability) after written notice specifying such failure and the manner in which the Executive may rectify such failure in the future;

     (2) the Executive has engaged in willful, intentional misconduct that has resulted in material damage to the Company’s business or reputation;

     (3) the Executive has been convicted of a felony; or

     (4) the Executive has engaged in fraud against the Company or misappropriated Company property (other than incidental property).

     For purposes of this Agreement, no act or failure by the Executive shall be considered “willful” if such act is done by the Executive in the good faith belief that such act is or was in the best interests of the Company or one or more of its businesses. Nothing in this Section 7(b)(i) shall be construed to prevent the Executive from contesting the Board’s determination that Cause exists.

     (ii) “Change in Control” of the Company shall mean:

     (1) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or “group” (as such term is used in Section 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the Voting Stock of the Company; provided that this clause (1) shall not apply with respect to a stockholder of the Company who beneficially owns more than 50% of the Voting Stock of the Company on the Effective Date;

     (2) all or substantially all of the assets or business of the Company are disposed of pursuant to a merger, consolidation or other transaction unless, immediately after such transaction, the stockholders of the Company immediately prior to the transaction own, directly or indirectly, in substantially the same proportion as they owned the Voting Stock of the Company prior to such transaction more than 50% of the Voting Stock of the company surviving such transaction or succeeding to all or substantially all of the assets or business of the Company or the ultimate parent company of such surviving or successor company if such surviving or successor company is a subsidiary of another

entity (there being excluded from the number of shares held by such stockholders, but not from the Voting Stock of the combined company, any shares received by affiliates of such other company in exchange for stock of such other company);

     (3) the Company adopts any plan of liquidation providing for the distribution of all or substantially all of its assets if such plan of liquidation will result in the winding-up of the business of the Company;

     (4) the consummation of any merger, consolidation or other similar corporate transaction unless, immediately after such transaction, the stockholders of the Company immediately prior to the transaction own, directly or indirectly, in substantially the same proportion as they owned the Voting Stock of the Company prior to such transaction more than 50% of the Voting Stock of the company surviving such transaction or its ultimate parent company if such surviving company is a subsidiary of another entity (there being excluded from the number of shares held by such stockholders, but not from the Voting Stock of the combined company, any shares received by affiliates of such other company in exchange for stock of such other company); or

     (5) the failure of the Company to have any securities required to be registered under Section 12 of the Exchange Act.

     For purposes of this definition, “the Company” shall include any entity that succeeds to all or substantially all of the business of the Company; “Voting Stock” shall mean securities of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation; and references to ownership of “more than 50% of the Voting Stock” shall mean the ownership of shares of Voting Stock that represent the right to exercise more than 50% of the votes entitled to be cast in the election of directors of a corporation.

     (iii) “Disability” of the Executive shall have occurred if, as a result of the Executive’s incapacity due to physical or mental illness as determined by a physician selected by the Executive, and reasonably acceptable to the Company, the Executive shall have been substantially unable to perform her duties hereunder for six consecutive months, or for an aggregate of 180 days during any period of twelve consecutive months.

     (iv) “Good Reason” shall mean the occurrence, without the Executive’s express prior written consent, of any one or more of the following:

     (1) a material diminution of, or material reduction or material adverse alteration in, the Executive’s position, title, reporting status, duties, or responsibilities from, or the assignment to the Executive of duties inconsistent with, those set forth in Section 2(a) (or as subsequently amended in accordance with Section 18 with the consent of the Executive);

     (2) a material breach of the Agreement by the Company that continues after the reasonable notice and opportunity to cure;

     (3) the Company’s requiring the Executive to be based at a location in excess of 35 miles from the location of the Executive’s principal job location or office specified in Section 2(b), except for required travel on the Company’s business to an extent substantially consistent with the Executive’s position; or

     (4) a reduction by the Company of the Executive’s base salary as in effect on the Effective Date, or as the same shall be increased from time to time.

     The Executive’s right to terminate employment in a termination for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness. Subject to the requirements set forth above, the Executive’s continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

     8. Termination Procedures.

               (a) Notice of Termination. Any termination of the Executive’s employment by the Company or by the Executive during the Employment Term (other than pursuant to Sections 7(a)(i) and 7(a)(v)) shall be communicated by written Notice of Termination to the other party. For purposes of this Agreement, a “Notice of Termination” shall mean a notice indicating the specific termination provision in this Agreement relied upon and setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under that provision.

               (b) Date of Termination. For purposes of this Agreement, “Date of Termination” shall mean (i) if the Executive’s employment is terminated by her death, the date of her death, (ii) if the Executive’s employment is terminated pursuant to Section 7(a)(ii), 30 days after the date of receipt of the Notice of Termination (provided that the Executive does not return to the substantial performance of her duties on a full-time basis during such 30-day period), (iii) if the Executive’s employment is terminated pursuant to Section 7(a)(v), the date of expiration of the Employment Term, and (iv) if the Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given or any later date (within 30 days after the giving of such notice) set forth in such Notice of Termination.

     9. Termination Payments.

               (a) Upon any termination of the Executive’s employment, she shall be entitled to payment of any earned but unpaid portion of the Base Salary, bonus, benefits and unreimbursed business expenses, in each case with respect to the period ending on the Date of Termination.

               (b) In addition to the payments and benefits provided in Section 9(a), if the Executive’s employment is terminated (x) by the Company without Cause or (y) by the Executive for Good Reason, (i) outstanding equity awards held by the Executive shall vest and/or become exercisable, (ii) the Company shall pay the Executive the Severance Payment and (iii) the Company shall provide the Executive with continued medical coverage at active-employee rates for eighteen months or, if earlier, until the Executive receives subsequent employer-provided coverage. For purposes of this Section 9(b), the “Severance Payment” shall be a lump-sum cash payment equal to 18 months’ salary.

     Payment of the Severance Payment shall be conditioned upon the Executive’s execution of a general release in form satisfactory to the Company and the Executive; provided, however, that such release shall not contain post-termination restrictions that are more onerous for the Executive than those contained in this Agreement.

     10. Confidential Information; Noncompetition; Nonsolicitation; Nondisparagement.

               (a) Confidential Information. Except as may be required or appropriate in connection with her carrying out her duties under this Agreement, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or any legal process, or as is necessary in connection with any adversarial proceeding against the Company (in which case the Executive shall cooperate with the Company in obtaining a protective order at the Company’s expense against disclosure by a court of competent jurisdiction), communicate, to anyone other than the Company and those designated by the Company or on behalf of the Company in the furtherance of its business or to perform her duties hereunder, any trade secrets, confidential information, knowledge or data relating to the Company, its affiliates or any businesses or investments of the Company or its affiliates, obtained by the Executive during the Executive’s services to the Company that is not generally available public knowledge (other than by acts by the Executive in violation of this Agreement).

               (b) Noncompetition. The Executive hereby agrees that during her employment with the Company and during any Tail Period (as defined below), Executive shall not engage in or become associated with a Competitive Activity (as defined below). A “Competitive Activity” shall mean any business which is directly competitive with any business of the Company and its affiliates with respect to which Executive performed any duties during her employment with MSO and its affiliates and their predecessors, i.e., a lifestyle media website, television program or publication. Executive shall be deemed to be “engaged in or associated with a Competitive Activity” if you become an owner, employee, officer, director, independent contractor, agent, partner, advisor, or render personal services in any other capacity, with or for any individual, partnership, corporation or other organization (collectively, an “Enterprise”) that is engaged in a Competitive Activity, provided, however, that Executive shall not be prohibited from (a) owning less than five percent of the stock in any publicly traded Enterprise engaging in a Competitive Activity, or (b) being an employee, independent contractor or otherwise providing services to an Enterprise that is engaged in a Competitive Activity so long as Executive’s services relate to an aspect or endeavor of such Enterprise that is distinct from, and unrelated to, and Executive has no influence or control over, such Enterprise’s pursuit of a Competitive Activity. “Tail Period” shall mean the period, if any, commencing on the date that your employment with the Company terminates, and ending on the 18-month anniversary of such date. If, at any time, the provisions of this paragraph shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to area, duration or scope of activity, this paragraph shall be considered divisible and shall become and be immediately amended to only such area, duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter. The Executive agrees that this paragraph as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein. The Executive further agrees that the remedies at law for any breach or threat of breach by her of this paragraph will be inadequate, and that, in addition to any other remedy to which the Company may be entitled at law or in equity, the Company will be entitled to seek a temporary or permanent injunction or injunctions or temporary restraining order or orders to prevent breaches thereof. The Executive’s agreement shall not be deemed to prohibit you from opposing such relief on the basis of a dispute of facts related to any such application.

               (c) Nonsolicitation. During the Employment Term, and for 18 months after the Executive’s Date of Termination, the Executive shall not, directly or indirectly, (1) solicit for employment by other than the Company any person (other than any personal secretary or assistant hired to work directly for the Executive) employed by the Company or its affiliated companies as of the Date of Termination, (2) solicit for employment by other than the Company any person known by the Executive (after reasonable inquiry) to be employed at the time by the Company or its affiliated companies as of the date of the solicitation or (3) solicit any employee, customer or other person with an employment or business relationship with the Company or any of its affiliated companies to terminate, curtail or otherwise limit such employment or business relationship.

               (d) Non-disparagement. During the Employment Term, and for 2 years after the Executive’s Date of Termination, (i) the Executive shall not, directly or indirectly, make or publish any disparaging statements (whether written or oral) regarding the Company or any of its affiliated companies or businesses, or the affiliates, directors, officers, agents, principal stockholders or customers of any of them and (ii) neither the Company nor any of its affiliated companies or businesses or their affiliates, directors, or officers shall directly or indirectly, make or publish any disparaging statements (whether written or oral) regarding the Executive.

               (e) Injunctive Relief. In the event of a breach or threatened breach of this Section 10, each party agrees that the non-breaching party shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the parties acknowledging that damages would be inadequate and insufficient.

     11. Reimbursement of Legal Fees. If any contest or dispute shall arise between the Company and the Executive regarding any provision of this Agreement, the Company shall reimburse the Executive for all legal fees and expenses reasonably incurred by the Executive in connection with such contest or dispute, but only if the Executive prevails to a substantial extent with respect to the Executive’s claims brought and pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company receives written evidence of such fees and expenses.

     12. Indemnification. The Company shall indemnify the Executive as required pursuant to the indemnification provisions contained in the Company’s By-laws.

     13. Dispute Resolution. Except as set forth in Section 10(e), any controversy or claim arising out of or relating to this Agreement or the making, interpretation or breach thereof shall be settled by arbitration in New York City, New York by three arbitrators in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof, and any party to the arbitration may institute proceedings in any court having jurisdiction for the specific performance of any such award. The powers of the arbitrator shall include, but not be limited to, the awarding of injunctive relief.

     14. Representations.

               (a) The Executive represents and warrants that (i) she is not subject to any contract, arrangement, policy or understanding, or to any statute, governmental rule or regulation, that in any way limits her ability to enter into and fully perform her obligations under this Agreement and (ii) she is not otherwise unable to enter into and fully perform her obligations under this Agreement.

               (b) The Company represents and warrants to the Executive that (i) this Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company and (ii) subject to the accuracy of the Executive’s representation in Section 14(a), the employment of the Executive on the terms and conditions contained in this Agreement will not conflict with or result in a breach or violation of the terms of any contract or other obligation or instrument to which the Company is a party or by which it is bound or any statute, law, rule, regulation, judgment, order or decree applicable to the Company.

     15. Successors; Binding Agreement.

               (a) Company’s Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred, except that the Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall include any successor to its business and/or assets (by merger, purchase or otherwise) which executes and delivers the agreement provided for in this Section 15 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

               (b) Executive’s Successors. No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than her rights to payments or benefits hereunder, which may be transferred only by will or the laws of descent and distribution. Upon the Executive’s death, this Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s beneficiary or beneficiaries, personal or legal representatives, or estate, to the extent any such person succeeds to the Executive’s interests under this Agreement. If the Executive should die following her Date of Termination while any amounts would still be payable to her hereunder if she had continued to live, all such amounts unless otherwise provided herein shall be paid in accordance with the terms of this Agreement to such person or persons so appointed in writing by the Executive, or otherwise to her legal representatives or estate.

     16. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive, at her residence address most recently filed with the Company; and

With a copy to:

Gavin McElroy, Esq.

Frankfurt, Kurnit, Klein & Selz PC
488 Madison Avenue
New York, NY 10022
Tel: (212) 826-5577
Fax: (347) 438-2113

If to the Company:

Martha Stewart Living Omnimedia, Inc.
11 West 42nd Street
New York, NY 10036
Attention: General Counsel
Tel: (212) 827-8036
Fax: (212) 827-8188;

     or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

     17. Mitigation. The Executive shall not be required to mitigate damages with respect to the termination of her employment under this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due the Executive under this Agreement on account of subsequent employment except as specifically provided in Section 9(b). Additionally, amounts owed to the Executive under this Agreement shall not be offset by any claims the Company may have against the Executive, and the Company’s obligation to make the payments provided for in this Agreement, and otherwise to perform its obligations hereunder, shall not be affected by any other circumstances, including, without limitation, any counterclaim, recoupment, defense or other right which the Company may have against the Executive or others.

     18. Modification; Waiver. No provision of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing and signed by the Executive and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged. No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

     19. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

     20. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

     21. Entire Agreement. This Agreement and the Equity Agreements set forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of such subject matter.

     22. Withholding. All payments hereunder shall be subject to any required withholding of federal, state and local taxes pursuant to any applicable law or regulation.

     23. Section Headings. The section headings in this Agreement are for convenience of reference only, and they form no part of this Agreement and shall not affect its interpretation.

     24. Governing Law. Except as otherwise provided in Section 13, the validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without regard to its conflicts of law principles. Each of the parties agrees that if any dispute is not resolved by the parties pursuant to Section 13, such dispute shall be resolved only in the courts of the State of New York sitting in the County of New York or the United States District Court for the Southern District of New York and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, each of the parties irrevocably and unconditionally (a) submits for itself in any Proceeding relating to this Agreement, or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the courts of the State of New York sitting in the County of New York, the court of the United States of America for the Southern District of New York, and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such Proceeding shall be heard and determined in such New York State court or, to the extent permitted by law, in such federal court; (b) consents that any such Proceeding may and shall be brought in such courts and waives any objection that it may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) waives all right to trial by jury in any Proceeding (whether based on contract, tort or otherwise) arising out of or relating to this Agreement, or its performance under or the enforcement of this Agreement; (d) agrees that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address as provided in Section 16; and (e) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of New York.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

MARTHA STEWART LIVING OMNIMEDIA, INC.
By: Name:	/s/ Susan Lyne Susan Lyne
Title:	Chief Executive Officer
EXECUTIVE:
	/s/ Wenda Harris Millard  Name: Wenda Harris Millard

EX-10.4

EXHIBIT 10.4

2008 Executive Severance Plan

MARTHA STEWART LIVING OMNIMEDIA, INC.
2008 EXECUTIVE SEVERANCE PAY PLAN

The Company previously adopted the Martha Stewart Living Omnimedia, Inc. 2002 Executive Severance Pay Plan, effective as of August 9, 2002 (the “2002 Plan”). Effective as of December 31, 2004, the 2002 Plan expired. The Company subsequently adopted the Martha Stewart Living Omnimedia, Inc. 2005 Executive Severance Pay Plan, effective as of January 1, 2005 (the “2005 Plan”). Effective as of December 31, 2007, the 2005 Plan expired. Effective as of January 1, 2008, the Company has adopted the Martha Stewart Living Omnimedia, Inc. 2008 Executive Severance Pay Plan.

The purpose of the Plan is to better provide for the retention of key executives through providing them with a higher degree of financial security, on the terms and conditions hereinafter stated. The Plan is intended to be a severance pay plan governed by Title I of ERISA primarily for the purpose of providing benefits for a select group of management or highly compensated employees. All benefits under the Plan will be paid solely from the general assets of the Company.

ARTICLE I
Definitions

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means Martha Stewart Living Omnimedia, Inc.

“Denial Notice” has the meaning given in Section 4.03(2) of the Plan.

“Disability” means a Total Disability under the Company’s long-term disability insurance policy, or such comparable term under any successor policy which the Company may secure after the date hereof, as interpreted by the Plan Administrator.

“Effective Date” means January 1, 2008.

“Eligible Participant” has the meaning given in Section 2.02 of the Plan.

“Employment Severance Date” means the date an Eligible Participant experiences a Separation from Service.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Good Reason” shall have the meaning given in Section 3.01 of the Plan.

“Involuntary Termination for Cause” has the meaning given in Section 3.02 of the Plan.

“Involuntary Termination for Disability” means any termination of a Participant’s employment with the Company initiated by the Company as a result of such Participant’s Disability.

“Participant” means any eligible executive who is made a participant in the Plan by action of the Plan Administrator as specified herein.

“Plan” means The Martha Stewart Living Omnimedia, Inc. 2008 Executive Severance Pay Plan.

“Plan Administrator” means the Compensation Committee of the Board of Directors of the Company, or, if the Board of Directors so determines, another committee of the Board or the Board itself.

“Qualifying Involuntary Termination” means a Participant’s Separation from Service with the Company initiated by the Company other than an Involuntary Termination for Cause or an Involuntary Termination for Disability.

“Separation from Service” shall mean a termination of services provided by the Eligible Participant to the Company as determined by the Company or Plan Administrator in accordance with Treas. Reg. §1.409A-1(h).

“Subsidiary” means any “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code.

“Voluntary Termination for Good Reason” has the meaning given in Section 3.01 of the Plan.

“Voluntary Termination without Good Reason” means any termination of employment initiated by a Participant other than a Voluntary Termination for Good Reason.

ARTICLE II
Eligibility; Participation; Benefits

Section 2.01. Participation in the Plan. The Plan Administrator may designate any executive of the Company to be a Participant, and may vary the terms of a Participant’s participation on a case-by-case basis. Promptly following such designation, each Participant shall be notified of his or her participation in a formal communication from the Plan Administrator or the Company, provided that any variation in the terms of a Participant’s participation from the default terms of the Plan shall be clearly explained to the Participant in such communication. Participation in the Plan shall be determined in the Plan Administrator’s sole discretion. Once participation in the Plan has commenced, a Participant shall remain a Participant until the first to occur of (i) the termination of his or her employment under circumstances not giving rise to a right to severance benefits under the Plan, (ii) the completion of the delivery of all severance benefits under the Plan following the termination of his or her employment under circumstances giving rise to a right to such benefits and (iii) the termination or expiration of the Plan pursuant to Article V before termination of the Participant’s employment or the giving of notice by a Participant under Section 3.01 hereof.

Section 2.02. Benefits Eligibility. A Participant shall become entitled to severance benefits under the Plan in the event he or she experiences a Voluntary Termination for Good Reason or a Qualifying Involuntary Termination, provided that all of the conditions set forth in Section 2.03 are satisfied and the termination is not described in Section 2.04. Any Participant who becomes so entitled shall be deemed an “Eligible Participant.”

Section 2.03. Conditions. As a condition to entitlement of each Participant to severance benefits under the Plan, the Participant must, following the Employment Severance Date, execute, and not revoke, a waiver and release of claims pursuant to Section 6.01 of the Plan, which shall provide, without limitation, the following: (i) that the Participant shall have returned to the Company all property of the Company held by the Participant; (ii) a reaffirmation of the Participant’s agreement to abide by the confidentiality agreement entered into by the Participant in connection with the Participant’s employment with the Company or, if no such agreement exists, a confidentiality agreement in form and substance comparable to that typically entered into by comparably situated executives upon commencing employment with the Company; (iii) that the Participant shall reasonably cooperate with the Company to complete the transition of matters with which the Participant is familiar or responsible to other executives or employees and to make himself or herself reasonably available to answer questions or assist in matters which may require attention after the Participant’s Employment Severance Date; (iv) that the Participant shall not disparage the Company and those persons and entities related to the Company; and (v) that, for two years following the Employment Severance Date, the Participant shall not interfere with the Company’s businesses, including by solicitation of the Company’s employees.

Section 2.04. Ineligible Terminations of Employment. A Participant will not be eligible for severance benefits under the Plan if his or her employment with the Company terminates for any of the following reasons:

1)	Death of the Participant;
2)	Involuntary Termination for Disability;
3)	Voluntary Termination without Good Reason;
4)	Involuntary Termination for Cause; or
5)	Expiration of applicable employment term.

Section 2.05. Amount of Severance Payment. An Eligible Participant shall receive, as a severance benefit under the Plan, continued payment of his or her base salary during the period from his or her Employment Severance Date until the 18-month anniversary of his or her Employment Severance Date, at the rate in effect as of his or her Employment Severance Date.

For purposes of this Section 2.05, no reduction in salary of an Eligible Participant shall be taken into account in determining his or her severance benefits, if such reduction formed the basis of a claim for Voluntary Termination for Good Reason or was instituted just prior to, or after, the giving of an employment termination notice by the Company or the Eligible Participant.

Section 2.06. Form and Times of Payment. All severance benefits payable pursuant to Section 2.05 shall be paid according to the Company’s regular payroll procedure.

Anything in this Plan to the contrary notwithstanding, if (A) on the date of the Eligible Participant’s Separation of Service with the Company or a Subsidiary, any of the Company’s stock is publicly traded on an established securities market or otherwise (within the meaning of Section 409A(a)(2)(B)(i) of the Code), (B) if the Eligible Participant is determined to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, (C) the payments exceed the amounts permitted to be paid pursuant to Treasury Regulations section 1.409A-1(b)(9)(iii) and (D) such delay is required to avoid the imposition of the tax set forth in Section 409A(a)(1) of the Code, as a result of such termination, the Eligible Participant would receive any payment that, absent the application of this Section 2.06, would be subject to interest and additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(2)(B)(i) of the Code, then no such payment shall be payable prior to the date that is the earliest of (1) six (6) months after the Eligible Participant’s Separation from Service, (2) the Eligible Participant’s death or (3) such other date as will cause such payment not to be subject to such interest and additional tax (with a catch-up payment equal to the sum of all amounts that have been delayed to be made as of the date of the initial payment).

It is the intention of the parties that payments or benefits payable under this Plan not be subject to the additional tax imposed pursuant to Section 409A of the Code. To the extent such potential payments or benefits could become subject to such Section, the parties shall cooperate to amend this Plan with the goal of giving the Participant the economic benefits described herein in a manner that does not result in such tax being imposed.

Section 2.07. Benefit Continuation Provisions. An Eligible Participant shall also be entitled to the following severance benefits:

1) Health and Life Insurance. The Eligible Participant shall continue to be covered by the Company’s health and life insurance plans on the same terms and conditions as apply to similarly situated active employees of the Company, until the earlier of (i) the end of the period during which the Eligible Participant is entitled to salary continuation under Section 2.05 above and (ii) the date on which the Eligible Participant first becomes eligible for benefits of the same type under a plan or plans provided by a subsequent employer.

2) Equity Awards. The Eligible Participant shall become immediately vested in, and restrictions shall lapse on, any and all outstanding equity awards of such Eligible Participant, including stock options and restricted stock grants unless otherwise provided in the applicable plan or award agreement.

3) Outplacement Benefits. The Eligible Participant shall be entitled to reimbursement for outplacement services of his or her choice if utilized in good faith of up to a maximum of $30,000. Any reimbursement made to a Participant pursuant to this Plan shall be made no later than the end of the calendar year following the calendar year in which the expense was incurred.

Section 2.08. An Eligible Participant shall not be required to mitigate the amount of any payment or benefit provided for in the Plan by seeking other employment or otherwise and, except as provided in Section 2.07(1), no such payment or benefit shall be offset or reduced by the amount of any compensation or benefits provided to the Eligible Participant in any subsequent employment. The severance payments and benefits under the Plan to an Eligible Participant are intended to constitute the exclusive payments and benefits in the nature of severance or termination pay that shall be due to an Eligible Participant upon termination of his or her employment and shall be in lieu of (or offset by) any other such payments or benefits under any agreement, plan, practice or policy of the Company or any of its affiliates. The severance payments and benefits to which an Eligible Participant is otherwise entitled shall be further reduced (but not below zero) by any payments or benefits to which the Eligible Participant may be entitled under any federal, state or local plant-closing (or similar or analogous) law (including, without limitation, the U.S. Worker Adjustment and Retraining Notification Act).

ARTICLE III

Termination Of Employment

Section 3.01. Voluntary Termination for Good Reason. If a Participant experiences a Separation from Service with the Company pursuant to the following terms, such termination shall be deemed a “Voluntary Termination for Good Reason”:

1) Within ninety (90) days after the Participant first learns of an event that constitutes “Good Reason” (as defined below), the Participant gives the Company at least thirty (30) calendar days’ advance written notice of his or her intent to terminate in a Voluntary Termination for Good Reason, which notice sets forth in reasonable detail the facts and circumstances giving rise to the Good Reason on which such termination shall be based; and

2) The Company fails to remedy the facts and circumstances giving rise to such Good Reason in a prompt and responsive fashion taking into account such facts and circumstances, but in any event within such thirty-day period, provided that (i) if a fact, event or circumstance is by its nature not subject to remedy, the discontinuance of such fact, event or circumstance on a prospective basis shall be deemed a cure thereof and (ii) in the event the Company takes deliberate actions with respect to a Participant that repeatedly give rise to Good Reasons which the Company subsequently cures, the Company shall forfeit the ability to cure such Good Reasons with respect to such Participant.

“Good Reason” shall mean the occurrence, without the Participant’s express prior written consent, of any one or more of the following:

(a) a material reduction or material adverse alteration in the Participant’s position, title, duties or responsibilities from those in effect as of the Effective Date (or as subsequently amended with the consent of the Participant);

(b) the Company’s requiring the Participant to be based at a location in excess of thirty-five (35) miles from the location of the Participant’s principal job location or office as of the Effective Date (or as subsequently changed with the consent of the Participant), except for required travel on the Company’s business to an extent substantially consistent with the Participant’s present business obligations;

(c) a material reduction by the Company of the Participant’s base salary or target annual bonus percentage as in effect on the Effective Date, or as the same shall be increased from time to time; or

(d) the failure of the Company to comply with the requirements of Section 5.03 below.

The Participant’s right to terminate employment in a Voluntary Termination for Good Reason shall not be affected by the Participant’s incapacity due to physical or mental illness. Subject to the requirements set forth above, the Participant’s continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason herein.

Section 3.02. Involuntary Termination for Cause. If any one or more of the following has occurred, and the Participant is terminated accordingly, it shall be deemed an “Involuntary Termination for Cause”:

1) the Participant has materially failed to perform his or her material duties to the Company after written notice specifying such failure and the manner in which the Participant may rectify such failure in the future if practicable and a reasonable opportunity to be heard by the Plan Administrator regarding such failure;

2) the Participant has engaged in willful, intentional misconduct that has resulted in material damage to the Company’s business or reputation after written notice and a reasonable opportunity to be heard by the Plan Administrator regarding such misconduct;

3) the Participant has been convicted of a felony;

4) the Participant has engaged in fraud against the Company or misappropriated property of the Company (other than incidental property); or

5) the Participant has materially failed to comply with the Company’s employment policies and rules after written notice and a reasonable opportunity to cure such failure and to be heard by the Plan Administrator regarding such failure, provided that, pursuant to the standard policies of the Company in effect at the time, whether or not such policies are written, and any disciplinary procedures set forth therein or commonly followed, such failure to comply with such employment policies and rules would otherwise give rise to termination.

ARTICLE IV

Administration of the Plan

Section 4.01. Administrator. The general administration of the Plan and the responsibility for carrying out the provisions of the Plan will be placed with the Plan Administrator. The Plan Administrator may be notified at the following address:

Martha Stewart Living Omnimedia, Inc.
11 West 42nd Street
New York, New York 10036
Attention:                    Plan Administrator
c/o General Counsel

Section 4.02. Duties and Powers. The Plan Administrator will have all powers necessary and or helpful to administering the Plan in all its details. This authority includes, but is not limited to, determining eligibility for participation and, where clearly stated in the designation of Plan participation and subsequently in the notice to a Participant of Plan participation, varying the terms of the Plan with respect to a particular Participant; making rules and regulations for the administration of the Plan that are consistent with the terms and provisions of the Plan; construing all terms, provisions, conditions and limitations of the Plan, and resolving ambiguities, correcting deficiencies and supplying omissions; determining all questions arising out of, or in connection with, cases in which the Plan Administrator deems such a determination advisable. The Plan Administrator shall have the full discretion to exercise the powers conferred by the Plan, and all such acts and determinations will be final, binding and conclusive upon all interested parties. The Plan Administrator shall also have the authority to designate other individuals to exercise the powers of the Plan Administrator on its behalf.

Section 4.03. Claims Procedures.

1) All claims for benefits shall be in writing and shall be filed with the Plan Administrator.

2) The Plan Administrator shall determine whether or not to accept a claim for severance benefits within ninety (90) days after receiving it. If the Plan Administrator wholly or partially denies a Participant’s claim for benefits, the Plan Administrator shall give the claimant written notice of such denial (a “Denial Notice”) within such ninety-day period, setting forth:

(a) The specific reason(s) for the denial;

(b) Specific reference to pertinent Plan provisions on which the denial is based;

(c) A description of any additional material or information which must be submitted to perfect the claim, and an explanation of why such material or information is necessary; and

(d) An explanation of the Plan’s review procedure as set forth in Section 4.03(3) below.

3) If a Participant wishes to appeal the denial or partial denial of a claim for benefits under the Plan, he or she shall so notify the Plan Administrator in writing within sixty (60) days after receiving the Denial Notice, during which period the Participant shall have the right to submit to the Plan Administrator written materials or information in support of his or her claim (which shall include any materials or information requested in the Denial Notice). If the Participant so requests, the Plan Administrator shall afford the Participant the opportunity, before the end of such sixty-day period, to meet with the Plan Administrator to discuss his or her claim. In addition, upon request, the Participant shall be provided, free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Participant’s claim for benefits. The Plan Administrator shall make a final determination with respect to such claim, and shall notify the Participant of the determination, within sixty (60) days following the end of the sixty-day appeal period.

ARTICLE V

Plan Amendment and Termination; Successors

Section 5.01. Amendment and Termination. The Plan, and any part thereof, is subject to amendment, waiver or individual adjustment by the Plan Administrator at any time and from time to time, for any reason, provided that no such amendment, waiver, adjustment or termination shall decrease or otherwise adversely affect the rights or entitlements possessed by a Participant, whether prior to or after such Participant’s Employment Severance Date, and whether with respect to benefits under the Plan to which a Participant is then entitled or with respect to which such Participant may become entitled upon a Voluntary Termination for Good Reason or a Qualifying Involuntary Termination, without such Participant’s written consent.

Section 5.02. Plan Expiration. The Plan shall expire on December 31, 2010. No termination of employment of an individual occurring after such expiration shall give rise to any rights to severance benefits under the Plan, but such expiration shall have no effect on the severance benefits to which any Eligible Participant whose Employment Severance Date occurs on or prior to such date is entitled.

Section 5.03. Successors. The Company shall cause the Plan to be assumed by any successor of the Company, whether such succession occurs by merger, asset acquisition or otherwise, unless such assumption would occur by operation of law.

Section 5.04. Employment Status. The Plan does not constitute a contract of employment or impose on the Company any obligation to retain any Participant as an employee or to change any employment policies of the Company.

Section 5.05. Withholding of Taxes. The Company shall withhold from any amounts payable under the Plan all federal, state, local or other taxes that are legally required to be withheld.

Section 5.06. No Effect on Other Benefits. Severance benefits shall not be counted as compensation for purposes of determining benefits under other benefit plans, programs, policies and agreements, except to the extent expressly provided therein.

Section 5.07. Validity and Severability. The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision of the Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 5.08. Settlement of Claims. The Company’s obligation to make the payments provided for in the Plan and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, defense, recoupment or other right which the Company may have against a Participant or others.

Section 5.09. Assignment. The Plan shall inure to the benefit of and shall be enforceable by a Participant’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If a Participant should die while any amount is still payable to the Participant under the Plan had the Participant continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of the Plan to the Participant’s estate. A Participant’s rights under the Plan shall not otherwise be transferable or subject to lien or attachment.

Section 5.10. Governing Law. The Plan shall be governed by ERISA and, to the extent not preempted thereby, the laws of the State of Delaware. Without limiting the generality of this Section 5.10, it is intended that the Plan comply with Section 409A of the Code, and, in the event that the Plan is determined to be a “deferred compensation plan” within the meaning of Section 409A(d)(1) of the Code, the Plan Administrator shall, as necessary, adopt such conforming amendments as are necessary to comply with Section 409A of the Code without reducing the severance benefits due to Participants hereunder.

ARTICLE VI

Waiver and Release of Claims Form

Section 6.01. Signing the Waiver and Release Form. To receive severance benefits under the Plan, an Eligible Participant must sign, and not revoke, a waiver and release of claims in the form attached hereto as Exhibit A, with such changes thereto as the Company shall reasonably provide which shall be provided to the Eligible Participant on the Employment Severance Date to be executed within 30 days of such date.

Exhibit A

WAIVER AND RELEASE OF CLAIMS

1. General Release. In consideration of the payments and benefits to be made under the Martha Stewart Living Omnimedia, Inc. 2008 Executive Severance Pay Plan (the “Plan”),                                          (the “Employee”), with the intention of binding the Employee and the Employee’s heirs, executors, administrators and assigns, does hereby release, remise, acquit and forever discharge Martha Stewart Living Omnimedia, Inc. (the “Company”) and each of its subsidiaries and affiliates (the “Company Affiliated Group”), their present and former officers, directors, executives, agents, attorneys, employees and employee benefits plans (and the fiduciaries thereof), and the successors, predecessors and assigns of each of the foregoing (collectively, the “Company Released Parties”), of and from any and all claims, actions, causes of action, complaints, charges, demands, rights, damages, debts, sums of money, accounts, financial obligations, suits, expenses, attorneys’ fees and liabilities of whatever kind or nature in law, equity or otherwise, whether accrued, absolute, contingent, unliquidated or otherwise and whether now known or unknown, suspected or unsuspected which the Employee, individually or as a member of a class, now has, owns or holds, or has at any time heretofore had, owned or held, against any Company Released Party in any capacity (an “Action”), including, without limitation, any and all Actions (i) arising out of or in any way connected with the Employee’s service to any member of the Company Affiliated Group (or the predecessors thereof) in any capacity, or the termination of such service in any such capacity, (ii) for severance or vacation benefits, unpaid wages, salary or incentive payments, (iii) for breach of contract, wrongful discharge, impairment of economic opportunity, defamation, intentional infliction of emotional harm or other tort and (iv) for any violation of applicable state and local labor and employment laws (including, without limitation, all laws concerning harassment, discrimination, retaliation and other unlawful or unfair labor and employment practices), any and all Actions based on the Employee Retirement Income Security Act of 1974 (“ERISA”), and any and all Actions arising under the civil rights laws of any federal, state or local jurisdiction, including, without limitation, Title VII of the Civil Rights Act of 1964 (“Title VII”), the Americans with Disabilities Act (“ADA”), Sections 503 and 504 of the Rehabilitation Act, the Family and Medical Leave Act, the Age Discrimination in Employment Act (“ADEA”), the New York State Constitution, the New York Human Rights Law, the New York Labor Law, the New York Civil Rights Law, the New York City Human Rights Law, the New York Retaliatory Action by Employers Law, the New York Non-Discrimination for Legal Actions Law and the New York Wage and Hour Law, excepting only:

(a) rights of the Employee under this Waiver and Release of Claims and the Plan;

(b) rights of the Employee relating to equity awards held by the Employee as of his or her Employment Severance Date (as defined in the Plan);

(c) the right of the Employee to receive COBRA continuation coverage in accordance with applicable law;

(d) rights to indemnification the Employee may have (i) under applicable corporate law, (ii) under the by-laws or certificate of incorporation of any Company Released Party or (iii) as an insured under any director’s and officer’s liability insurance policy now or previously in force;

(e) claims (i) for benefits under any health, disability, retirement, deferred compensation, life insurance or other, similar employee benefit plan or arrangement of the Company Affiliated Group and (ii) for earned but unused vacation pay through the Employment Severance Date in accordance with applicable Company policy; and

(f) claims for the reimbursement of unreimbursed business expenses incurred prior to the Employment Severance Date pursuant to applicable Company policy.

2. No Admissions, Complaints or Other Claims. The Employee acknowledges and agrees that this Waiver and Release of Claims is not to be construed in any way as an admission of any liability whatsoever by any Company Released Party, any such liability being expressly denied. The Employee also acknowledges and agrees that he or she has not, with respect to any transaction or state of facts existing prior to the date hereof, filed any Actions against any Company Released Party with any governmental agency, court or tribunal.

3. Application to all Forms of Relief. This Waiver and Release of Claims applies to any relief no matter how called, including, without limitation, wages, back pay, front pay, compensatory damages, liquidated damages, punitive damages for pain or suffering, costs and attorney’s fees and expenses.

4. Specific Waiver. The Employee specifically acknowledges that his or her acceptance of the terms of this Waiver and Release of Claims is, among other things, a specific waiver of any and all Actions under Title VII, ADEA, ADA and any state or local law or regulation in respect of discrimination of any kind; provided, however, that nothing herein shall be deemed, nor does anything herein purport, to be a waiver of any right or claim or cause of action which by law the Employee is not permitted to waive.

5. Additional Covenants.

(a) Confidentiality. The Employee shall not, without the prior written consent of the Company or as may otherwise be required by law or any legal process, or as is necessary in connection with any adversarial proceeding against any member of the Company Affiliated Group (in which case the Employee shall cooperate with the Company in obtaining a protective order at the Company’s expense against disclosure by a court of competent jurisdiction), communicate, to anyone other than the Company and those designated by the Company or on behalf of the Company in the furtherance of its business, any trade secrets, confidential information, knowledge or data relating to any member of the Company Affiliated Group, obtained by the Employee during the Employee’s employment by the Company that is not generally available public knowledge (other than by acts by the Employee in violation of this Waiver and Release of Claims).

(b) Return of Company Material. The Employee represents that he or she has returned to the Company all Company Material (as defined below). For purposes of this Section 5(b), “Company Material” means any documents, files and other property and information of any kind belonging or relating to (i) any member of the Company Affiliated Group, (ii) the current and former suppliers, creditors, directors, officers, employees, agents and customers of any of them or (iii) the businesses, products, services and operations (including, without limitation, business, financial and accounting practices) of any of them, in each case whether tangible or intangible (including, without limitation, credit cards, building and office access cards, keys, computer equipment, cellular telephones, pagers, electronic devices, hardware, manuals, books, files, documents, records, software, customer data, research, financial data and information, memoranda, surveys, correspondence, statistics and payroll and other employee data, and any copies, compilations, extracts, excerpts, summaries and other notes thereof or relating thereto), excluding only information (x) that is generally available public knowledge or (y) that relates to the Employee’s compensation or employee benefits.

(c) Cooperation. Following the Employment Severance Date, the Employee shall reasonably cooperate with the Company upon reasonable request of the Board of Directors of the Company or any committee thereof, and shall be reasonably available to the Company with respect to matters arising out of the Employee’s services to the Company Affiliated Group.

(d) Nondisparagement. The Employee agrees not to communicate negatively about or otherwise disparage any Company Released Party or the products or businesses of any of them in any way whatsoever.

(e) Nonsolicitation. The Employee agrees that, from the Employment Severance Date through the second anniversary of the Employment Severance Date, the Employee shall not, directly or indirectly, interfere with the Company’s businesses by, without limitation, (i) soliciting any of the Company’s employees or customers or (ii) requesting or causing any customers, employees or vendors of the Company to alter, cancel or terminate any business or employment relationship with the Company.

(f) Noncompetition and other Restrictive Covenants. The Employee agrees and reaffirms that the non-competition provision and other restrictive covenants contained in his or her initial employment letter or agreement, as the case may be, with the Company shall survive by their own terms unless specifically preempted by the terms hereof.

(g) Injunctive Relief. In the event of a breach or threatened breach by the Employee of this Section 5, the Employee agrees that the Company shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Employee acknowledging that damages would be inadequate or insufficient.

6. Voluntariness. The Employee acknowledges and agrees that he or she is relying solely upon his or her own judgment; that the Employee is over eighteen (18) years of age and is legally competent to sign this Waiver and Release of Claims; that the Employee is signing this Waiver and Release of Claims of his or her own free will; that the Employee has read and understood the Waiver and Release of Claims before signing it; and that the Employee is signing this Waiver and Release of Claims in exchange for consideration that he or she believes is satisfactory and adequate. The Employee also acknowledges and agrees that he or she has been informed of the right to consult with legal counsel and has been encouraged to do so.

7. Complete Agreement/Severability. This Waiver and Release of Claims constitutes the complete and final agreement between the parties and supersedes and replaces all prior or contemporaneous agreements, negotiations, or discussions relating to the subject matter of this Waiver and Release of Claims. All provisions and portions of this Waiver and Release of Claims are severable. If any provision or portion of this Waiver and Release of Claims or the application of any provision or portion of the Waiver and Release of Claims shall be determined to be invalid or unenforceable to any extent or for any reason, all other provisions and portions of this Waiver and Release of Claims shall remain in full force and shall continue to be enforceable to the fullest and greatest extent permitted by law.

8. Acceptance and Revocability. The Employee acknowledges that he or she has been given a period of twenty-one (21) days within which to consider this Waiver and Release of Claims, unless applicable law requires a longer period, in which case the Employee shall be advised of such longer period and such longer period shall apply. The Employee may accept this Waiver and Release of Claims at any time within this period of time by signing the Waiver and Release of Claims and returning it to the Company. This Waiver and Release of Claims shall not become effective or enforceable until seven (7) calendar days after the Employee signs it. The Employee may revoke his or her acceptance of this Waiver and Release of Claims at any time within that seven (7) calendar day period by sending written notice to the Company. Such notice must be received by the Company within the seven (7) calendar day period in order to be effective and, if so received, would void this Waiver and Release of Claims for all purposes.

9. Effect of Unenforceability of Release. In the event that the Employee or his or her successors or assigns initiates an Action in respect any portion of the Waiver and Release of Claims set forth herein that is held to be null and void or otherwise determined not to be enforceable by the Company for any reason (whether as part of such Action or otherwise), then, in addition to any other remedy available to the Company hereunder (including, without limitation, the right to cease the severance benefits), the Employee shall promptly repay to the Company any portion of the severance benefits that has previously been paid or provided to him or her.

10. Governing Law. Except for issues or matters as to which federal law is applicable, this Waiver and Release of Claims shall be governed by and construed and enforced in accordance with the laws of the State of New York without giving effect to the conflicts of law principles thereof.

Employee

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Susan Lyne, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Martha Stewart Living Omnimedia, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2007

                    /s/ Susan Lyne  

Susan Lyne 

President & Chief Executive Officer 

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Howard Hochhauser, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Martha Stewart Living Omnimedia, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2007

                    /s/ Howard Hochhauser  

Howard Hochhauser 

Chief Financial Officer 

EX-32

EXHIBIT 32

CERTIFICATION
PURSUANT TO 18 U.S.C. Section 1350

In connection with the Quarterly Report of Martha Stewart Living Omnimedia, Inc. (the “registrant”) on Form 10-Q for the period ending September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “report”), we, Susan Lyne and Howard Hochhauser, Chief Executive Officer and Chief Financial Officer, respectively, of the registrant, certify, pursuant to 18 U.S.C. § 1350, that:

(1)	The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)	The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

Dated: November 9 , 2007	/s/ Susan Lyne
	Susan Lyne
	President & Chief Executive Officer
Dated: November 9, 2007	/s/ Howard Hochhauser
	Howard Hochhauser
	Chief Financial Officer