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 June 30, 2008

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, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company 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	August 5, 2008
Class A, $0.01 par value		27,793,859
Class B, $0.01 par value		26,690,125
Total		54,483,984

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.	14
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	30
	Item 4.	Controls and Procedures.	30
Part II.	Other Information
	Item 1.	Legal Proceedings.	31
	Item 1A.	Risk Factors.	31
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	37
	Item 3.	Defaults Upon Senior Securities.	37
	Item 4.	Submission of Matters to a Vote of Security Holders.	38
	Item 5.	Other Information.	38
	Item 6.	Exhibits.	39
	Signatures		40
EX-3.2: BY-LAWS
EX-10.1: NEW DIRECTOR COMPENSATION PROGRAM
EX-10.8: SEPARATION AGREEMENT
EX-10.9: INTANGIBLE ASSET LICENSE AGREEMENT
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)

	June 30,			December 31,
	2008			2007
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	43,267		$	30,536
Restricted cash		28,500			—
Short-term investments		490			26,745
Accounts receivable, net		52,766			94,195
Inventories		5,511			4,933
Deferred television production costs		6,056			5,316
Income taxes receivable		9			513
Other current assets		2,773			3,921
Total current assets		139,372			166,159
PROPERTY, PLANT AND EQUIPMENT, net		15,100			17,086
GOODWILL AND OTHER INTANGIBLE ASSETS, net		105,372			53,605
INVESTMENT IN EQUITY INTEREST, net		4,001			—
OTHER NONCURRENT ASSETS		21,311			18,417
Total assets	$	285,156		$	255,267
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	25,854		$	27,425
Accrued payroll and related costs		11,449			13,863
Income taxes payable		672			1,246
Current portion of deferred subscription revenue		24,255			25,578
Current portion of other deferred revenue		12,337			5,598
Current portion loan payable		6,000			—
Total current liabilities		80,567			73,710
DEFERRED SUBSCRIPTION REVENUE		7,260			9,577
OTHER DEFERRED REVENUE		14,048			14,482
LOAN PAYABLE		22,500			—
OTHER NONCURRENT LIABILITIES		2,751			1,969
Total liabilities		127,126			99,738
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Class A common stock, $.01 par value, 350,000 shares authorized; 27,780 and 26,738 shares outstanding in 2008 and 2007, respectively		278			267
Class B common stock, $.01 par value, 150,000 shares authorized; 26,690 and 26,722 shares outstanding in 2008 and 2007, respectively		267			267
Capital in excess of par value		279,707			272,132
Accumulated deficit		(120,268	)		(116,362	)
Accumulated other comprehensive loss		(1,179	)		—
		158,805			156,304
Less: Class A treasury stock — 59 shares at cost		(775	)		(775	)
Total shareholders’ equity		158,030			155,529
Total liabilities and shareholders’ equity	$	285,156		$	255,267

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						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
REVENUES
Publishing	$	46,265		$	47,478		$	87,057		$	88,096
Merchandising		16,249			10,352			29,315			23,952
Internet		3,241			5,183			6,655			8,713
Broadcasting		11,355			10,433			21,916			19,389
Total revenues		77,110			73,446			144,943			140,150
OPERATING COSTS AND EXPENSES
Production, distribution and editorial		36,720			38,914			72,756			78,658
Selling and promotion		18,051			22,172			36,765			42,403
General and administrative		19,093			17,887			35,355			35,190
Depreciation and amortization		1,523			2,263			2,879			4,241
Total operating costs and expenses		75,387			81,236			147,755			160,492
OPERATING INCOME / (LOSS)		1,723			(7,790	)		(2,812	)		(20,342	)
OTHER (EXPENSE) / INCOME
Interest income, net		56			775			539			1,547
Other (expense) / income		(1,131	)		432			(1,131	)		432
Total other (expense) / income		(1,075	)		1,207			(592	)		1,979
INCOME /(LOSS) BEFORE INCOME TAXES AND LOSS IN EQUITY INTEREST		648			(6,583	)		(3,404	)		(18,363	)
Income tax provision		(106	)		(154	)		(288	)		(243	)
Loss in equity interest		(214	)		—			(214	)		—
NET INCOME / (LOSS)	$	328		$	(6,737	)	$	(3,906	)	$	(18,606	)
EARNINGS/(LOSS) PER SHARE — BASIC AND DILUTED
Net income / (loss)	$	0.01		$	(0.13	)	$	(0.07	)	$	(0.36	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		53,476			52,386			53,087			52,382
Diluted		55,588			52,386			53,087			52,382

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 Six Months Ended June 30, 2008
(unaudited, in thousands)

	Class A				Class B										Accumulated other			Class A
	common stock				common stock					Capital in excess		Accumulated			comprehensive			treasury stock
	Shares		Amount		Shares			Amount		of par value		deficit			loss			Shares			Amount			Total
Balance at January 1, 2008		26,738	$	267		26,722		$	267	$	272,132	$	(116,362	)	$	—			(59	)	$	(775	)	$	155,529
Comprehensive loss:
Net loss		—		—		—			—		—		(3,906	)		—			—			—			(3,906	)
Other comprehensive loss:
Unrealized loss on investment		—		—		—			—		—		—			(1,179	)		—			—			(1,179	)
Total comprehensive loss																									(5,085	)
Shares returned on a net treasury basis		—		—		(32	)		—		—		—			—			—			—			—
Issuance of shares in conjunction with stock option exercises		3		—		—			—		20		—			—			—			—			20
Issuance of shares of stock and restricted stock, net of cancellations and tax withholdings		1,039		11		—			—		3,648		—			—			—			—			3,659
Non-cash equity compensation		—		—		—			—		3,907		—			—			—			—			3,907
Balance at June 30, 2008		27,780	$	278		26,690		$	267	$	279,707	$	(120,268	)	$	(1,179	)		(59	)	$	(775	)	$	158,030

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)

	Six Months Ended
	June 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(3,906	)	$	(18,606	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		2,879			4,241
Amortization of deferred television production costs		9,454			10,489
Non-cash equity compensation		3,981			12,872
Other non-cash charges, net		1,112			—
Changes in operating assets and liabilities		26,023			13,769
Net cash provided by operating activities		39,543			22,765
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business		(46,311	)		—
Investment in equity interest		(4,215	)		—
Capital expenditures		(564	)		(2,680	)
Purchases of short-term investments		(50	)		(102,993	)
Sales of short-term investments		26,305			93,010
Net cash used in investing activities		(24,835	)		(12,663	)
CASH FLOWS FROM FINANCING ACTIVITIES
Debt issuance costs		(657	)		—
Proceeds from long-term debt		30,000			—
Repayment of long-term debt		(1,500	)		—
Proceeds received from stock option exercises		20			287
Change in restricted cash		(28,500	)		—
Issuance of stock and restricted stock, net of cancellations and tax liabilities		(1,340	)		(2,346	)
Net cash used in financing activities		(1,977	)		(2,059	)
Net increase in cash		12,731			8,043
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		30,536			28,528
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	43,267		$	36,571
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Acquisition of business financed by stock issuance	$	5,000			—

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. Accounting policies

1. General

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

     The information included in the foregoing interim condensed consolidated financial statements is unaudited. In the opinion of management, all adjustments, all of 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, 2007 (the “2007 10-K”) which may be accessed through the SEC’s World Wide Web site at http://www.sec.gov.

     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.

     In the second quarter 2008, several new significant accounting policies were adopted to reflect certain transactions that occurred in the period:

Principles of Consolidation

     The consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries. Equity investments in which we exercise significant influence, but do not control and are not the primary beneficiary, are accounted for using the equity method of accounting. This method requires our equity investment to be adjusted each reporting period to reflect our share in the investee’s income or losses. Investments in which we do not exercise significant influence over the investee are accounted for using the cost method of accounting. Intercompany transactions are eliminated.

Acquisitions

     The Company accounts for acquisitions using the purchase method. Under this method, the acquiring company allocates the purchase price to the assets acquired based upon their estimated fair values at the date of acquisition, including intangible assets that can be identified. The purchase price in excess of the fair value of the net assets is recorded as goodwill.

Investment in equity securities

     The Company has certain investments in equity securities which have readily determinable fair values. These securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of shareholder’s equity. If a decline in fair value is judged to be other than temporary, the cost basis of the security will be written down to fair value and amount of the write down will be accounted for as a realized loss, included in earnings.

Derivative Instruments

     All derivative instruments are required to be recognized on the balance sheet at fair value. Derivatives that are not designated as hedges for accounting purposes are adjusted to fair value through income.

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     The Company’s other “Significant Accounting Policies” are discussed in more detail in the 2007 10-K, especially under the heading “Note 2. Summary of Significant Accounting Policies.”

2. Recent accounting standards

     In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”), which clarifies the definition of fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurement. SFAS 157 does not require any new fair value measurements and eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. However, on February 12, 2008, the FASB issued FASB Staff Position (“FSP”) FAS 157-2 which delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). This FSP partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP. The Company adopted SFAS 157 as of January 1, 2008 for financial assets and liabilities. The adoption of SFAS 157 for financial assets and liabilities did not have a material impact on the consolidated financial statements. The Company is currently assessing the impact to the Company’s consolidated financial position, cash flows or results of operations upon adoption of SFAS 157 for nonfinancial assets and nonfinancial liabilities as deferred by FSP FAS 157-2.

     In December 2007, the FASB issued Statement No. 141(R), Business Combinations (Revised) (“SFAS 141(R)”). SFAS 141(R) replaces the current standard on business combinations and will significantly change the accounting for and reporting of business combinations in consolidated financial statements. SFAS 141(R) requires an entity to measure the business acquired at fair value and to recognize goodwill attributable to any noncontrolling interests (previously referred to as minority interests) rather than just the portion attributable to the acquirer. SFAS 141(R) will also result in fewer exceptions to the principle of measuring assets acquired and liabilities assumed in a business combination at fair value. In addition, SFAS 141(R) will result in payments to third parties for consulting, legal, audit, and similar services associated with an acquisition to be recognized as expenses when incurred rather than capitalized as part of the business combination. Also in December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 requires that accounting and reporting for minority interests be recharacterized as noncontrolling interests and classified as a component of equity. SFAS 141(R) and SFAS 160 are required to be adopted simultaneously and are effective for the Company beginning January 1, 2009, with earlier adoption being prohibited. The Company is currently assessing the impact, if any, to the Company’s consolidated financial position, cash flows or results of operations upon adoption of SFAS 141(R) and SFAS 160.

     In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS 161”). SFAS 161 amends and expands the disclosure requirements of SFAS 133, Accounting for Derivative Instruments and Hedging Activities. It requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2008. Accordingly, the Company will adopt SFAS 161 in fiscal year 2009.

     In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of non-governmental entities that are presented in conformity with generally accepted accounting principles in the United States of America. SFAS 162 will be effective 60 days after the Security and Exchange Commission approves the Public Company Accounting Oversight Board’s amendments to AU Section 411. The Company does not anticipate the adoption of SFAS 162 will have an impact on the Company’s consolidated financial position, results of operations or cash flows.

     In June 2008, the FASB issued Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 concludes that unvested share-based payment awards that contain rights to receive nonforfeitable dividends or dividend equivalents are participating securities, and thus, should be included in the two-class method of computing earnings per share (“EPS”). FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim

8

periods within those years. Early application of EITF 03-6-1 is prohibited. FSP EITF 03-6-1 also requires that all prior-period EPS data be adjusted retrospectively. The Company is currently evaluating the impact FSP EITF 03-6-1 will have on its consolidated 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 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 $1.4 million to its deferred tax asset (“DTA”) and valuation allowance in the first six months of 2008, resulting in a cumulative balance for both its DTA and valuation allowance of $64.7 million as of June 30, 2008. 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.

     As of January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which establishes guidance on the accounting for uncertain tax positions. As of June 30, 2008, the Company had a FIN 48 liability balance of $0.7 million, of which $0.5 million represented unrecognized tax benefits, which if recognized at some point in the future would favorably impact the effective tax rate, and $0.2 million is interest. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for the years before 2005 and state examinations for the years before 2003. 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 $0.1 million.

4. Equity compensation

     Prior to May 2008, the Company had several stock incentive plans that permitted the Company to grant various types of share-based incentives to key employees, directors and consultants. The primary types of incentives granted under these plans were stock options and restricted shares of common stock. The Compensation Committee of the Board of Directors was authorized to 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 May 2008, the Company’s Board of Directors adopted the Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan (the “New Stock Plan”), which was approved by the Company’s stockholders at the Company’s 2008 annual meeting. The New Stock Plan has 10,000,000 shares available for issuance. The New Stock Plan replaced the 1999 Option Plan and Non-Employee Director Plan (together, the “Prior Plans”), which together had an aggregate of approximately 1,850,000 shares still available for issuance. Therefore, the total net effect of the replacement of the Prior Plans and adoption of the New Stock Plan was an increase of approximately 8,150,000 shares of Class A Common Stock available for issuance under the Company’s stock plans.

     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.

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.”

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     Certain prior year financial information has been reclassified to conform to fiscal 2008 financial statement presentation.

6. Inventories

     Inventory is comprised of paper stock. The inventory balance at June 30, 2008 and December 31, 2007 was $5.5 million and $4.9 million, respectively.

7. Acquisition of Business

     On April 2, 2008, the Company acquired all of the assets related to the business of Chef Emeril Lagasse other than his restaurant business and Foundation in exchange for approximately $45.0 million in cash and $5.0 million in shares of the Company’s Class A Common Stock which equaled 674,854 shares at closing. These shares issued in connection with this acquisition were not covered by the Company’s existing equity plans. The Company also paid $1.3 million in cash related to the direct costs of the acquisition. The acquisition agreement also includes a potential additional payment of up to $20 million, in 2013, based upon the achievement of certain operating metrics in 2011 and 2012, a portion of which may be payable, at the Company’s election, in shares of the Company’s Class A Common Stock.

     The Company acquired the assets related to chef Emeril Lagasse to further our diversification strategy and help grow our operating results. Consistent with SFAS No. 141, “Business Combinations,” this acquisition was accounted for under purchase accounting. While the primary assets purchased in the transaction were certain trade names valued at $45.2 million as well as a television content library valued at $5.2 million, a nominal portion of the value is apportioned to goodwill of $0.9 representing the excess purchase price over the fair market value of the assets acquired. To the extent that the certain operating metrics in 2011 and 2012 are achieved, the potential additional payment will be allocated to the acquisition and may be recognized as goodwill.

     Of the intangible assets acquired, only the television content library is subject to amortization over a six-year period. For both the three and six month periods ended June 30, 2008 approximately $0.2 million was charged to amortization expense and accumulated amortization related to this asset.

     The results of operations for the acquisition have been included in the Company’s condensed consolidated financial statements of operations since April 2, 2008, and are recorded approximately 60 % and 40% in the Merchandising and Broadcasting segments, respectively. The following unaudited pro forma financial information presents a summary of the results of operations assuming the acquisition occurred at the beginning of each period presented:

	Three Months Ended June 30,					Six Months Ended June 30,
(unaudited, in thousands, except per share amounts)	2008		2007			2008			2007
Net revenues	$	77,110	$	76,612		$	148,162		$	146,482
Net income/(loss)		328		(5,772	)		(3,002	)		(16,706	)
Net earnings/(loss) per share — basic and diluted	$	0.01	$	(0.11	)	$	(0.06	)	$	(0.31	)

     Pro forma adjustments have been made to reflect amortization using asset values recognized after applying purchase accounting adjustments, to record incremental compensation costs and to record amortization of deferred financing costs and interest expense related to the long-term debt incurred to fund a part of the acquisition. No tax adjustment was necessary due to the benefit of the Company’s net operating loss carryforwards. The pro forma earnings/(loss) per share amounts are based on the pro forma number of shares outstanding as of the end of each period presented which include the shares issued by the Company as a portion of the total consideration for the acquisition.

     The pro forma condensed consolidated financial information is presented for information purposes only. The pro forma condensed consolidated financial information should not be construed to be indicative of the combined results of operations that might have been achieved had the acquisition been consummated at the beginning of each period presented, nor is it necessarily indicative of the future results of the combined company.

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8. Investment in Equity Interest

     In the first quarter of 2008, the Company entered into a series of transactions with WeddingWire, a localized wedding platform that combines an online marketplace with planning tools and a social community. In exchange for a cash payment from the Company of $5.0 million, the Company acquired approximately 40 percent of the equity in WeddingWire and a commercial agreement related to software and content licensing, and media sales. The transaction has been accounted for using the equity method. Accordingly, the Company allocated $0.8 million of the purchase price to intangible assets related to the commercial agreement and the remaining $4.2 million to investment in equity interest. The intangible asset was determined to have a life of three years and will be amortized accordingly. The Company records its proportionate share of the results of WeddingWire one quarter in arrears within the loss in equity interest on the condensed consolidated statement of operations

9. Loan Payable

     On April 4, 2008, the Company and its wholly-owned subsidiary, MSLO Emeril Acquisition Sub LLC (the “Borrower”) entered into a loan agreement with Bank of America, N.A. Pursuant to the loan agreement, on April 7, 2008, the Borrower borrowed a $30 million term loan from Bank of America, the material terms of which were disclosed in Company’s Current Report on Form 8-K filed with the SEC on April 8, 2008. At June 30, 2008, the loan was secured by cash collateral of $28.5 million. The cash collateral is reflected as restricted cash on the condensed consolidated balance sheet as of June 30, 2008. In the third quarter of 2008, the cash collateral was replaced by collateral consisting of substantially all of the assets of the Emeril business. See Note 12, “Subsequent Events,” for further information. Martha Stewart Living Omnimedia, Inc. and most of its domestic subsidiaries are guarantors of the loan.

     Loan repayments commenced June 30, 2008 with quarterly principal installments of $1.5 million. The interest rate on the loan while secured by cash collateral was equal to a floating rate of 1-month LIBOR plus 1.00%. In the third quarter of 2008, the rate increased to 1-month LIBOR plus 2.85% when the cash collateral supporting the loan was replaced with assets of the Emeril business.

     The loan terms include financial covenants, failure of which could result in an acceleration of repayment or a full payment on demand. The loan agreement also contains a variety of customary affirmative and negative covenants that, among other things, limit our and our subsidiaries’ ability to incur additional debt, suffer the creation of liens on their assets, pay dividends or repurchase stock, make investments or loans, sell assets, enter into transactions with affiliates other than on arm’s length terms, make capital expenditures, merge into or acquire other entities or liquidate. The negative covenants expressly permit us to, among other things: incur an additional $15 million of debt to finance permitted investments or acquisitions; incur an additional $15 million of earnout liabilities in connection with permitted acquisitions; spend up to $30 million repurchasing our stock or paying dividends thereon (so long as no default or event of default existed at the time of or would result from such repurchase or dividend payment and we would be in pro forma compliance with the above-described financial covenants assuming such repurchase or dividend payment had occurred at the beginning of the most recently-ended four-quarter period); make investments and acquisitions (so long as no default or event of default existed at the time of or would result from such investment or acquisition and we would be in pro forma compliance with the above-described financial covenants assuming the acquisition or investment had occurred at the beginning of the most recently-ended four-quarter period); make up to $15 million in capital expenditures in fiscal year 2008 and $7.5 million in each subsequent fiscal year, provided that we can carry over any unspent amount to any subsequent fiscal year (but in no event may we make more than $15 million in capital expenditures in any fiscal year); sell one of our investments (or any asset we might receive in conversion or exchange for such investment); and sell assets during the term of the loan comprising, in the aggregate, up to 10% of our consolidated shareholders’ equity, provided we receive at least 75% of the consideration in cash.

10. Industry segments

     The Company is an integrated media and merchandising company providing consumers with inspiring lifestyle content and well-designed, high-quality products. 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 Merchandising segment also includes

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the new flowers program with 1-800-Flowers.com which began in the second quarter of 2008. The Internet segment primarily consists of the content-driven website marthastewart.com supported by advertising and, until the middle of the first quarter of 2008, the operations relating to direct-to-consumer floral business. 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. The Martha Stewart Show airs in syndication seasonally over a 12-month period beginning and ending in the middle of September. The Broadcasting segment also includes certain operations related to Emeril Lagasse, predominantly television programming featuring Emeril Lagasse.

     The accounting policies for the Company’s business segments are discussed in more detail in Note 1 above and in the 2007 10-K, especially under the heading “Note 2. Summary of Significant Accounting Policies.”

     Segment information for the quarter ended June 30, 2008 and 2007 is as follows:

(in thousands)	Publishing		Merchandising		Internet			Broadcasting			Corporate			Consolidated
2008
Revenues	$	46,265	$	16,249	$	3,241		$	11,355		$	—		$	77,110
Non-cash equity compensation		773		375		91			222			585			2,046
Depreciation and amortization		93		25		492			300			613			1,523
Operating income/(loss)		7,177		8,418		(1,968	)		855			(12,759	)		1,723
2007
Revenues	$	47,478	$	10,352	$	5,183		$	10,433		$	—		$	73,446
Non-cash equity compensation		1,434		355		90			1,160			1,701			4,740
Depreciation and amortization		295		97		349			837			685			2,263
Operating income/(loss)		5,050		3,450		(2,144	)		(871	)		(13,275	)		(7,790	)

     Segment information for the six months ended June 30, 2008 and 2007 is as follows:

(in thousands)	Publishing		Merchandising		Internet			Broadcasting			Corporate			Consolidated
2008
Revenues	$	87,057	$	29,315	$	6,655		$	21,916		$	—		$	144,943
Non-cash equity compensation		1,423		736		151			460			1,211			3,981
Depreciation and amortization		192		49		870			410			1,358			2,879
Operating income/(loss)		8,835		15,014		(4,216	)		1,029			(23,474	)		(2,812	)
Total assets		90,584		53,907		11,864			45,037			83,764			285,156
2007
Revenues	$	88,096	$	23,952	$	8,713		$	19,389		$	—		$	140,150
Non-cash equity compensation		2,219		715		164			7,046			2,728			12,872
Depreciation and amortization		588		193		505			1,699			1,256			4,241
Operating income/(loss)		6,350		10,226		(4,647	)		(6,969	)		(25,302	)		(20,342	)
Total assets		86,790		9,983		6,336			19,831			97,035			219,975

11. 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 has been Chairman of the Board and a Director of the Company since the execution of the agreement. This October 2005 agreement superseded a previous consulting agreement with him, which was entered into in January 2005 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 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 Company’s Compensation Committee which meets periodically throughout the year but not necessarily at the end of the quarter. Through June 30, 2008, the Compensation Committee has vested Mr. Koppelman in 53% of the potential milestone fee and 50% of the bonus feature tied to adjusted EBITDA and acquisition goals 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 2007 10-K.

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     In July 2008, the Board of Directors of the Company appointed Mr. Koppelman as Executive Chairman and the principal executive officer of the Company. It also named two co-Chief Executive Officers who report directly to the Executive Chairman. The Company anticipates negotiating a new employment arrangement with Mr. Koppelman.

     On June 13, 2008, the Company entered into an intangible asset license agreement (the “Intangible Asset License Agreement”) with MS Real Estate Management Company (the “Licensor”), an entity owned by Martha Stewart. The Intangible Asset License Agreement replaced the Location Rental Agreement dated as of September 17, 2004 between the parties, which expired on September 17, 2007, but which was extended by letter agreement dated as of September 12, 2007 pending negotiation of the Intangible Asset License Agreement. The Intangible Asset License Agreement is retroactive to September 18, 2007 and has a five-year term.

     Pursuant to the Intangible Asset License Agreement, the Company will pay an annual fee of $2 million to the Licensor over the 5-year term for the perpetual, exclusive right to use Ms. Stewart’s lifestyle intangible asset in connection with Company products and services and during the term of the agreement to access various real properties owned by Ms. Stewart. The Licensor will be responsible, at its expense, to maintain, landscape and garden the properties in a manner consistent with past practices; provided, however that the Company will be responsible for approved business expenses associated with security and telecommunications systems and security personnel related to Ms. Stewart at the properties, and will reimburse Licensor for up to $100,000 of approved and documented household expenses.

12. Subsequent Events

     As previously reported by the Company on a Current Report on Form 8-K dated April 8, 2008 (the “Initial 8-K”), the Company and its wholly-owned subsidiary, MSLO Emeril Acquisition Sub LLC (the “Borrower”) entered into a Loan Agreement with Bank of America, N.A. (the “Bank”) dated as of April 4, 2008 (the “Loan Agreement”), pursuant to which the Borrower borrowed a $30 million term loan from the Bank (the “Loan”) on April 7, 2008. As described in the Initial 8-K, the Loan is guaranteed by the Company and its domestic subsidiaries (other than MSLO Shared IP Sub LLC), and the Loan was secured by cash collateral (“Cash Collateral”) held in an account into which the Loan proceeds were deposited; yet the Borrower could elect at any time, subject to fulfillment of certain conditions set forth in the Loan Agreement (such conditions, the “Collateral Replacement Conditions”), to replace (the “Collateral Replacement”) the Cash Collateral with collateral consisting of substantially all of the assets of the businesses owned and operated by Emeril Lagasse and certain affiliated parties (together, “Emeril”), except for Emeril’s restaurant-related business and Emeril’s foundation (such businesses, except for Emeril’s restaurant-related business and Emeril’s foundation, the “Acquired Business”). As described in the Initial 8-K, the Company acquired the Acquired Business from Emeril on or about April 2, 2008. To facilitate the Collateral Replacement, the Company transferred substantially all of the assets comprising the Acquired Business to the Borrower.

     On August 1, 2008, the Collateral Replacement Conditions were satisfied and the Collateral Replacement occurred. In connection therewith, the Company, the Borrower and the Bank entered into a Security Agreement whereby the Company and the Borrower granted to the Bank a security interest in their rights to the assets comprising the Acquired Business to secure the Loan, and the pledge agreement related to the Cash Collateral was terminated. As described in the Initial 8-K, upon the occurrence of the Collateral Replacement, the interest rate on the Loan increased from a floating rate (adjusted daily) of 1-month LIBOR plus 1.00% to a floating rate (adjusted daily) of 1-month LIBOR plus 2.85%. All other obligations and covenants of the Loan remain in effect.

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

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. Our actual results may differ materially from those projected in these statements, and factors that could cause such differences include the following among others:

• adverse reactions to publicity relating to Martha Stewart or Emeril Lagasse by consumers, advertisers and business partners;

• a loss of the services of Ms. Stewart;

• a loss of the services of other key personnel, including Mr. Lagasse;

• a further softening of the domestic advertising market;

• a continued downturn in national or local economies;

• loss or failure of merchandising and licensing programs;

• failure in acquiring or developing new brands;

• dependence on a single source of revenue in the Merchandising segment;

• failure to protect our intellectual property;

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

• unanticipated increases in paper, postage or printing costs;

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

• the receptivity of consumers to our new product introductions;

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

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

     These and other factors are discussed in this Quarterly Report on Form 10-Q under the heading “Part II. Other Information, Item 1A. Risk Factors.” We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake 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.

EXECUTIVE SUMMARY

     We are an integrated media and merchandising company providing consumers with inspiring lifestyle content and well-designed, high-quality products. Our Company is organized into four business segments: Publishing, Merchandising, Internet and Broadcasting. In the second quarter of 2008, total revenues increased approximately 5% driven by the acquisition of certain assets of Emeril Lagasse on April 2, 2008 as well as advertising revenue growth in our media divisions and the launch of several new Merchandising initiatives.

Media Update. In the second quarter, our media platforms performed well with the Publishing and Internet segments experiencing advertising revenue growth and with new Emeril Lagasse television programming providing growth for the Broadcasting segment. Based on our current outlook, however, we expect to experience year-over-year declines in print advertising for the third quarter.

Publishing

     Advertising revenue continued to grow, despite a decrease in volume, from higher rates per page driven in part by a higher circulation rate base and a change in advertiser category mix. The improvements in revenues were partially offset by an increase in certain of our expenses, including compensation, paper and distribution. Trends in print advertising have deteriorated as we entered the third quarter with print advertising revenue trending lower by approximately 15% in the third quarter as compared to the prior year period. We also expect the unfavorable trends in our paper and distribution expenses to continue throughout the second half of the year.

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Internet

     In the second quarter of 2008, we continued to experience growth from our online audience with page views increasing, on average, over 20% from the prior year and advertising revenue increasing 31%. We expect these traffic gains to continue throughout the second half of the year as well.

Broadcasting

     Distribution of the fourth season of The Martha Stewart Show has resulted in a national clearance of over 90% to date. In the second quarter, the Broadcasting segment benefited from programming related to a new original series on Planet Green featuring Chef Emeril Lagasse. In the third quarter, we expect to have continued growth in Broadcasting from Emeril Lagasse’s new Planet Green series, as well as from the Essence of Emeril on the Food Network and the rebroadcast of Emeril Live! on the Fine Living Network.

Merchandising Update. In the second quarter, the Merchandising segment benefited from the acquisition of certain assets of Emeril Lagasse including all of his licensing agreements. In addition, Merchandising segment revenues grew due to stronger sales from new and existing partners. We experienced continued growth from our agreement with Macy’s for our line of Martha Stewart Collection products; from our newly-launched program with 1-800-Flowers.com; and from EK Success for our line of broadly-distributed crafts products, including the expansion of our crafts line into Wal-Mart. We expect these initiatives to continue providing positive operating results for the full-year. However, we believe that these initiatives will be more than offset by the decrease in our Kmart minimum guarantees, and we expect total Merchandising revenues and operating profit to be lower in 2008 as compared to 2007.

     Our multi-year agreement with Kmart includes royalty payments based on sales, as well as minimum guarantees. The minimum guarantees have exceeded actual royalties earned from retail sales from 2003 through 2008 primarily due to store closings and historic lower same-store sales trends. For the contract years ending January 31, 2009 and 2010, the minimum guarantees will be substantially lower than prior years. The following are the minimum guaranteed royalty payments (in millions) over the term of the agreement for the respective years ending on the indicated dates:

	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 contract 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 contract year ended January 31, 2008, our earned royalty based on actual retail sales at Kmart was $24.7 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.

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Results of Operations

Comparison of Three Months Ended June 30, 2008 to Three Months Ended June 30, 2007

PUBLISHING SEGMENT

	2008		2007
(in thousands)	(unaudited)		(unaudited)		Variance
Publishing Segment Revenues
Advertising	$	28,889	$	27,840	$	1,049
Circulation		16,802		18,343		(1,541	)
Books		251		948		(697	)
Other		323		347		(24	)
Total Publishing Segment Revenues		46,265		47,478		(1,213	)
Publishing Segment Operating Costs and Expenses
Production, distribution and editorial		23,950		23,497		(453	)
Selling and promotion		13,401		17,809		4,408
General and administrative		1,644		827		(817	)
Depreciation and amortization		93		295		202
Total Publishing Segment Operating Costs and Expenses		39,088		42,428		3,340
Operating Income	$	7,177	$	5,050	$	2,127

     Publishing revenues decreased 3% for the three months ended June 30, 2008 from the prior year period. Advertising revenue increased $1.0 million despite prior year revenue from Blueprint, a publication that we discontinued at the end of 2007. The increase in advertising revenue was primarily due to higher advertising rates across all titles, partially offset by a decrease in pages in Everyday Food and Martha Stewart Living. Advertising revenue was higher also due to an extra issue of Body + Soul and an increase in advertising pages in Martha Stewart Weddings. Advertising revenue from Martha Stewart Living increased $1.3 million while advertising revenue from Body + Soul and Martha Stewart Weddings increased $1.2 million. These increases were partially offset by the prior year contribution of Blueprint of $0.7 million in advertising revenue. Circulation revenue decreased $1.5 million due to lower subscription rate per copy and higher agency commissions in the current period for Martha Stewart Living and Everyday Food. Circulation revenue was negatively impacted by the prior year contribution of Blueprint and lower newsstand sales of Martha Stewart Weddings and Martha Stewart Living. These decreases were partially offset by higher volume of subscription sales for Martha Stewart Living, Everyday Food and Body + Soul as well as the positive impact of the frequency increase in Body + Soul and one special interest publication in the current period. Revenue related to our books business decreased $0.7 million primarily due to the timing of delivery of manuscripts related to our 12-book agreement with Clarkson Potter/Publishers.

Magazine Publication Schedule

	Second Quarter 2008	Second Quarter 2007
Martha Stewart Living	Three Issues	Three Issues
Everyday Food	Three Issues	Three Issues
Martha Stewart Weddings	Three Issues	Three Issues
Body + Soul	Three Issues	Two Issues
Special Interest Publications	Two Issues	One Issue
Blueprint (a)	N/A	One Issue

(a) Launched in May 2006 and discontinued in 2007 as a stand-alone publication with no future issues planned.

     Production, distribution and editorial expenses increased $0.5 million, primarily due to higher print order and higher rates related to physical costs to distribute the magazines, partially offset by savings related to the discontinuation of Blueprint. Selling and promotion expenses decreased $4.4 million due to lower circulation marketing costs and more favorable fulfillment rates associated with Martha Stewart Living and Everyday Food,

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partially offset by an increase in circulation marketing costs for Body + Soul. Prior year period selling and promotion expenses also included a non-recurring employee-related separation charge as well as costs associated with the discontinued publication Blueprint. General and administrative expenses increased $0.8 million primarily due to higher compensation costs.

MERCHANDISING SEGMENT

	Three Months Ended June 30,
	2008		2007
(in thousands)	(unaudited)		(unaudited)		Variance
Merchandising Segment Revenues
Kmart earned royalty	$	6,205	$	6,791	$	(586	)
Other		10,044		3,561		6,483
Total Merchandising Segment Revenues		16,249		10,352		5,897
Merchandising Segment Operating Costs and Expenses
Production, distribution and editorial		2,655		3,144		489
Selling and promotion		2,642		1,958		(684	)
General and administrative		2,509		1,703		(806	)
Depreciation and amortization		25		97		72
Total Merchandising Segment Operating Costs and Expenses		7,831		6,902		(929	)
Operating Income	$	8,418	$	3,450	$	4,968

     Merchandising revenues increased 57% for the three months ended June 30, 2008 from the prior year period. Other revenues increased primarily due to contributions from Emeril Lagasse’s business. The increase in other revenues was also the result of our new initiatives with Macy’s for our line of Martha Stewart Collection products and with 1-800-Flowers.com for our newly-launched flowers program. In addition, we expanded our crafts line with EK Success into Wal-Mart which contributed to the other revenue increase in the second quarter of 2008. Actual retail sales of our products at Kmart declined 10% on a comparable store and total store basis due to lower same-store sales trends and decreased assortment of product categories.

     Production, distribution and editorial expenses decreased $0.5 million due to lower compensation costs. Selling and promotion expenses increased $0.7 million related to media expenditures made on behalf of our partners, a substantial majority of which are paid by our partners and recorded to revenue. General and administrative costs increased $0.8 million reflecting the additional Merchandising segment expenses of our Emeril Lagasse franchise.

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INTERNET SEGMENT

	Three Months Ended June 30,
	2008			2007
(in thousands)	(unaudited)			(unaudited)			Variance
Internet Segment Revenues
Advertising	$	3,243		$	2,480		$	763
Product		(2	)		2,703			(2,705	)
Total Internet Segment Revenues		3,241			5,183			(1,942	)
Internet Segment Operating Costs and Expenses
Production, distribution and editorial		2,241			4,149			1,908
Selling and promotion		1,476			1,806			330
General and administrative		1,000			1,023			23
Depreciation and amortization		492			349			(143	)
Total Internet Segment Operating Costs and Expenses		5,209			7,327			2,118
Operating Loss	$	(1,968	)	$	(2,144	)	$	176

     Internet revenues decreased 37% for the three months ended June 30, 2008 from the prior year period. Advertising revenue increased $0.8 million primarily due to an increase in advertising volume. Product revenue decreased $2.7 million due to the transition of our flowers program from Martha Stewart Flowers to our new, co-branded agreement with 1-800-Flowers.com which began generating revenue in the second quarter for the Merchandising segment.

     Production, distribution and editorial costs decreased $1.9 million due primarily to the transition of our flowers business to 1-800-Flowers.com which eliminated inventory and shipping expenses. All costs related to the new flowers program will be reported in the Merchandising segment. Selling and promotion expenses decreased $0.3 million due to lower marketing costs related to our website marthastewart.com as well as the transition of our flowers business partially offset by higher compensation costs from increased headcount.

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BROADCASTING SEGMENT

	Three Months Ended June 30,
	2008		2007
(in thousands)	(unaudited)		(unaudited)			Variance
Broadcasting Segment Revenues
Advertising	$	6,744	$	4,740		$	2,004
Radio		1,875		1,875			—
Licensing and other		2,736		3,818			(1,082	)
Total Broadcasting Segment Revenues		11,355		10,433			922
Broadcasting Segment Operating Costs and Expenses
Production, distribution and editorial		7,878		8,124			246
Selling and promotion		532		599			67
General and administrative		1,790		1,744			(46	)
Depreciation and amortization		300		837			537
Total Broadcasting Segment Operating Costs and Expenses		10,500		11,304			804
Operating Income/(Loss)	$	855	$	(871	)	$	1,726

     Broadcasting revenues increased 9% for the three months ended June 30, 2008 from the prior year period. Advertising revenue increased $2.0 million primarily due to the increase in advertising inventory (related to our revised season 3 distribution agreement for The Martha Stewart Show), partially offset by fewer integrations as well as a decline in household ratings. Licensing revenue decreased $1.1 million primarily due to the exchange of season 3 license fees for additional advertising inventory related to The Martha Stewart Show. This decrease in licensing revenue was partially offset by new television programming featuring Emeril Lagasse, a domestic distribution agreement with the Fine Living Network on cable to air The Martha Stewart Show and a new marketing agreement with TurboChef.

     Production, distribution and editorial expenses decreased $0.2 million due lower non-cash charges associated with the vesting of a portion of a warrant granted in connection with the production of The Martha Stewart Show, as well as lower production costs for season 3 of The Martha Stewart Show as compared to season 2. These decreases are partially offset by 2008 distribution costs which were reported net of licensing revenues in 2007. Depreciation and amortization decreased $0.5 million as the set for The Martha Stewart Show was fully depreciated as of the second quarter of 2007.

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CORPORATE

	Three Months Ended June 30,
	2008			2007
(in thousands)	(unaudited)			(unaudited)			Variance
Corporate Operating Costs and Expenses
General and administrative	$	12,146		$	12,590		$	444
Depreciation and amortization		613			685			72
Total Corporate Operating Costs and Expenses		12,759			13,275			516
Operating Loss	$	(12,759	)	$	(13,275	)	$	516

     Corporate operating costs and expenses decreased 4% for the three months ended June 30, 2008 from the prior year period. General and administrative expenses decreased $0.4 million primarily due to lower non-cash compensation of $1.1 million and lower cash compensation. The decrease was partially offset by costs associated with a new intangible asset agreement and higher professional fees.

OTHER ITEMS

Interest Income, net. Interest income, net, was $0.1 million for the quarter ended June 30, 2008 compared to $0.8 million for the prior year quarter. The decrease was attributable primarily to current period interest expense from our $30 million term loan related to the acquisition of certain assets of Emeril Lagasse.

Other (Expense) / Income. Other expense was $(1.1) million for the quarter ended June 30, 2008 compared to other income of $0.4 million for the quarter ended June 30, 2007. The current period expense is result of marking certain assets to fair value in accordance with accounting principles governing derivative instruments. The prior period income is related to the final legal settlement of the class action lawsuit known as In re Martha Stewart Living Omnimedia, Inc. Securities Litigation.

Income tax expense. Income tax expense for the three months ended June 30, 2008 was $0.1 million, compared to a $0.2 million expense in the prior year period.

Loss in equity interest. The loss in equity interest was $0.2 million for the quarter ended June 30, 2008 related to our equity investment in WeddingWire. We record our proportionate share of the results of WeddingWire one quarter in arrears. Therefore, the loss of $0.2 million represents our portion of prorated first quarter 2008 results of WeddingWire.

Net Income / (Loss). Net income was $0.2 million for the quarter ended June 30, 2008, compared to a net loss of $(6.7) million for the quarter ended June 30, 2007, as a result of the factors described above.

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Comparison of Six Months Ended June 30, 2008 to Six Months Ended June 30, 2007

PUBLISHING SEGMENT

	2008		2007
(in thousands)	(unaudited)		(unaudited)		Variance
Publishing Segment Revenues
Advertising	$	50,984	$	49,209	$	1,775
Circulation		33,353		36,422		(3,069	)
Books		2,018		1,594		424
Other		702		871		(169	)
Total Publishing Segment Revenues		87,057		88,096		(1,039	)
Publishing Segment Operating Costs and Expenses
Production, distribution and editorial		46,182		44,989		(1,193	)
Selling and promotion		28,576		34,405		5,829
General and administrative		3,272		1,764		(1,508	)
Depreciation and amortization		192		588		396
Total Publishing Segment Operating Costs and Expenses		78,222		81,746		3,524
Operating Income	$	8,835	$	6,350	$	2,485

     Publishing revenues decreased 1% for the six months ended June 30, 2008 from the prior year period. Advertising revenue increased $1.8 million despite prior year revenue from Blueprint, a publication that we discontinued at the end of 2007. The increase in advertising revenue was primarily due to higher advertising rates across all titles, partially offset by a decrease in pages in Everyday Food and Martha Stewart Living. Advertising revenue was higher also due to an extra issue of Body + Soul and an increase in advertising pages in Martha Stewart Weddings. Advertising revenue from Martha Stewart Living increased $2.1 million while advertising revenue from Body + Soul and Martha Stewart Weddings increased $1.5 million. These increases were partially offset by the prior year contribution of Blueprint of $1.3 million in advertising revenue. Circulation revenue decreased $3.1 million due to lower subscription rate per copy and higher agency commissions in the current period for Martha Stewart Living and Everyday Food. Circulation revenue was negatively impacted by the prior year contribution of Blueprint and lower newsstand sales of Martha Stewart Weddings and Martha Stewart Living in the first half of 2008. These decreases were partially offset by higher volume of subscription sales for Martha Stewart Living, Everyday Food and Body + Soul as well as the positive impact of the frequency increase in Body + Soul and one additional special interest publication in the current period. Revenue related to our books business increased $0.4 million primarily due to the timing of delivery of manuscripts related to our 12-book agreement with Clarkson Potter/Publishers.

Magazine Publication Schedule

	First Half 2008	First Half 2007
Martha Stewart Living	Six Issues	Six Issues
Everyday Food	Six Issues	Six Issues
Martha Stewart Weddings	Three Issues	Three Issues
Body + Soul	Five Issues	Four Issues
Special Interest Publications	Four Issues	Three Issues
Blueprint (a)	N/A	Two Issues

(a) Launched in May 2006 and discontinued in 2007 as a stand-alone publication with no future issues planned.

     Production, distribution and editorial expenses increased $1.2 million, primarily due to higher print order and higher rates related to physical costs to distribute the magazines, partially offset by savings related to the discontinuation of Blueprint. Selling and promotion expenses decreased $5.8 million due to lower circulation marketing costs and more favorable fulfillment rates associated with Martha Stewart Living and Everyday Food, partially offset by an increase in circulation marketing costs for Body + Soul. Prior year period selling and promotion expenses also included a non-recurring employee-related separation charge as well as costs associated

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with the discontinued publication Blueprint. General and administrative expenses increased $1.5 million primarily due to higher compensation costs.

MERCHANDISING SEGMENT

	Six Months Ended June 30,
	2008		2007
(in thousands)	(unaudited)		(unaudited)		Variance
Merchandising Segment Revenues
Kmart earned royalty	$	10,763	$	12,745		(1,982	)
Kmart minimum true-up		3,806		2,648		1,158
Other		14,746		8,559		6,187
Total Merchandising Segment Revenues		29,315		23,952		5,363
Merchandising Segment Operating Costs and Expenses
Production, distribution and editorial		5,762		6,433		671
Selling and promotion		4,079		3,607		(472	)
General and administrative		4,411		3,493		(918	)
Depreciation and amortization		49		193		144
Total Merchandising Segment Operating Costs and Expenses		14,301		13,726		(575	)
Operating Income	$	15,014	$	10,226	$	4,788

     Merchandising revenues increased 22% for the six months ended June 30, 2008 from the prior year period. Other revenues increased as the result of our new initiatives with Macy’s for our line of Martha Stewart Collection products. In addition, the increase in other revenues was also due to contributions from Emeril Lagasse’s business, from 1-800-Flowers.com for our newly-launched flowers program and from the expansion of our crafts line with EK Success into Wal-Mart. The increases from these new initiatives were partially offset by the 2007 endorsement and promotional agreement with U.S. affiliates of SVP Worldwide, makers of Singer, Husqvarna Viking and Pfaff sewing machines with no comparable revenue in 2008. Actual retail sales of our products at Kmart declined 15% on a comparable store and total store basis due to lower same-store sales trends and decreased assortment of product categories. The pro-rata portion of revenues related to the contractual minimum amounts covering the specified periods, net of amounts subject to recoupment, is listed separately above.

     Production, distribution and editorial expenses decreased $0.7 million due to lower compensation costs. Selling and promotion expenses increased $0.5 million related to media expenditures made on behalf of our partners, a substantial majority of which are paid by our partners and recorded to revenue. General and administrative costs increased $0.9 million reflecting the additional Merchandising segment expenses of our Emeril Lagasse franchise.

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INTERNET SEGMENT

	Six Months Ended June 30,
	2008			2007
(in thousands)	(unaudited)			(unaudited)			Variance
Internet Segment Revenues
Advertising	$	5,553		$	4,246		$	1,307
Product		1,102			4,467			(3,365	)
Total Internet Segment Revenues		6,655			8,713			(2,058	)
Internet Segment Operating Costs and Expenses
Production, distribution and editorial		5,290			7,862			2,572
Selling and promotion		2,676			3,005			329
General and administrative		2,035			1,988			(47	)
Depreciation and amortization		870			505			(365	)
Total Internet Segment Operating Costs and Expenses		10,871			13,360			2,489
Operating Loss	$	(4,216	)	$	(4,647	)	$	431

     Internet revenues decreased 24% for the six months ended June 30, 2008 from the prior year period. Advertising revenue increased $1.3 million due to an increase in advertising volume and higher advertising rates. Product revenue decreased $3.4 million due to the transition of our flowers program from Martha Stewart Flowers, which generated sales through Valentine’s Day, to our new, co-branded agreement with 1-800-Flowers.com which began generating revenue in the second quarter for the Merchandising segment.

     Production, distribution and editorial costs decreased $2.6 million due primarily to the transition of our flowers business to 1-800-Flowers.com which eliminated inventory and shipping expenses, as well as due to the prior year use of freelancers and consultants and technology costs related to the 2007 re-design of marthastewart.com. These savings are partially offset by an increase in headcount and related compensation costs. All costs related to the new flowers program will be reported in the Merchandising segment. Selling and promotion expenses decreased $0.3 million due to lower marketing costs related to our website marthastewart.com as well as the transition of our flowers business partially offset by higher compensation costs from increased headcount. Depreciation and amortization expenses increased $0.4 million due to the 2007 launch of the redesigned website and the related depreciation costs.

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BROADCASTING SEGMENT

	Six Months Ended June 30,
	2008		2007
(in thousands)	(unaudited)		(unaudited)			Variance
Broadcasting Segment Revenues
Advertising	$	13,837	$	8,283		$	5,554
Radio		3,750		3,750			—
Licensing and other		4,329		7,356			(3,027	)
Total Broadcasting Segment Revenues		21,916		19,389			2,527
Broadcasting Segment Operating Costs and Expenses
Production, distribution and editorial		15,526		19,374			3,848
Selling and promotion		1,434		1,386			(48	)
General and administrative		3,517		3,899			382
Depreciation and amortization		410		1,699			1,289
Total Broadcasting Segment Operating Costs and Expenses		20,887		26,358			5,471
Operating Income/(Loss)	$	1,029	$	(6,969	)	$	7,998

     Broadcasting revenues increased 13% for the six months ended June 30, 2008 from the prior year period. Advertising revenue increased $5.6 million primarily due to the increase in advertising inventory (related to our revised season 3 distribution agreement for The Martha Stewart Show), partially offset by fewer integrations as well as a decline in household ratings. Licensing revenue decreased $3.0 million primarily due to the exchange of season 3 license fees for additional advertising inventory related to The Martha Stewart Show. This decrease was partially offset by new television programming featuring Emeril Lagasse, a domestic distribution agreement with the Fine Living Network on cable to air The Martha Stewart Show, increased international distribution of The Martha Stewart Show and a new marketing agreement with TurboChef.

     Production, distribution and editorial expenses decreased $3.8 million due principally to a 2007 non-cash charge of $6.6 million associated with the vesting of a portion of a warrant granted in connection with the production of The Martha Stewart Show, as well as lower production costs for season 3 of The Martha Stewart Show as compared to season 2. These decreases are partially offset by 2008 distribution costs which were reported net of licensing revenues in 2007. Depreciation and amortization decreased $1.3 million as the set for The Martha Stewart Show was fully depreciated as of the second quarter of 2007.

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CORPORATE

	Six Months Ended June 30,
	2008			2007
(in thousands)	(unaudited)			(unaudited)			Variance
Corporate Operating Costs and Expenses
General and administrative	$	22,116		$	24,046			1,930
Depreciation and amortization		1,358			1,256			(102	)
Total Corporate Operating Costs and Expenses		23,474			25,302			1,828
Operating Loss	$	(23,474	)	$	(25,302	)	$	1,828

     Corporate operating costs and expenses decreased 7% for the six months ended June 30, 2008 from the prior year period. General and administrative expenses decreased $1.9 million primarily due to lower non-cash compensation of $1.5 million and cash compensation. The decrease is partially offset by costs associated with a new intangible asset agreement.

OTHER ITEMS

Interest Income, net. Interest income, net, was $0.5 million for the six months ended June 30, 2008 compared to $1.5 million for the prior year period. The decrease was attributable primarily to current period interest expense from our $30 million term loan related to the acquisition of certain assets of Emeril Lagasse.

Other (Expense) / Income. Other expense was $(1.1) million for the period ended June 30, 2008 compared to other income of $0.4 million for the period ended June 30, 2007. The current period expense is result of marking certain assets to fair value in accordance with accounting principles governing derivative instruments. The prior period income is related to the final legal settlement of the class action lawsuit known as In re Martha Stewart Living Omnimedia, Inc. Securities Litigation.

Income tax expense. Income tax expense for the six months ended June 30, 2008 was $0.3 million, compared to a $0.2 million expense in the prior year period.

Loss in equity interest. The loss in equity interest was $0.2 million for the period ended June 30, 2008 related to our equity investment in WeddingWire. We record our proportionate share of the results of WeddingWire one quarter in arrears. Therefore, the loss of $0.2 million represents our portion of prorated first quarter 2008 results of WeddingWire.

Net Loss. Net loss was $3.9 million for the six months ended June 30, 2008, compared to a net loss of $18.6 million for the six months ended June 30, 2007, as a result of the factors described above.

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Liquidity and Capital Resources

Overview

     In the first half of 2008, our overall cash, cash equivalents and short-term investments decreased $13.5 million from December 31, 2007 excluding $28.5 million in cash restricted as collateral against the remaining principal for our term loan related to the acquisition of certain assets of Emeril Lagasse. The decrease was primarily due to the $46.3 million cash payment related to the Emeril Lagasse acquisition as well as the payment of 2007 bonuses and our investment in WeddingWire. These decreases were partially offset by the satisfaction of our 2007 year-end receivable due from Kmart in the amount of $47.6 million. Cash, cash equivalents and short-term investments were $43.8 million and $57.3 million at June 30, 2008 and December 31, 2007, respectively.

     The acquisition agreement for the Emeril Lagasse transaction also included a payment of $5.0 million in shares of our Class A Common Stock as well as a potential additional payment of up to $20 million, in 2013, based upon the achievement of certain operating metrics in 2011 and 2012, a portion of which may be payable, at our election, in shares of our Class A Common Stock. We borrowed $30.0 million from Bank of America to partially offset the cash payment related to the acquisition. 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 2008 inclusive of debt service obligations.

Cash Flows from Operating Activities

     Cash flows provided by operating activities were $39.5 million and $22.8 million for the six months ended June 30, 2008 and 2007, respectively. In 2008, cash flow from operations was primarily due to the changes in operating assets and liabilities of $26.0 million, the majority of which was the result of the satisfaction of the 2007 year-end receivable due from Kmart. Operating assets and liabilities also benefited from higher deferred revenue from advance payments related to television programming featuring Emeril Lagasse. These inflows were partially offset by the payment of 2007 bonuses and expenses paid in the normal course of business.

     During the second quarter of 2008, we entered into a marketing and promotional agreement with TurboChef Technologies, Inc. (“TurboChef”). In lieu of cash consideration, TurboChef has the ability, per the agreement, to provide compensation in the form of shares and a warrant to purchase shares. The aggregate value of the contract is approximately $10 million and revenue will be recognized over the three-year term of the agreement. As of the 2008 second quarter end, TurboChef issued to us 381,049 shares of TurboChef stock and a warrant to purchase 454,000 shares of TurboChef stock. The value of these equity instruments on the date of grant was approximately $5 million and deferred accordingly. The remaining $5 million may be satisfied in either shares or cash, at TurboChef’s option. Any changes to the market value of the TurboChef stock require an adjustment to both our shares held as well as our warrant to purchase shares. Any temporary adjustment to our shares held affects the investment balance and flows through other income on the balance sheet. Any adjustment to our warrant affects the investment balance and flows through other income on our statement of operations. Therefore, any change to the warrant valuation is an adjustment to the cash flows from operations.

Cash Flows from Investing Activities

     Cash flows used in investing activities were $24.8 million and $12.7 million for the six months ended June 30, 2008 and 2007, respectively. In 2008, cash flow used in investing activities was primarily due to the cash paid in connection with the acquisition of certain assets of Emeril Lagasse. We also invested $5.0 million of cash in WeddingWire of which $4.2 million was used in investing activities and $0.8 million was used in operating activities. These cash payments were partially offset by significant sales of short-term investments of $26.3 million in advance of the Emeril Lagasse acquisition.

Cash Flows from Financing Activities

     Cash flows used in financing activities were $2.0 million and $2.1 million for the six months ended June 30, 2008 and 2007, respectively. In 2008, in connection with the acquisition of certain assets of Emeril Lagasse, we entered into an agreement with Bank of America for a $30.0 million term loan with principal installments of $1.5 million to be paid quarterly. Cash provided by financing activities related to the loan was fully offset by the first installment paid on June 30, 2008, as well as the use of cash to collateralize the remaining principal. Subsequent to June 30,

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2008, the cash collateral was replaced by collateral consisting of substantially all of the assets of the Emeril business. Cash flows used in financing activities during 2008 were due to the remittance payroll related tax obligations associated with the vesting of certain restricted stock grants.

Debt

     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, we are required to satisfy certain debt covenants, with which we were compliant as of June 30, 2008. We had no outstanding borrowings under this facility as of June 30, 2008. On a total line of $5.0 million, we currently have letters of credit drawn of $2.7 million.

     We entered into a loan agreement with Bank of America in the amount of $30 million related to the acquisition of certain assets of Emeril Lagasse. The loan agreement requires equal principal payments and related interest to be paid by the Company quarterly for the duration of the loan term, approximately 5 years. In the next 12 months, $6.0 million in principal payments will be due. The interest rate on the loan was equal to a floating rate of 1-month LIBOR plus 1.00% for the period ended June 30, 2008. On August 1, 2008, the cash collateral supporting the loan was replaced with asset collateral related to the acquisition and therefore our interest rate increased to 1-month LIBOR plus 2.85%. We expect to pay the principal installments and interest expense with cash from operations.

     The loan terms include financial covenants, failure of which could result in an acceleration of repayment or a full payment on demand. The loan agreement also contains a variety of customary affirmative and negative covenants that, among other things, limit our and our subsidiaries’ ability to incur additional debt, suffer the creation of liens on their assets, pay dividends or repurchase stock, make investments or loans, sell assets, enter into transactions with affiliates other than on arm’s length terms, make capital expenditures, merge into or acquire other entities or liquidate. The negative covenants expressly permit us to, among other things: incur an additional $15 million of debt to finance permitted investments or acquisitions; incur an additional $15 million of earnout liabilities in connection with permitted acquisitions; spend up to $30 million repurchasing our stock or paying dividends thereon (so long as no default or event of default existed at the time of or would result from such repurchase or dividend payment and we would be in pro forma compliance with the above-described financial covenants assuming such repurchase or dividend payment had occurred at the beginning of the most recently-ended four-quarter period); make investments and acquisitions (so long as no default or event of default existed at the time of or would result from such investment or acquisition and we would be in pro forma compliance with the above-described financial covenants assuming the acquisition or investment had occurred at the beginning of the most recently-ended four-quarter period); make up to $15 million in capital expenditures in fiscal year 2008 and $7.5 million in each subsequent fiscal year, provided that we can carry over any unspent amount to any subsequent fiscal year (but in no event may we make more than $15 million in capital expenditures in any fiscal year); sell one of our investments (or any asset we might receive in conversion or exchange for such investment); and sell assets during the term of the loan comprising, in the aggregate, up to 10% of our consolidated shareholders’ equity, provided we receive at least 75% of the consideration in cash.

Seasonality and Quarterly Fluctuations

     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 and performance of certain product lines. In addition, we recognize the revenue resulting from the difference, if any, 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 has been tied to key holidays during the year (although this program was replaced in the first quarter of 2008 by our new program with 1-800-Flowers.com, which launched in the second quarter of 2008 and will be reported in our Merchandising segment), while advertising revenue on 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. Certain aspects of our business related to Emeril Lagasse also fluctuate based on production schedules since revenue related to this business is generally recognized when services are performed.

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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 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 disclosed in our 2007 10-K, 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. 00-21, “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. We have applied the guidance included in EITF 00-21 in establishing revenue recognition policies for our arrangements with multiple deliverables. For agreements with multiple deliverables, if we are unable to put forth vendor specific objective evidence required under EITF 00-21 to determine the fair value of each deliverable, then we will account for the deliverables as a combined unit of accounting rather than separate units of accounting. In this case, revenue will be recognized as the earnings process is completed.

     Advertising revenue in the Publishing segment 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 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. Revenue earned from book publishing is recorded as new manuscripts are delivered to and accepted by our publisher and as sales on a unit basis exceed the advanced royalty.

     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. Generally, revenue is recognized 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 the true-up, if any, 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 served.

     Television advertising revenue is recorded when the related commercial is aired and is recorded net of agency commission, estimated reserves for television audience underdelivery and, when applicable, distribution fees. Television integration revenue is recognized when the segment featuring the related product/brand immersion is initially aired. Television revenue related to Emeril Lagasse is generally recognized when services are performed.

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Revenue from our radio operations is recognized evenly over the four-year life of the contract, with the potential for additional revenue based on certain subscriber and advertising based targets.

     We maintain reserves for all segment receivables, as appropriate. These reserves are adjusted regularly based upon actual results. We maintain allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances might be required.

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 and other intangible assets on an annual basis as well as when events and circumstances indicate 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 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 our financial statements.

Long-Lived Assets

     We review the carrying values of our long-lived assets whenever events or changes in circumstances indicate that such carrying values may not be recoverable. 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, which could have a material adverse effect on our financial statements.

Deferred 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 for years ended December 31, 2006 and 2005 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 a stock incentive plan that permits us to grant various types of share-based incentives to key employees, directors and consultants. The primary types of incentives granted under the plan 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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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     We are exposed to certain market risks as the result of our use of financial instruments, in particular the potential market value loss arising from adverse changes in interest rates as well as from adverse changes in our publicly traded investments. We also hold a derivative financial instrument that could expose us to further market risk. We do not utilize financial instruments for trading purposes.

Interest Rate Risk

     We are exposed to market rate risk due to changes in interest rates on our loan agreement that we entered into on April 2, 2008 under which we borrowed $30.0 million related to the acquisition of certain assets of Emeril Lagasse. Interest rates applicable to amounts outstanding under this facility are at variable rates based on the 1-month LIBOR rate plus 1.00% while the loan was secured by cash collateral. In the third quarter of 2008, the rate increased to 1-month LIBOR plus 2.85% when the cash collateral supporting the loan was replaced with assets of the Emeril business. A change in interest rates on this variable rate debt impacts the interest incurred and cash flows but does not impact the fair value of the instrument. We have outstanding borrowings of $28.5 million on the term loan at June 30, 2008 at an average rate of 3.59%. A one percent increase in the interest rate would have increased the current period interest expense $0.1 million and would increase 2008 expected interest expense $0.2 million.

     We also have exposure to market rate risk for changes in interest rates as those rates relate to our investment portfolio. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest our excess cash in debt instruments of the United States Government and its agencies, in high-quality corporate issuers and, by internal policy, limit both the term and amount of credit exposure to any one issuer. As of June 30, 2008, net unrealized gains and losses on these investments were not material. We did not hold any investments in either auction rate securities or collateralized debt obligations as of June 30, 2008. We protect and preserve our invested funds by limiting default, market and reinvestment risk. Our future investment income may fluctuate due to changes in interest rates, or we may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates. A one percent decrease in average interest rates would have changed the current period interest income $0.2 million.

Investment Risk

     We are exposed to market rate risk due to changes in the fair value of the warrant to purchase the publicly-traded common stock of TurboChef. The value of this warrant was originally determined to be $2.0 million using a Black-Scholes valuation methodology. As of June 30, 2008, we recognized an expense of $1.1 million related to the decrease in fair value of the warrant primarily driven by a decrease in the common stock of TurboChef. Our maximum exposure is an additional loss of approximately $0.9 million. However, there is no corresponding limit to the income that may be recognized due to an increase in fair value of the underlying shares.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

     Under the supervision and with the participation of our management, including our Principal Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) required by Exchange Act Rules 13a-15(b) or 15d-15(b), as of the end of the period covered by this report. Based upon that evaluation, our Principal Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of that date to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

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Evaluation of Changes in Internal Control over Financial Reporting

     Under the supervision and with the participation of our management, including our Principal Executive Officer and Chief Financial Officer, we have determined that, during the second quarter of fiscal 2008, 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.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     In April 2008, a complaint was filed against the Company and 23 other defendants in the United States District Court for the Eastern District of Texas, captioned Datatern, Inc. v. Bank of America Corp. et al. (No. 5-08CV-70). The complaint alleges that each defendant is directly or indirectly infringing a United States patent (No. 5,937,402) putatively owned by plaintiff, through alleged use on websites of object oriented source code to employ objects that are populated from a relational database, and seeks injunctive relief and money damages. The matter is currently being evaluated. Due to the early stages of the Company’s review, the merits of plaintiff’s position and the validity of the patents being asserted, among other issues, have not yet been determined.

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 brands and the reputation and popularity of our founder, Martha Stewart, and Emeril Lagasse. Any adverse reactions to publicity relating to Ms. Stewart or Mr. Lagasse, or the loss of either of their 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 stand-alone brands, the image, reputation, popularity and talent of Martha Stewart and Emeril Lagasse remain important factors.

     Ms. Stewart’s efforts, personality and leadership have been, and continue to be, critical to our success. While we have managed our business without her daily participation at times in the past, 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.

     In addition, we recently acquired the assets relating Emeril Lagasse’s businesses other than his restaurants and foundation. The value of these assets is largely related to the ongoing popularity and participation of Mr. Lagasse in the activities related to exploiting these assets. The continued value of these assets would be materially adversely affected if Mr. Lagasse were to lose popularity with the public or be unable to participate in our business, forcing us potentially to write-down a significant amount of the value we paid for these assets.

     Our business is largely dependent on advertising revenues in our publications, online operations and broadcasts. The market for advertising has been adversely affected by the economy. Our failure to attract or retain advertisers would have a material adverse effect on our business.

     We depend on advertising revenue in our Publishing, Internet and Broadcasting businesses. We cannot control how much or where companies choose to advertise. We are seeing a downward trend in advertising dollars generally in the marketplace, and in our publications in particular. We cannot assure how or whether this trend might correct. If advertisers continue to spend less money, or if they advertise elsewhere in lieu of our publications, broadcasts or website, our revenues and business will 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.

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     Reduction in the availability of credit, increased gas expenses and heating costs, or a continued downturn in housing turnover or the overall housing market, all of which have occurred in the past two years, and each of which could become more pronounced in the future, has and could further limit consumers’ discretionary spending or affect their confidence. These and other adverse consumer trends lead to reduced spending on general merchandise, homes and home improvement projects, categories in which we license our brands. Downturns in consumer spending adversely impact consumer sales generally, resulting in weaker revenues from our licensed products. Continuation of this trend could materially adversely impact our business, financial condition and prospects.

     Acquiring or developing additional brands or businesses, and integrating acquired assets, poses inherent financial and other risks and challenges.

     We recently acquired certain assets of Chef Emeril Lagasse. We cannot assure that we will be able to adequately manage the acquired businesses. Failure to integrate those assets or exploit the Emeril brand could adversely affect our results of operations and our ability to acquire other brands.

     The process of consolidating and integrating acquired operations and assets takes a significant period of time, places a significant strain on resources and could prove to be more expensive and time consuming than we predicted. We may increase expenditures to accelerate the integration process with the goal of achieving longer-term cost savings and improved profitability. We also may be required to manage multiple relationships with third parties as we expand our product offerings and brand portfolio. These developments may increase expenses as we hire additional personnel to manage our growth. These investments require significant time commitments from our senior management and place a strain on their ability to manage our existing business.

     Part of our strategic plan is to acquire other businesses. These transactions involve challenges and risks in negotiation, execution, valuation, and integration. Moreover, competition for certain types of acquisitions is significant, particularly in the field of interactive media. Even if successfully negotiated, closed, and integrated, certain acquisitions may not advance our business strategy and may fall short of expected return on investment targets.

     We have significant goodwill and indefinite life assets subject to impairment analysis. The impairment analysis is based on subjective criteria, and an impairment loss could be recorded.

     Goodwill represents the excess of the amount we paid to acquire our subsidiaries over the fair value of their net assets at the dates of the acquisitions. Under SFAS No. 142, “Goodwill and Other Intangible Assets,” we are required to test goodwill for impairment at least annually based upon a fair value approach. We must also review the carrying value of our other intangible assets to determine if any impairment has occurred. The analysis is based on anticipated future cash flows, which are calculated based on assets under management. As of June 30, 2008, the estimated net carrying value of goodwill and other intangible assets on our consolidated condensed balance sheet amount to $105.4 million or 37% of our total assets. An impairment charge with respect to either or both, depending on the amount, could have a significant impact on our results of operations.

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

     For the twelve months ended January 31, 2008, we received guaranteed minimum royalty payments of $65.0 million from Kmart. 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 (we anticipate they will be $20.0 million and $15.0 million, respectively). As a result of the substantial decline in minimum guarantees, we expect that the revenue we receive from Kmart will decline significantly because our actual earned royalties have not been in excess of the applicable minimums in prior years. If in future periods we are unable to earn, from sources other than Kmart, revenue in excess of the reduction of guarantees from our Kmart contract, our revenues and operating profit may be materially 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.

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     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 in the past few years and have acquired new agreements through our acquisition of the Emeril Lagasse assets. Some of these agreements are exclusive and may have a duration of many years. While we require that our licensees maintain the quality of our respective 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 brands. There is also a risk that our extension 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 implemented, that they will be successful. 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 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, the value and recognition of our brands as well as our business, financial condition and prospects could be materially adversely affected.

     If The Martha Stewart Show fails to maintain a sufficient audience, if adverse trends continue or 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. We also anticipate deriving value from Mr. Lagasse’s television shows, the popularity of which cannot be assured.

     Our television production business is subject to a number of uncertainties. Our business and financial condition could be materially 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 that reflects both the general decline in daytime broadcast television viewers discussed in the paragraph below, as well as the decision by some major market stations to shift the airing of the show. 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. Ratings decline further than we anticipate could also 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 us and our 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.

     The television shows featuring Emeril Lagasse are not produced by us. Nonetheless, Emeril’s failure to maintain or build popularity would result in the loss of a significant marketing platform for us and our products as well as the loss of anticipated revenue and profits from his television shows.

     Adverse trends in the television 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. Any or 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 adverse 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 adverse changes were to occur, the revenues we generate from television programming could decline.

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     We have placed emphasis on building an advertising-revenue-based website, dependent on high levels of consumer traffic and resulting page views. Failure to fulfill these undertakings would adversely affect our brand and business prospects.

     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 advertising-revenue-based website. In response to initial results from the relaunch of the marthastewart.com site in the second quarter of 2007, which were below expectations, we made changes to the site. 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 advertising 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 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 brands 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.

     New product launches may reduce our earnings or generate losses.

     Our future success will depend in part on our ability to continue offering new products and services that successfully gain market acceptance by addressing the needs of our current and future customers. Our efforts to introduce new or integrate acquired products may not be successful or profitable. The process of internally researching and developing, launching, gaining acceptance and establishing profitability for a new product or service, or assimilating and marketing an acquired product, is both risky and costly. New products generally incur initial operating losses. Costs related to the development of new products and services are generally expensed as incurred and, accordingly, our profitability from year to year may be adversely affected by the number and timing of new product launches. For example, we had a cumulative loss of $15.4 million in connection with Blueprint, which we have ceased to publish as a stand-alone title. Other businesses and brands that we may develop also may prove not to be successful.

     We face significant competition for advertising and circulation.

     We face significant competition from a number of print and website publishers, some of which have greater financial and other resources than we have, which may enhance their ability to compete in the markets we serve. Competition for advertising revenue in publications is primarily based on advertising rates, the nature and scope of readership, reader response to the promotions for advertisers’ products and services and the effectiveness of sales

34

teams. Other competitive factors in publishing include product positioning, editorial quality, circulation, price and customer service, which impact readership audience, circulation revenues and, ultimately, advertising revenues. Because our industry is relatively easy to enter, we anticipate that additional competitors, some of whom have greater resources than we do, may enter these markets and intensify competition.

     Our principal vendors are consolidating and this may adversely affect our business and operations.

     We rely on our principal vendors and their ability or willingness to sell goods and services to us at favorable prices and other terms. Many factors outside our control may harm these relationships and the ability and willingness of these vendors to sell these goods and services to us on such terms. Our principal vendors include paper suppliers, printers, subscription fulfillment houses and national newsstand wholesalers, distributors and retailers. Each of these industries in recent years has experienced consolidation among its principal participants. Further consolidation may result in all or any of the following, which could adversely affect our results of operations:

• decreased competition, which may lead to increased prices;

• interruptions and delays in services provided by such vendors; and

• greater dependence on certain vendors.

     We may be adversely affected by fluctuations in paper and postage costs.

     Our principal raw material is paper. Paper prices have fluctuated over the past several years. We generally purchase paper from major paper suppliers who adjust the price periodically. We have not entered, and do not currently plan to enter, into long-term forward price or option contracts for paper. Accordingly, significant increases in paper prices could adversely affect our future results of operations.

     Postage for magazine distribution is also one of our significant expenses. We primarily use the U.S. Postal Service to distribute magazine subscriptions. We may not be able to recover, in whole or in part, paper or postage cost increases. In recent years, postal rates have increased including a rise in 2007. Accordingly, significant increases in postage prices could adversely affect our future results of operations.

     We may face increased costs for distribution of our magazines to newsstands and bookstores.

     Distribution of magazines to newsstands and bookstores is conducted primarily through four companies, known as wholesalers. Earlier in 2008, one of our wholesalers advised us that they intend to increase the price of their services by approximately 8%. We commenced discussions with this wholesaler regarding this matter and cannot provide assurance as to the outcome. It is possible that other wholesalers likewise may seek to increase the price of their services. An increase in the price of our wholesalers’ services could have a material adverse effect on our results of operations.

     We may be adversely affected by a continued weakening of newsstand sales.

     The magazine industry has seen a weakening of newsstand sales during the past few years. A continuation of this decline could adversely affect our financial condition and results of operations by reducing our circulation revenue and causing us to either incur higher circulation expense to maintain our rate bases, or to reduce our rate bases which could negatively impact our revenue.

     Our websites and networks may be vulnerable to unauthorized persons accessing our systems, which could disrupt our operations and result in the theft of our and our users’ proprietary or personal information.

     Our Internet activities involve the storage and transmission of proprietary information and personal information of our users. We endeavor to protect our proprietary information and personal information of our users from third party access. However, it is possible that unauthorized persons may be able to circumvent our protections and misappropriate proprietary or personal information or cause interruptions or malfunctions in our Internet operations. We may be required to expend significant capital and other resources to protect against or remedy any such security breaches. Accordingly, security breaches could expose us to a risk of loss, or litigation and possible liability. Our security measures and contractual provisions attempting to limit our liability in these areas may not be successful or enforceable.

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     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 91% 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 2006 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.

     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 financial condition and our results of operations.

     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. Please refer to our latest Annual Report on Form 10-K as filed with the SEC on March 17, 2008 for a description of our competitive risks in our applicable business lines as described under the following headings: “Business — Publishing—Competition,” “Business — Merchandising—Competition,” “Business — Internet—Competition” and “Business — Broadcasting—Competition.”

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

(a) None.

(b) None.

(c) Issuer Purchases of Equity Securities

     The following table provides information about our purchases of our Class A Common Stock during each month of the quarter ended June 30, 2008:

	(a)		(b)		(c)	(d)
						Maximum Number (or
					Total Number of	Approximate Dollar
					Shares (or Units)	Value) of Shares
					Purchased as Part	(or Units) that may
	Total Number of				of Publicly	yet be Purchased
	Shares (or Units)		Average Price Paid		Announced Plans or	under the Plans or
Period	Purchased		per Share (or Unit)		Programs	Programs
Quarter ended June 30, 2008:
April 1-30, 2008(1)		5,910	$	7.80	Not applicable	Not applicable
May 1-31, 2008(1)		3,169	$	8.82	Not applicable	Not applicable
June 1-30, 2008(1)		7,090	$	8.29	Not applicable	Not applicable
Total for quarter ended June 30, 2008		16,169	$	8.30	Not applicable	Not applicable

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

     None.

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

(a) We held our 2008 Annual Meeting of Stockholders on May 20, 2008.

(b) During the Annual Meeting, holders of Class A Common Stock and Class B Common Stock, voting as one class, voted to elect seven directors to our Board of Directors, each to hold office for a term of approximately one year ending on the date of our next succeeding annual meeting of stockholders

Board of Directors Election Results

	Votes For		Votes Withheld
Charlotte Beers		287,092,213		502,722
Rick Boyko		287,005,165		589,770
Michael Goldstein		287,015,524		579,411
Charles Koppelman		287,021,427		573,508
Susan Lyne (1)		287,103,726		491,209
Thomas Siekman (2)		287,030,984		563,951
Todd Slotkin		286,995,988		598,947

(1)	On July 11, 2008, Susan Lyne resigned as a director of the Company pursuant to her separation agreement with the Company dated June 10, 2008.
(2)	On June 6, 2008, Thomas Siekman resigned from the Board of Directors.

(c) During the Annual Meeting, holders of Class A Common Stock and Class B Common Stock, voting as one class, voted to approve the Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Plan

Omnibus Stock and Option Plan Results

	Votes For		Votes Against		Votes Abstained		Broker Non-Votes
Omnibus Stock and Option Plan		271,874,693		201,647		53,618		15,464,977

ITEM 5. OTHER INFORMATION.

     None.

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ITEM 6. EXHIBITS.

(a) Exhibits

Exhibit
Number	Exhibit Title
3.2	By-Laws of Martha Stewart Living Omnimedia, Inc. — Incorporated under the Laws of the State of Delaware (As in effect as of June 11, 2008) *
10.1	New Director Compensation Program as of May 20, 2008. *
10.2	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan (incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.3	Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Option Agreement and forms of related Notices (incorporated by reference to Exhibit 99.2 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.4	Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Restricted Stock Unit Agreement (incorporated by reference to Exhibit 99.3 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.5	Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Restricted Stock Grant Agreement (incorporated by reference to Exhibit 99.4 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.6	Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Appreciation Right Agreement and form of related Notice (incorporated by reference to Exhibit 99.5 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.7	Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Grant Agreement and form of related Acknowledgement (incorporated by reference to Exhibit 99.6 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.8	Separation Agreement dated as of June 10, 2008 between Martha Stewart Living Omnimedia, Inc. and Susan Lyne. *
10.9	Intangible Asset License Agreement dated as of June 13, 2008 between Martha Stewart Living Omnimedia, Inc. and MS Real Estate Management Company. *
31.1	Certification of Principal Executive Officer *
31.2	Certification of Chief Financial Officer *
32	Certification of Principal 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: August 11, 2008	/s/ Howard Hochhauser
	Name:	Howard Hochhauser
	Title:	Chief Financial Officer (Principal Financial Officer and duly authorized officer)

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EXHIBIT INDEX

Exhibit
Number	Exhibit Title
3.2	By-Laws of Martha Stewart Living Omnimedia, Inc. — Incorporated under the Laws of the State of Delaware (As in effect as of June 11, 2008) *
10.1	New Director Compensation Program as of May 20, 2008. *
10.2	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan (incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.3	Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Option Agreement and forms of related Notices (incorporated by reference to Exhibit 99.2 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.4	Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Restricted Stock Unit Agreement (incorporated by reference to Exhibit 99.3 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.5	Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Restricted Stock Grant Agreement (incorporated by reference to Exhibit 99.4 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.6	Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Appreciation Right Agreement and form of related Notice (incorporated by reference to Exhibit 99.5 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.7	Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Grant Agreement and form of related Acknowledgement (incorporated by reference to Exhibit 99.6 to our Current Report on Form 8-K (file number 001-15395) filed on May 20, 2008).
10.8	Separation Agreement dated as of June 10, 2008 between Martha Stewart Living Omnimedia, Inc. and Susan Lyne. *
10.9	Intangible Asset License Agreement dated as of June 13, 2008 between Martha Stewart Living Omnimedia, Inc. and MS Real Estate Management Company. *
31.1	Certification of Principal Executive Officer *
31.2	Certification of Chief Financial Officer *
32	Certification of Principal 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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EX-3.2

EXHIBIT 3.2

BY-LAWS

OF

MARTHA STEWART LIVING OMNIMEDIA, INC.

Incorporated under the Laws of the State of Delaware

(As in effect as of June 11, 2008)

Table of Contents

	Page
ARTICLE I OFFICES AND RECORDS		1
SECTION 1.1 Delaware Office		1
SECTION 1.2 Other Offices		1
SECTION 1.3 Books and Records		1
ARTICLE II STOCKHOLDERS		1
SECTION 2.1 Annual Meeting		1
SECTION 2.2 Special Meeting		1
SECTION 2.3 Place of Meeting		1
SECTION 2.4 Notice of Meeting		1
SECTION 2.5 Quorum and Adjournment		2
SECTION 2.6 Proxies		2
SECTION 2.7 Notice of Stockholder Business and Nominations		2
SECTION 2.8 Procedure for Election of Directors; Required Vote		4
SECTION 2.9 Inspectors of Elections; Opening and Closing the Polls		4
SECTION 2.10 Record Date for Action by Written Consent		4
SECTION 2.11 Inspectors of Written Consent		5
SECTION 2.12 Effectiveness of Written Consent		5
ARTICLE III BOARD OF DIRECTORS		6
SECTION 3.1 General Powers		6
SECTION 3.2 Number and Tenure		6
SECTION 3.3 Chairman of the Board		6
SECTION 3.4 Regular Meetings		6
SECTION 3.5 Special Meetings		6
SECTION 3.6 Notice		6
SECTION 3.7 Action by Consent of Board of Directors		7
SECTION 3.8 Conference Telephone Meetings		7
SECTION 3.9 Quorum		7
SECTION 3.10 Vacancies		7
SECTION 3.11 Executive and Other Committees		7
SECTION 3.12 Removal		8

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Table of Contents
(continued)

	Page
SECTION 3.13 Records		8
ARTICLE IV OFFICERS		8
SECTION 4.1 Elected Officers		8
SECTION 4.2 Election and Term of Office		9
SECTION 4.3 Chief Executive Officer		9
SECTION 4.4 President		9
SECTION 4.5 Vice-Presidents		9
SECTION 4.6 Chief Financial Officer		9
SECTION 4.7 Treasurer		9
SECTION 4.8 Secretary		9
SECTION 4.9 Removal		10
SECTION 4.10 Vacancies		10
ARTICLE V STOCK CERTIFICATES AND TRANSFERS		10
SECTION 5.1 Stock Certificates and Transfers		10
SECTION 5.2 Lost, Stolen or Destroyed Certificates		11
ARTICLE VI MISCELLANEOUS PROVISIONS		11
SECTION 6.1 Fiscal Year		11
SECTION 6.2 Dividends		11
SECTION 6.3 Seal		11
SECTION 6.4 Waiver of Notice		11
SECTION 6.5 Audits		11
SECTION 6.6 Resignations		11
SECTION 6.7 Indemnification and Insurance		11
ARTICLE VII CONTRACTS, PROXIES, ETC.		14
SECTION 7.1 Contracts		14
SECTION 7.2 Proxies		15
ARTICLE VIII AMENDMENTS		15
SECTION 8.1 Amendments		15

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ARTICLE I

OFFICES AND RECORDS

     SECTION 1.1 Delaware Office. The principal office of the Corporation in the State of Delaware shall be located in the City of Wilmington, County of New Castle, and the name and address of its registered agent is The Corporation Trust Company, The Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware.

     SECTION 1.2 Other Offices. The Corporation may have such other offices, either within or without the State of Delaware, as the Board of Directors may designate or as the business of the Corporation may from time to time require.

     SECTION 1.3 Books and Records. The books and records of the Corporation may be kept outside the State of Delaware at such place or places as may from time to time be designated by the Board of Directors.

ARTICLE II

STOCKHOLDERS

     SECTION 2.1 Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held on such date and at such place and time as may be fixed by resolution of the Board of Directors.

     SECTION 2.2 Special Meeting. Subject to the rights, if any, of the holders of any series of stock having a preference over the Common Stock of the Corporation as to dividends or upon liquidation (“Preferred Stock”) with respect to such series of Preferred Stock, special meetings of the stockholders may be called only by the Chairman of the Board or by the Board of Directors or a majority of the total number of directors which the Corporation would have if there were no vacancies (the “Whole Board”).

     SECTION 2.3 Place of Meeting. The Board of Directors or the Chairman of the Board, as the case may be, may designate the place of meeting for any annual meeting or for any special meeting of the stockholders called by the Board of Directors or the Chairman of the Board. If no designation is so made, the place of meeting shall be the principal office of the Corporation.

     SECTION 2.4 Notice of Meeting. Written or printed notice, stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered by the Corporation not less than 10 days nor more than 60 days before the date of the meeting, either personally or by mail, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, addressed to the stockholder at his address as it appears on the stock transfer books of the Corporation. Such further notice shall be given as may be required by law. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Meetings may be held without notice if all stockholders entitled to vote are present, or if notice is waived by those not present in accordance with Section 6.4 of these By-Laws. Any previously

scheduled meeting of the stockholders may be postponed, and (unless the Certificate of Incorporation otherwise provides) any special meeting of the stockholders may be cancelled, by resolution of the Board of Directors upon public notice given prior to the date previously scheduled for such meeting of stockholders.

     SECTION 2.5 Quorum and Adjournment. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the voting power of the outstanding shares of the Corporation entitled to vote generally in the election of directors (the “Voting Stock”), represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on separately by a class or series of stock voting as a class, the holders of a majority of the shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. The Chairman of the meeting or a majority of the shares so represented may adjourn the meeting from time to time, whether or not there is such a quorum. No notice of the time and place of adjourned meetings need be given except as required by law. The stockholders present at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

     SECTION 2.6 Proxies. At all meetings of stockholders, a stockholder may vote by proxy executed in writing (or in such manner prescribed by the General Corporation Law of the State of Delaware) by the stockholder, or by his duly authorized attorney in fact.

     SECTION 2.7 Notice of Stockholder Business and Nominations.

          (A) Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation’s notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this By-Law, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this By-Law.

               (2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this By-Law, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth (a) as to each person whom

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the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 14a-11 thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner.

               (3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this By-Law to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 70 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this By-Law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

          (B) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this By-Law, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this By-Law. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (A)(2) of this By-Law shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.

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          (C) General. (1) Only such persons who are nominated in accordance with the procedures set forth in this By-Law shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this By-Law. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this By-Law and, if any proposed nomination or business is not in compliance with this By-Law, to declare that such defective proposal or nomination shall be disregarded.

               (2) For purposes of this By-Law, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

               (3) Notwithstanding the foregoing provisions of this By-Law, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this By-Law. Nothing in this By-Law shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock to elect directors under specified circumstances.

     SECTION 2.8 Procedure for Election of Directors; Required Vote. Election of directors at all meetings of the stockholders at which directors are to be elected shall be by ballot, and subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, a plurality of the votes cast thereat shall elect directors. Except as otherwise provided by law, the Certificate of Incorporation, or these By-Laws, in all matters other than the election of directors, the affirmative vote of the holders of a majority of the voting power represented by the shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the act of the stockholders.

     SECTION 2.9 Inspectors of Elections; Opening and Closing the Polls. The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at the meetings of stockholders and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders, the Chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging such inspector’s duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspectors shall have the duties prescribed by law. The Chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.

     SECTION 2.10 Record Date for Action by Written Consent. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing

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without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within 10 days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within 10 days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business or to any officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action.

     SECTION 2.11 Inspectors of Written Consent. In the event of the delivery, in the manner provided by Section 2.10, to the Corporation of the requisite written consent or consents to take corporate action and/or any related revocation or revocations, the Corporation shall engage nationally recognized independent inspectors of elections for the purpose of promptly performing a ministerial review of the validity of the consents and revocations. For the purpose of permitting the inspectors to perform such review, no action by written consent without a meeting shall be effective until such date as the independent inspectors certify to the Corporation that the consents delivered to the Corporation in accordance with Section 2.10 represent at least the minimum number of votes that would be necessary to take the corporate action. Nothing contained in this paragraph shall in any way be construed to suggest or imply that the Board of Directors or any stockholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after such certification by the independent inspectors, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

     SECTION 2.12 Effectiveness of Written Consent. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated written consent received in accordance with Section 2.10, a written consent or consents signed by a sufficient number of holders to take such action are delivered to the Corporation in the manner prescribed in Section 2.10.

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ARTICLE III

BOARD OF DIRECTORS

     SECTION 3.1 General Powers. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws required to be exercised or done by the stockholders.

     SECTION 3.2 Number and Tenure. Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, the business and affairs of the Corporation shall be managed by the Board of Directors, the number thereof to be determined from time to time by resolution of the Board of Directors. Each director shall serve for a term of one year from the date of his election and until his successor is elected. Directors need not be stockholders.

     SECTION 3.3 Chairman of the Board. The Chairman of the Board shall be chosen from among the Directors. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors. Unless otherwise provided by resolution of the Board of Directors, the Chairman of the Board shall not be an officer of the Corporation. The Chairman of the Board shall perform all duties incidental to his office which may be required by law and all such other duties as are properly required of him by the Board of Directors.

     SECTION 3.4 Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this By-Law immediately after, and at the same place as, the Annual Meeting of Stockholders. The Board of Directors may, by resolution, provide the time and place for the holding of additional regular meetings without other notice than such resolution.

     SECTION 3.5 Special Meetings. Special meetings of the Board of Directors shall be called at the request of the Chairman of the Board or a majority of the Board of Directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of the meetings.

     SECTION 3.6 Notice. Notice of any special meeting of directors shall be given to each director at the director’s business or residence in writing by hand delivery, first-class or overnight mail or courier service, telegram or facsimile transmission, or orally by telephone. If mailed by first-class mail, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five days before such meeting. If by telegram, overnight mail or courier service, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company or the notice is delivered to the overnight mail or courier service company at least 24 hours before such meeting. If by facsimile transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least 12 hours before such meeting. If by telephone or by hand delivery, the notice shall be given at least 12 hours prior to the time set for the meeting. Neither the business to be

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transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting, except for amendments to these By-Laws, as provided under Section 8.1. A meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Section 6.4 of these By-Laws.

     SECTION 3.7 Action by Consent of Board of Directors. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.

     SECTION 3.8 Conference Telephone Meetings. Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

     SECTION 3.9 Quorum. Subject to Section 3.9, a whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. The directors present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum.

     SECTION 3.10 Vacancies. Subject to applicable law and the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, and unless the Board of Directors otherwise determines, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until such director’s successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the Whole Board shall shorten the term of any incumbent director.

     SECTION 3.11 Executive and Other Committees. The Board of Directors may, by resolution adopted by a majority of the Whole Board, designate an Executive Committee to exercise, subject to and to the full extent of applicable provisions of law, all the powers of the Board in the management of the business and affairs of the Corporation when the Board is not in session and may, by resolution similarly adopted, designate one or more other committees. The Executive Committee may not, however (i) approve or adopt, or recommend to the stockholders of the Corporation, any action or matter expressly required by the General Corporation Law of the State of Delaware to be submitted to stockholders for approval, or (ii) adopt, amend or repeal

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any By-Law of the Corporation. The Executive Committee and each such other committee shall consist of two or more directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, other than the Executive Committee (the powers of which are expressly provided for herein), may to the extent permitted by law exercise such powers and shall have such responsibilities as shall be specified in the designating resolution. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Each committee shall keep written minutes of its proceedings and shall report such proceedings to the Board when required.

     A majority of any committee may determine its action and fix the time and place of its meetings, unless the Board shall otherwise provide. Notice of such meetings shall be given to each member of the committee in the manner provided for in Section 3.6 of these By-Laws. The Board shall have power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee. Nothing herein shall be deemed to prevent the Board from appointing one or more committees consisting in whole or in part of persons who are not directors of the Corporation; provided, however, that no such committee shall have or may exercise any authority of the Board.

     SECTION 3.12 Removal. Subject to the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, any director, or the entire Board of Directors, may be removed from office at any time, either with or without cause, by the affirmative vote of holders of a majority of the voting power of shares of Voting Stock

     SECTION 3.13 Records. The Board of Directors shall cause to be kept a record containing the minutes of the proceedings of the meetings of the Board and of the stockholders, appropriate stock books and registers and such books of records and accounts as may be necessary for the proper conduct of the business of the Corporation.

ARTICLE IV

OFFICERS

     SECTION 4.1 Elected Officers. The elected officers of the Corporation shall be one or more Chief Executive Officers, a Secretary, a Treasurer, and such other officers (including, without limitation, a Chief Financial Officer) as the Board of Directors from time to time may deem proper. All officers elected by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof. The Board or any committee thereof may from time to time elect, or the Chief Executive Officer(s) may appoint, such other officers (including one or more Presidents, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, and Assistant Controllers) and such agents, as may be necessary or desirable for the conduct of the business of the Corporation. Such other officers

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and agents shall have such duties and shall hold their offices for such terms as shall be provided in these By-Laws or as may be prescribed by the Board or such committee or by the Chief Executive Officer, as the case may be.

     SECTION 4.2 Election and Term of Office. The elected officers of the Corporation shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held after the annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until his successor shall have been duly elected and shall have been qualified or until his death or until he shall resign, but any officer may be removed from office at any time by the affirmative vote of a majority of the Whole Board or, except in the case of an officer or agent elected by the Board, by the Chief Executive Officer. Such removal shall be without prejudice to the contractual rights, if any, of the person so removed.

     SECTION 4.3 Chief Executive Officer. The Chief Executive Officer shall be responsible for the general management of the affairs of the Corporation and shall perform all duties incidental to this office which may be required by law and all such other duties as are properly required of this officer by the Board of Directors. The Chief Executive Officer shall make reports to the Board of Directors and the stockholders, and shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect. The Chief Executive Officer may also serve as President, if so elected by the Board. Where two or more persons hold the office of Chief Executive Officer, references in these By-Laws to the Chief Executive Officer shall refer to such Executive Officers as have been assigned such duties by the Board of Directors.

     SECTION 4.4 President. The President, if one or more shall be appointed, shall act in a general executive capacity and shall assist the Chief Executive Officer in the administration and operation of the Corporation’s business and general supervision of its policies and affairs. The President shall, in the absence of or because of the inability to act of the Chief Executive Officer, perform all duties of the Chief Executive Officer. Where two or more persons hold the office of President, references in these By-Laws to the President shall refer to such Executive Officers as have been assigned such duties by the Board of Directors.

     SECTION 4.5 Vice-Presidents. Each Vice President shall have such powers and shall perform such duties as shall be assigned to him by the Board of Directors or the Chief Executive Officer.

     SECTION 4.6 Chief Financial Officer. The Chief Financial Officer (if any) shall be a Vice President and act in an executive financial capacity. He shall assist the Chief Executive Officer and the President in the general supervision of the Corporation’s financial policies and affairs.

     SECTION 4.7 Treasurer. The Treasurer shall exercise general supervision over the receipt, custody and disbursement of corporate funds. The Treasurer shall cause the funds of the Corporation to be deposited in such banks as may be authorized by the Board of Directors, or in such banks as may be designated as depositaries in the manner provided by resolution of the Board of Directors. He shall have such further powers and duties and shall be subject to such

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directions as may be granted or imposed upon him from time to time by the Board of Directors or the Chief Executive Officer.

     SECTION 4.8 Secretary. The Secretary shall keep or cause to be kept in one or more books provided for that purpose, the minutes of all meetings of the Board, the committees of the Board and the stockholders; he shall see that all notices are duly given in accordance with the provisions of these By-Laws and as required by law; he shall be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; and he shall see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and in general, he shall perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board or the Chief Executive Officer.

     SECTION 4.9 Removal. Any officer elected, or agent appointed, by the Board of Directors may be removed by the affirmative vote of a majority of the Whole Board whenever, in their judgment, the best interests of the Corporation would be served thereby. Any officer or agent appointed by the Chief Executive Officer may be removed by such officer whenever, in judgment of such officer, the best interests of the Corporation would be served thereby. No elected officer shall have any contractual rights against the Corporation for compensation by virtue of such election beyond the date of the election of his successor, his death, his resignation or his removal, whichever event shall first occur, except as otherwise provided in an employment contract or under an employee deferred compensation plan.

     SECTION 4.10 Vacancies. A newly created elected office and a vacancy in any elected office because of death, resignation, or removal may be filled by the Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors. Any vacancy in an office appointed by the Chief Executive Officer because of death, resignation, or removal may be filled by the Chief Executive Officer.

ARTICLE V

STOCK CERTIFICATES AND TRANSFERS

     SECTION 5.1 Stock Certificates and Transfers. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Every holder of stock in the Corporation represented by a certificate shall be entitled to have a certificate signed in the name of the Corporation (i) by the Chairman of the Board, any Vice Chairman of the Board, or the Chief Executive Officer and (ii) by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, representing the number of shares registered in certificate form. Except as otherwise provided by law or these by-laws, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

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     Any signature required to be on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

     Stock of the Corporation shall be transferable in the manner prescribed by law and in these by-laws. Transfers of stock shall be made on the books of the Corporation only by the holder of record or by such person’s attorney duly authorized, and upon the surrender of properly endorsed certificates for a like number of shares (or, with respect to uncertificated shares, by delivery of duly executed instructions or in any other manner permitted by applicable law).

     SECTION 5.2 Lost, Stolen or Destroyed Certificates. No certificate for shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation of a bond of indemnity in such amount, upon such terms and secured by such surety, as the Board of Directors or any financial officer may in its or his discretion require.

ARTICLE VI

MISCELLANEOUS PROVISIONS

     SECTION 6.1 Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January and end on the 31st day of December of each year.

     SECTION 6.2 Dividends. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Certificate of Incorporation.

     SECTION 6.3 Seal. The corporate seal shall have enscribed thereon the words “Corporate Seal”, the year of incorporation and around the margin thereof the words “Martha Stewart Living Omnimedia, Inc. — Delaware.”

     SECTION 6.4 Waiver of Notice. Whenever any notice is required to be given to any stockholder or director of the Corporation under the provisions of the General Corporation Law of the State of Delaware or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders or the Board of Directors or committee thereof need be specified in any waiver of notice of such meeting.

     SECTION 6.5 Audits. The accounts, books and records of the Corporation shall be audited upon the conclusion of each fiscal year by an independent certified public accountant selected by the Board of Directors, and it shall be the duty of the Board of Directors to cause such audit to be done annually.

     SECTION 6.6 Resignations. Any director or any officer, whether elected or appointed, may resign at any time by giving written notice of such resignation to the Chief Executive

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Officer, the President, or the Secretary, and such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chief Executive Officer, the President, or the Secretary, or at such later time as is specified therein. No formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective.

     SECTION 6.7 Indemnification and Insurance. (A) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit, or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that such person or a person of whom such person is the legal representative is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the Corporation, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of such person’s heirs, executors and administrators; provided, however, that except as provided in paragraph (C) of this By-Law, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred in this By-Law shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition, such advances to be paid by the Corporation within 20 days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided, however, that if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in such person’s capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this By-Law or otherwise.

          (B) To obtain indemnification under this By-Law, a claimant shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification. Upon written request by a claimant for indemnification pursuant to the first sentence of this paragraph (B), a determination, if required by applicable law, with respect to the claimant’s entitlement thereto shall be made as

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follows: (i) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (ii) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (iii) if a quorum of Disinterested Directors so directs, by the stockholders of the Corporation. If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within 10 days after such determination.

          (C) If a claim under paragraph (A) of this By-Law is not paid in full by the Corporation within 30 days after a written claim pursuant to paragraph (B) of this By-Law has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, Independent Counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because such claimant has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board of Directors, Independent Counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

          (D) If a determination shall have been made pursuant to paragraph (B) of this By-Law that the claimant is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to paragraph (C) of this By-Law.

          (E) The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to paragraph (C) of this By-Law that the procedures and presumptions of this By-Law are not valid, binding and enforceable and shall stipulate in such proceeding that the Corporation is bound by all the provisions of this By-Law.

          (F) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this By-Law shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Laws, agreement, vote of stockholders or Disinterested Directors or otherwise. No repeal or modification of this By-Law shall in any way diminish or adversely affect the rights of any director, officer, employee or agent of the Corporation hereunder in respect of any occurrence or matter arising prior to any such repeal or modification.

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          (G) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. To the extent that the Corporation maintains any policy or policies providing such insurance, each such director or officer, and each such agent or employee to which rights to indemnification have been granted as provided in paragraph (H) of this By-Law, shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such director, officer, employee or agent.

          (H) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent of the Corporation to the fullest extent of the provisions of this By-Law with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.

          (I) If any provision or provisions of this By-Law shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this By-Law (including, without limitation, each portion of any paragraph of this By-Law containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this By-Law (including, without limitation, each such portion of any paragraph of this By-Law containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

          (J) For purposes of this By-Law:

               (1) “Disinterested Director” means a director of the Corporation who is not and was not a party to the matter in respect of which indemnification is sought by the claimant.

               (2) “Independent Counsel” means a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of corporation law and shall include any person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the Corporation or the claimant in an action to determine the claimant’s rights under this By-Law.

          (K) Any notice, request or other communication required or permitted to be given to the Corporation under this By-Law shall be in writing and either delivered in person or sent by telecopy, telex, telegram, overnight mail or courier service, or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Corporation and shall be effective only upon receipt by the Secretary.

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ARTICLE VII

CONTRACTS, PROXIES, ETC.

     SECTION 7.1 Contracts. Except as otherwise required by law, the Certificate of Incorporation or these By-Laws, any contracts or other instruments may be executed and delivered in the name and on the behalf of the Corporation by such officer or officers of the Corporation as the Board of Directors may from time to time direct. Such authority may be general or confined to specific instances as the Board may determine. The Chief Executive Officer, the President or any Vice President may execute bonds, contracts, deeds, leases and other instruments to be made or executed for or on behalf of the Corporation. Subject to any restrictions imposed by the Board of Directors or the Chief Executive Officer, the President or any Vice President of the Corporation may delegate contractual powers to others under his jurisdiction, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power.

     SECTION 7.2 Proxies. Unless otherwise provided by resolution adopted by the Board of Directors, the Chief Executive Officer, the President or any Vice President may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holder of stock or other securities in any other corporation, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation, or to consent in writing, in the name of the Corporation as such holder, to any action by such other corporation, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises.

ARTICLE VIII

AMENDMENTS

     SECTION 8.1 Amendments. Except as expressly provided otherwise by the Delaware General Corporation Law, the Certificate of Incorporation of the Corporation, or other provisions of these By-Laws, these By-Laws may be altered, amended or repealed and new By-Laws adopted at any regular or special meeting of the Board of Directors by an affirmative vote of a majority of the Whole Board.

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EX-10.1

EXHIBIT 10.1

New Director Compensation Program

     The Board of Directors approved a new compensation plan as of May 20, 2008. Under the new compensation plan, the Directors’ annual retainer of $40,000 remains unchanged. The annual retainer continues to be payable in a mix of stock and cash, with a required minimum equity component of 25%.

     The annual fee paid to the chairperson of the Nominating and Corporate Governance committee remains unchanged at $7,000. The annual fees paid to the Lead Director and the chairpersons of the Audit Committee and Compensation Committee have been increased from $7,000 to $15,000. Any special committee chair receives a fee of $25,000 paid annually. These fees are payable in cash.

     Under the new compensation plan, the meeting fees have been increased. Directors now earn $1,500 for each in-person Board Meeting, an increase from $1,000 per meeting. Directors also earn $1,000 for each Board call, an increase from $500; and Directors earn $1,000 for each committee meeting, an increase from $500. These fees are now payable in cash.

     The new plan does away with the initial grant to new directors of an option to purchase 25,000 shares, and also does away with the annual grant to directors of an option to purchase 7,500 immediately following each annual meeting of stockholders. Instead, each non-employee director will receive an annual grant of $75,000 of value upon election/re-election to the Board. This grant will be comprised of a mix of restricted stock and options, all of which will vest on the first anniversary of the grant.

EX-10.8

Exhibit 10.8

SEPARATION AGREEMENT

     This Separation Agreement (the “Agreement”), dated as of June 10, 2008 (the “Effective Date”), is entered into between Martha Stewart Living Omnimedia, Inc. (the “Company”) and Susan Lyne (“Ms. Lyne”).

     WHEREAS, the parties are party to an Employment Agreement dated as of November 11, 2004 (the “Employment Agreement”), pursuant to which Ms. Lyne serves as the Company’s President and Chief Executive Officer and a member of the Company’s Board of Directors;

     WHEREAS, Ms. Lyne has informed the Board of Directors of her intention to resign from her positions with the Company pursuant to the terms hereof; and

     WHEREAS, the parties desire that, subject to the terms and conditions set forth herein, (i) Ms. Lyne shall cooperate with the Company to assist in the transition to one or more new Chief Executive Officer(s) (the “Successor”) as an advisor to the Company until July 11, 2008 (such date, the “Resignation Date”); (ii) Ms. Lyne shall resign as the Company’s President and Chief Executive Officer as of the date hereof; and (iii) Ms. Lyne shall resign as a member of the Company’s Board of Directors on the Resignation Date;

     NOW, THEREFORE, in consideration of these premises and the mutual covenants hereinafter set forth, the parties agree as follows:

     1. (a) Ms. Lyne shall:

     (i) cooperate with the Company and the Successor in efforts to effect an orderly transition;

     (ii) until the Resignation Date, continue to serve as a member of the Company’s Board of Directors;

     (iii) resign as of the date hereof as the Company’s President and Chief Executive Officer pursuant to the terms of the Employment Agreement (as amended hereby); and

     (iv) execute and deliver the Waiver and Release of Claims in the form attached hereto as Exhibit A (the “Waiver and Release of Claims”) on the Date of Termination as defined in the Employment Agreement.

     (b) Subject to Section 1(c) below, the Company shall:

     (i) on the Resignation Date, pay Ms. Lyne the sum of the following amounts: (A) the amount of her Base Salary and unused vacation time, each prorated on a daily basis, that was accrued and unpaid as of the Resignation Date; (B) the product obtained by multiplying her Base Salary by a fraction, (x) the numerator of which is the number of calendar days between the Resignation Date, exclusive, and December 31, 2008, inclusive, and (y) the denominator of which is 365; (C) a portion of her expected 2008 bonus in the amount of $540,000; and (D) reimbursement of reasonable attorneys fees in connection with the negotiation and

execution of this Agreement in an amount not to exceed $15,000. The parties will cooperate to the extent required by Ms. Lyne with respect to timing of payments hereunder for purposes of complying with Section 409A of the Internal Revenue Code.

     (ii) on the date that the Company pays annual incentive bonuses to its senior executives in respect of 2008 (the “2008 Incentive Bonus” for each such senior executive), but not later than March 15, 2009, pay Ms. Lyne the amount, if any, by which (A) the product of (x) $900,000 and (y) the percentage multiplier applied to senior executives in the bonus pool, exceeds (B) $540,000; and

     (iii) for purposes of clarification of Section 5 of the Nonqualified Stock Option Agreement dated as of November 11, 2004 between the parties (the “2004 Option Agreement”), deem Ms. Lyne’s Termination of Employment (as defined in the 2004 Option Agreement) to provide that all options which have previously vested under the 2004 Option Agreement remain exercisable until the fifth anniversary of the Resignation Date, subject to Section 1(c) below;

     (c) Notwithstanding anything herein to the contrary, (i) Ms. Lyne shall not be entitled to payment pursuant to Section l(b)(i)(B), and Sections l(b)(ii) and (iii) of this Agreement if she has committed a material breach (following notice by the Company and a reasonable opportunity to cure) of her obligations under this Agreement or under Section 10 of the Employment Agreement (as amended pursuant to Section 2 below, and which amended Employment Agreement shall apply to her service to the Company as an advisor) or under the Waiver and Release of Claims (as defined below), or if Ms. Lyne’s employment with the Company is terminated prior to the Resignation Date by Ms. Lyne without Good Reason or by the Company for Cause.

     2. The parties agree that the Employment Agreement shall hereby be deemed amended as of the Effective Date as follows:

     (a) Section 9 of the Employment Agreement (Termination Payments) is deleted in its entirety;

     (b) Section 10(b) of the Employment Agreement (Noncompetition) is deleted in its entirety;

     (c) Section 10(c) of the Employment Agreement (Nonsolicitation) is amended as follows: the reference therein to “12 months” is amended to read “24 months;” and

     (d) Section 10(d) of the Employment Agreement (Nondisparagement) is amended as follows: the reference therein to “12 months” is amended to read “all periods.”

Without limiting the foregoing and for avoidance of doubt, Ms. Lyne shall not be entitled to receive any payments pursuant to Section 9 of the Employment Agreement under any circumstances, including but not limited to in the event her employment as an advisor with the Company is terminated prior to the Resignation Date by her for Good Reason or without Good Reason or by the Company without Cause or for Cause. Without limiting anything in this

Agreement and notwithstanding anything in the Employment Agreement to the contrary, the Employment Term thereunder shall not be deemed to extend beyond July 11, 2008. Except as expressly amended by Section 2 of this Agreement, all other terms and provisions of the Employment Agreement shall remain unmodified and in full force and effect, including without limitation Section 12 thereof (Indemnification); provided however, that such Employment Agreement shall apply to Ms. Lyne in her new capacity as an advisor to the Company. For avoidance of doubt, Ms. Lyne’s employment with the Company as an advisor may be terminated prior to the Resignation Date by her for Good Reason or without Good Reason or by the Company without Cause or for Cause pursuant to Section 7 of the Employment Agreement; provided that if Ms. Lyne resigns for Good Reason or is terminated without Cause prior to the Resignation Date, Ms. Lyne shall be entitled to the benefits set forth in Section 1(b) above.

     3. Nothing in this Agreement shall be construed to amend or modify the terms of any agreement executed by the parties, including without limitation (i) the 2004 Option Agreement, (ii) the Restricted Stock Award Agreement dated as of November 11, 2004 between the parties and (iii) the Nonqualified Stock Option Agreement dated as of March 3, 2008 between the parties (the agreements referenced in clauses (i)-(iii) hereof, collectively, the “Equity Agreements”).

     4. Ms. Lyne acknowledges and agrees that her execution on the Date of Termination and the enforceability of the Waiver and Release of Claims is an integral part of, and a material inducement to the Company to enter into, this Agreement and agrees that in the event that either (i) Ms. Lyne fails to execute and deliver to the Company the Waiver and Release of Claims or (ii) Ms. Lyne revokes the Waiver and Release of Claims as provided in Section 9 of the Waiver and Release of Claims, the Company may in its sole and absolute discretion revoke this Agreement by giving written notice to Ms. Lyne, in which event this Agreement shall be deemed null and void ab initio and Ms. Lyne shall promptly after receipt of such notice return to the Company any amounts paid to Ms. Lyne pursuant to this Agreement that are in excess of the amounts to which she is entitled to receive under the Employment Agreement. For avoidance of doubt, if the Company revokes this Agreement pursuant to the preceding sentence the Employment Agreement shall not have been deemed amended hereby.

     5. Ms. Lyne’s contribution to the Company’s 401(k) plan will cease on the last day of the Employment Term. When directed by Ms. Lyne, the Company shall pay Ms. Lyne any amounts she contributed or which are vested in such plan in accordance with the terms of such plan. To the extent that Ms. Lyne does not receive any portion of the Company contribution for 2008 under the 401(k) or forfeits any prior Company contributions under the 401(k) plan as of the Resignation Date, Ms. Lyne shall receive a separate cash payment from the Company promptly following the Resignation Date to maker her whole for any such lost payments. Ms. Lyne’s active participation in the Company’s benefits plans shall end on the last day of the Employment Term and she shall retain all rights to vested benefits payable in accordance with the terms of such plans. In addition, until such time as Ms. Lyne is entitled to medical benefits from another employer, but in no event for a period of longer than eighteen (18) months from the Resignation Date, the Company shall reimburse Ms. Lyne for the portion of COBRA benefits Ms. Lyne pays in an amount equal to the contributions that the Company would have made on her behalf had she remained an employee of the Company (i.e., Ms. Lyne will not be reimbursed for that portion of the COBRA premium equal to the amount that was deducted from her payroll for such benefits when she was an employee).

     6. Promptly after the end of the Employment Term, Ms. Lyne shall submit to the Company a reimbursement request, with supporting documentation as required by the Company, for any expenses incurred through such date with respect to which Ms. Lyne is entitled to be reimbursed pursuant to Section 4 of the Employment Agreement (“Reimbursable Expenses”) and the Company shall promptly reimburse Ms. Lyne for such expenses (or pay such expenses directly if requested pursuant to the following sentence). Ms. Lyne shall promptly pay any expenses that Ms. Lyne incurred with respect to which the Company could be liable (e.g., expenses incurred on any corporate credit card if the Company may be liable for the payment thereof); except that Ms. Lyne may request the Company to pay directly, in accordance with the Company’s policy and procedure, any Reimbursable Expenses incurred on her Company American Express Corporate Card.

     7. Capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed to such terms in the Employment Agreement.

     8. This Agreement, the Employment Agreement (as amended hereby) and the Waiver and Release of Claims constitute the complete and final agreement between the parties and supersede and replace all prior or contemporaneous agreements, negotiations, or discussions relating to the subject matter of this Agreement, the Employment Agreement and the Waiver and Release of Claims. This Agreement may not be amended except in a writing signed by each of the parties hereto. No waiver of any right set forth in this Agreement shall be effective unless set forth in a writing signed by the party against whom the waiver is to be enforced. All provisions and portions of this Agreement are severable. If any provision or portion of this Agreement or the application of any provision or portion of this Agreement shall be determined to be invalid or unenforceable to any extent or for any reason, all other provisions and portions of this Agreement shall remain in full force and shall continue to be enforceable to the fullest and greatest extent permitted by law. This Agreement shall be binding upon and inure to benefit of each party’s respective successors and permitted assigns. The word “including” shall mean “including without limitation.” As used herein, the plural includes the singular and the singular includes the plural, unless such a construction of such sentence would be unreasonable. Titles and headings to Sections in this Agreement are inserted for convenience only and are not intended to be a part of or to affect the meaning or interpretation of the Agreement. The parties acknowledge that they are entering into this Agreement after consulting with counsel and based upon equal bargaining power and that the attorneys for each party have had an equal opportunity to participate in the negotiation and preparation of this Agreement. The terms of this Agreement shall not be interpreted in favor of or against any party on account of the draftsperson, but shall be interpreted solely for the purpose of fairly effectuating the intent of the parties hereto expressed herein.

     9. Except for issues or matters as to which federal law is applicable, this Agreement 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. The federal and state courts located in New York County, New York, shall have sole and exclusive jurisdiction over any dispute arising out of or relating to this Agreement, and each party hereby expressly consents to the jurisdiction of such courts and waives any objection (whether on grounds of venue, residence, domicile, inconvenience of forum or otherwise), to such a proceeding brought before such a court.

     By signing below, the Company and Ms. Lyne acknowledge that they have carefully read and understood the terms of this Agreement, enter into this Agreement knowingly, voluntarily and of their own free will, understand its terms and significance and intend to abide by its provisions, including the Waiver and Release of Claims, without exception.

     MARTHA STEWART LIVING OMNIMEDIA, INC.

By:	/s/ Howard Hochhauser	6/10/08
Name:	Howard Hochhauser	Date
Title:	Chief Financial Officer
	/s/ Susan Lyne	6/10/08
	Susan Lyne	Date

Exhibit A
WAIVER AND RELEASE OF CLAIMS

1. General Release. In consideration of the payments and benefits to be made pursuant to that Separation Agreement dated as of June 10, 2008 (the “Agreement”), Susan Lyne (the “Employee”), with the intention of binding the Employee and the Employee’s heirs, executors, administrators and assigns, does hereby waive, release, remise, acquit and forever discharge Martha Stewart Living Omnimedia, Inc. (the “Company”) and each of its subsidiaries and affiliates (collectively, the “Company Affiliated Group”), the respective present and former directors, officers, employees, representatives, agents, attorneys, employee benefits plans (and the fiduciaries thereof) and attorneys of each of the foregoing, and the successors, predecessors and assigns of each of the foregoing (together with each member of the Company Affiliated Group, each a “Company Released Party” and collectively, the “Company Released Parties”), of and from any and all claims, actions, causes of action, complaints, charges, demands, rights, obligations, damages, debts, sums of money, accounts, financial obligations, suits, expenses, attorneys’ fees, liens 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, or may at any time hereafter up to and including the Date of Termination (as defined under the Employment Agreement) have, own or hold, 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 or any other statute, laws, ordinances, or regulations of any jurisdiction, excepting only:

     (a) rights of the Employee under this Waiver and Release of Claims, rights under the Agreement, and rights under the Employment Agreement (as amended by the Agreement);

     (b) rights of the Employee under any of the Equity Agreements (as defined in the Agreement);

     (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, (iii) the Employment Agreement; or (iv) as an insured under any director’s and officer’s liability insurance policy now or previously in force; and

     (e) claims for benefits under any health, disability, retirement, deferred compensation, life insurance or other, similar employee benefit plan or arrangement of the Company Affiliated Group.

Employee represents and warrants that she is the sole and lawful owner of all right, title and interest in and to every Action and other matters that is being released above and that no other party has received any assignment or other right of substitution or subrogation to any such claim or matter. Employee also represents that she has the full power and authority to execute this Waiver and Release of Claims. With respect to the foregoing release, Employee hereby waives all rights or protection under section 1542 of the Civil Code of California or any similar law of any other state, territory, country or any political division thereof, to the extent applicable (such waiver is not intended to indicate that the law of any jurisdiction other than New York is applicable to this Waiver and Release of Claims). Section 1542 provides:

A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.

2. Release by Company. The Company does hereby release, remise, acquit and forever discharge the Employee from any and all known Actions arising out of or in any way connected with the Employee’s service to any member of the Company Affiliated Group.

3. 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 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.

4. 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.

5. Specific Waiver. The Employee specifically acknowledges that his 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.

6. Additional Covenants.

     (a) Return of Company Material. The Employee shall on the last day of the Employment Term (as defined in the Employment Agreement between the Employee and the Company dated as of November 11, 2004 (the “Employment Agreement”)) return to the Company all Company Material (as defined below). For purposes of this Section 6, “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 exclusively to the Employee’s compensation or employee benefits.

     (b) Cooperation. Following the end of the Employment Term, the Employee shall reasonably cooperate with the Company upon reasonable request of the Board of Directors and be reasonably available to the Company with respect to matters arising out of the Employee’s services to the Company Affiliated Group.

     (c) 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, and that in connection with seeking such injunctive relief the Company shall not be required to show any actual damage or the inadequacy of any remedy at law or to post a bond or other security.

7. Voluntariness. The Employee acknowledges and agrees that she is relying solely upon her own judgment; that the Employee is over eighteen 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 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 she believes is satisfactory and adequate. The Employee also acknowledges and agrees that she has been informed of the right to consult with legal counsel, has been encouraged to do so and has had sufficient opportunity to do so. The Employee agrees that she is not relying on any representations, whether written or oral, not set forth in this Waiver and Release of Claims, in determining to execute this Waiver and Release of Claims.

8. Complete Agreement/Amendment/Waiver/Severability/Interpretation. The Agreement, the Employment Agreement (as amended by the Agreement) and this Waiver and Release of Claims constitute the complete and final agreement between the parties and supersede and replace all prior or contemporaneous agreements, negotiations, or discussions relating to the subject matter of this Waiver and Release of Claims, the Agreement and the Employment Agreement. This Waiver and Release of Claims may not be amended except in a writing signed by each of the parties hereto. No waiver of any right set forth in this Waiver and Release of Claims shall be effective unless set forth in a writing signed by the party against whom the waiver is to be enforced. 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. This Waiver and Release of Claims shall be binding upon and inure to benefit of each party’s respective successors and permitted assigns. The word “including” shall mean “including without limitation.” As used herein, the plural includes the singular and the singular includes the plural, unless such a construction of such sentence would be unreasonable. Titles and headings to Sections in this Waiver and Release of Claims are inserted for convenience only and are not intended to be a part of or to affect the meaning or interpretation of the Waiver and Release of Claims. The parties acknowledge that they are entering into this Waiver and Release of Claims after consulting with counsel and based upon equal bargaining power and that the attorneys for each party have had an equal opportunity to participate in the negotiation and preparation of this Waiver and Release of Claims. The terms of this Waiver and Release of Claims shall not be interpreted in favor of or against any party on

account of the draftsperson, but shall be interpreted solely for the purpose of fairly effectuating the intent of the parties hereto expressed herein.

     9. Acceptance and Revocability. The Employee acknowledges that 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 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 to the attention of General Counsel. 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.

     10. Effect of Unenforceability of Release. In the event that the Employee or any of her heirs, successors or assigns initiates an Action in respect of any portion of this Waiver and Release of Claims 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, the Employee shall promptly repay to the Company any payments made to her pursuant to, and/or forfeit any other compensation provided for in, the Agreement.

     10. Governing Law/Jurisdiction. 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. The federal and state courts located in New York County, New York, shall have sole and exclusive jurisdiction over any dispute arising out of or relating to this Waiver and Release of Claims, and each party hereby expressly consents to the jurisdiction of such courts and waives any objection (whether on grounds of venue, residence, domicile, inconvenience of forum or otherwise), to such a proceeding brought before such a court.

/s/ Susan Lyne

Susan Lyne

EX-10.9

Exhibit 10.9

INTANGIBLE ASSET LICENSE AGREEMENT

     This INTANGIBLE ASSET LICENSE AGREEMENT (this “Agreement”), dated as of June 13, 2008, is by and between MS Real Estate Management Company (“Licensor”) and Martha Stewart Living Omnimedia, Inc. (the “Company”).

     WHEREAS, Licensor has the right to license the intangible asset consisting of Martha Stewart’s lifestyle. Licensor’s lifestyle intangible asset encompasses Martha Stewart’s lifestyle and the public perception of Martha Stewart’s lifestyle. It includes, but is not limited to: real property that Martha Stewart owns directly or indirectly as of the date hereof (the “Real Property” or “Real Properties,” including without limitation each of (a) [Address Withheld], Katonah, New York, (b) [Address Withheld], East Hampton, New York, and (c) [Address Withheld], Seal Harbor, Maine, but excluding any Subsequently-Acquired Real Property (as defined below) that is not an Elective Real Property (as defined below)); the design of and the furnishings and finishings contained in the structures located on the Real Properties; the manner in which Martha Stewart selects, designs and arranges the finishings and furnishings contained in the structures located on the Real Properties; the inventory of home furnishings Martha Stewart has acquired and maintains for use in the structures located on the Real Properties; the color schemes, fabrics, art, linens, glassware, appliances in the kitchens in the structures located on, and the gardens located on, the Real Properties, which Martha Stewart designs and maintains; the outdoor furniture located on the Real Properties; and any other items that contribute to the visible appearance and impression of the Real Properties (collectively, the “Lifestyle Intangible Asset”).

     NOW, THEREFORE, in consideration of the mutual premises set forth herein, and for such other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

     1. The Company’s Acknowledgment of Licensor’s Rights. The Company hereby acknowledges that (a) Martha Stewart exclusively owns all right, title and interest throughout the world (the “Territory”) in and to the Lifestyle Intangible Asset, which Lifestyle Intangible Asset has intrinsic value, and (b) Licensor and Martha Stewart otherwise reserve all rights to the Lifestyle Intangible Asset except those specifically granted to the Company herein (provided, however, that this reservation of rights shall not alter in any manner the Company’s rights under that certain Intellectual Property License and Preservation Agreement dated as of October 22, 1999 between Martha Stewart and the Company (the “IP License Agreement”)). Licensor represents and warrants to the Company that, as of the date hereof, it has the power and authority to license the Lifestyle Intangible Asset on the terms and conditions of this Agreement.

     2. Term. The term of this Agreement shall be deemed to have commenced on September 18, 2007 and shall continue until the fifth anniversary of such date, unless this Agreement is terminated pursuant to Section 10 hereof.

     3. Consideration. During the term of this Agreement, in consideration for the license provided by this Agreement, the Company shall pay Licensor, or an entity designated by Licensor in writing, an annual license fee of $2,000,000 (the “Annual License Fee”). The

Company shall pay the Annual License Fee in advance in a lump sum for each of the future years on or about each successive September 15. For the current year, $850,000 of the current Annual License Fee has been paid by the Company, with the balance of $1,150,000 due and owing.

     4. Use of the Lifestyle Intangible Asset.

     (a) Subject to the terms and conditions of this Agreement, Licensor hereby licenses to the Company the perpetual, exclusive right to use, and to authorize others to use (subject to Licensor’s consent right set forth in Section 4(e)), pursuant to the terms hereof, throughout the Territory on or in connection with any products and services of the Company (such products and services (including the magazine Martha Stewart Living) are referred to herein as the “Licensed Products” and the “Licensed Services”) all elements of the Lifestyle Intangible Asset as such exist at any time during the term of this Agreement. For avoidance of doubt, after the expiration or termination of this Agreement, the Company shall not have any right to utilize any elements of the Lifestyle Intangible Asset that did not exist as of the date of such expiration or termination (“Post-Term Elements”), but shall have the perpetual license to use, and to authorize others to use, the Lifestyle Intangible Asset exclusive of Post-Term Elements, in accordance with the foregoing sentence.

     (b) During the term of any license pursuant to this Agreement, the Company shall use commercially reasonable efforts to preserve the historical goodwill of the Lifestyle Intangible Asset. All use of the Lifestyle Intangible Asset by the Company or any sublicense thereof shall inure solely to the benefit of Licensor. The use of the Lifestyle Intangible Asset by the Company or any sublicense thereof shall be of a quality at least substantially consistent with the Historical Standard (as defined below); provided that any use of the Lifestyle Intangible Asset by the Company while Martha Stewart is in Control (as defined below) shall be conclusively presumed to meet the Historical Standard. The “Historical Standard,” as of any date, shall mean the quality, style and image of the Licensed Products or Licensed Services as the Lifestyle Intangible Asset has been used by the Company through the earlier of (1) such date or (2) the date that Martha Stewart ceases to be the owner, directly or indirectly, of in excess of 50% of the outstanding voting power of the Company (the circumstances in clause (2) immediately preceding being referred to as “Control,” and such period being referred to as the “Historical Period”). At any time that Martha Stewart is not in Control (other than due to a Termination Trigger, as defined in Section 10), (i) subject to Licensor’s prior written approval, which shall not be unreasonably withheld or delayed, the Company may continue to use the Lifestyle Intangible Asset in connection with new businesses not planned or developed while Martha Stewart was in Control, and (ii) the Company may develop, use and register new derivatives of the Lifestyle Intangible Asset not developed while Martha Stewart was in Control, so long as such new derivatives and Derived Marks (as defined in Section 7(a)) are substantially consistent with the image, look and goodwill of the Lifestyle Intangible Asset at the time when Martha Stewart ceased to be in Control or to which Licensor has consented in writing (such businesses and derivatives, “New Uses”). For clarity, reasonable extensions of the lines of business in which the Company is engaged or planned to be engaged at any time that Martha Stewart is in Control shall not be considered New Uses and shall be included in the license contained herein. After Martha Stewart’s death or disability, the Company may use the Lifestyle Intangible Asset for additional New Uses, provided that any such businesses and derivatives are substantially consistent with the image, look and goodwill of the Lifestyle Intangible Asset at the

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time at which Martha Stewart ceased to be in Control, or to which Licensor has consented in writing. The Company shall keep Licensor advised of any New Uses in a timely manner, so that such entity may confirm the Company’s compliance with the terms hereof.

     (c) [Intentionally Omitted]

     (d) Subject to the terms and conditions of this Agreement, Licensor hereby grants to the Company the exclusive right to use and exploit in any and all media now known or which may in the future be invented the Lifestyle Intangible Asset as it appears in any and all television programs and/or videos (including content developed for the Company’s online businesses) produced by or for the Company (or its predecessor), whether such television programs and/or videos were produced, aired, marketed or sold prior to, on, or after, the date of this Agreement, provided that the grant in this sentence shall be limited to the use of such programs and/or videos (i) substantially as a whole (it being acknowledged and understood that the Company shall have the right to edit such programs and/or videos for time and commercials and to add bumpers and introductions), (ii) as part of a collection or similar compilation (such as “Best of” programs or videos) of Martha Stewart appearances, (iii) in any other manner used by the Company while Martha Stewart was in Control or (iv) regarding excerpts of such programs and/or videos, as part of the advertising, promotion and/or marketing of any of the foregoing.

     (e) To the extent that the Company desires access to the Real Properties in order to utilize the Lifestyle Intangible Asset, the Company shall provide reasonable notice of the intended dates and manner of use and the parties shall cooperate therewith; provided that Licensor shall provide the Company with any such requested access to the Real Properties in a manner consistent with past practice pursuant that certain Location Rental Agreement dated as of September 17, 2004 between Martha Stewart and the Company (the “Location Rental Agreement”), which Location Rental Agreement was extended by a letter agreement on September 18, 2007, and applicable law; and provided further that Licensor may deny access to the Real Properties to Company’s sublicensees other than those entities with which the Company has a bona fide business relationship involving matters other than the Real Properties at its sole discretion, and further provided that Licensor maintains a reasonable right to review and object to an excessive number of staff proposed for any such use.

     (f) To the extent that the Licensor incurs any expenses in connection with the Company’s use of the Lifestyle Intangible Asset or any element of the Lifestyle Intangible Asset (including without limitation any costs associated with cleaning, arranging and maintenance of any items within the Lifestyle Intangible Asset), Licensor shall bear such costs; provided that the Company shall be responsible for (i) all film, video, photography and other production costs it incurs or authorizes in writing related to its use of the Lifestyle Intangible Asset and (ii) such other costs as may be approved in advance by the Company in writing, within any budget limitations that may be specified in such approval.

     (g) Subject to the terms of this Agreement, Licensor shall, at its expense, cause the Real Properties to be maintained, landscaped, gardened and developed in a manner generally consistent with past practice; provided that the Company (i) shall be responsible for Company-approved costs associated with those business expenses set forth on Schedule A hereto, and (ii) shall reimburse Licensor for up to $100,000 in approved and documented household expenses associated with the Real Properties.

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     (h) Notwithstanding any other provision of this Agreement, but subject to any employment or other agreement that Licensor may have from time to time with the Company, the license provided herein shall not prohibit Licensor or Martha Stewart from using the Lifestyle Intangible Asset to endorse products or engage in other business activities other than those covered by this Agreement, including the exclusivity provisions hereof.

     (i) Any sublicense by the Company of the Lifestyle Intangible Asset shall contain protections with respect to the Lifestyle Intangible Asset consistent with the terms hereof and shall acknowledge that such sublicensee does not obtain any ownership rights in, or goodwill to, the Lifestyle Intangible Asset.

     5. Termination Trigger License. Upon a Termination Trigger, the Company shall automatically be deemed to have granted Licensor an exclusive, perpetual, worldwide, royalty free, sub-licensable license to use the Lifestyle Intangible Asset as, or as part of, a trademark, service mark or trade name, for any goods or services Licensor desires, to the extent, if any, that said mark or name is likely to cause confusion with or otherwise infringe or violate the Company’s rights in any mark or name the Company owns (the “Termination Trigger License”). The Termination Trigger License shall include, without limitation, the right to use the Lifestyle Intangible Asset in connection with any goods or services which compete directly with goods or services of the Company. Notwithstanding the foregoing, Licensor shall not have the right to use any mark or name which is identical to any mark or name owned by the Company. The quality of Licensor’s goods and services sold pursuant to the Termination Trigger License (the “Licensor Goods/Services”) shall be of at least the same kind of quality as goods and services sold by the Company as of the date of the Termination Trigger, and the Company shall have the right to take reasonable steps to monitor the quality of the Licensor Goods/Services. Upon Licensor’s reasonable request, the Company shall use its commercially reasonable best efforts to register trademarks and/or service marks which are the subject of the Termination Trigger License and shall take reasonable steps to maintain any such registrations, in the Company’s name and at the Company’s sole expense. The Company shall, at its expense, take any action reasonably requested by Licensor to protect any trademark, service mark or trade name which is the subject of the Termination Trigger License.

     6. Quality, Style and Image of Products and Services Provided in Connection with Lifestyle Intangible Asset. At any time Martha Stewart is not in Control, upon reasonable request and to the extent necessary to protect Licensor’s rights under this Agreement, Licensor shall have the right to request and receive, at no cost to Licensor, a sample of each Licensed Product and Licensed Service, as well as a prototype of each type of all promotional, advertising and marketing material used in connection therewith, for the purpose of evaluating the quality, style and image of the same. In the event that in Licensor’s reasonable and good faith judgment, any Licensed Product or Licensed Service fails (other than in an immaterial manner) to satisfy the Historical Standard, then promptly upon written notice by Licensor to the Company, the Company and Licensor shall cooperate in good faith to make necessary appropriate changes (if any) in the quality, style or image of such Licensed Product or Licensed Service to comply with the standard provided for herein; provided that nothing in this sentence shall be deemed to affect the substantive rights and obligations of the parties hereunder.

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     7. The Derived Marks.

     (a) Subject to the terms hereof, including Section 4, the Company may combine any designation with the Lifestyle Intangible Asset so as to form a new trademark, service mark, trade name or company name (such trademark, service mark, trade name or company name, the “Derived Marks”). The Derived Marks may include any names or marks used by the Company prior to the date hereof which include or are derived from the Lifestyle Intangible Asset. Subject to the terms of this Agreement, the Company shall be the owner of the Derived Marks (but not of the Lifestyle Intangible Asset incorporated therein).

     (b) The Company acknowledges that it is not, and will not become by virtue of this Agreement, the owner of any right, title or interest in and to the Lifestyle Intangible Asset in any form or embodiment. The Company shall not at any time commit any act anywhere in the world which would reasonably be expected to have a material adverse effect on Licensor’s rights in and to the Lifestyle Intangible Asset, or any registrations therefor or any applications for registration thereof. The Company shall never challenge anywhere in the world Martha Stewart’s ownership of or the validity of the Lifestyle Intangible Asset, any application for registration therefor or any rights therein or thereto, except as otherwise expressly provided herein.

     (c) The Company, at its expense, shall file appropriate registrations in its own name or in the name of a Company subsidiary or affiliate of any Derived Marks so as to preserve the goodwill thereof and Licensor’s rights in the Lifestyle Intangible Asset, shall prosecute and defend such registrations and all common law rights in the Derived Marks and Lifestyle Intangible Asset consistent with good commercial practices, and shall use all reasonable commercial efforts to defend and otherwise protect the Derived Marks and the Lifestyle Intangible Asset, provided that following the a Termination Trigger, Licensor shall have the right to reasonably direct and control such actions with respect to the Lifestyle Intangible Asset, in each case at the Company’s expense. At the request of Licensor, and at the Company’s expense,
the Company shall prosecute, including by filing lawsuits or other actions, any potential infringement, dilution, libel, slander or other diminution in the goodwill or other denigration of the Lifestyle Intangible Asset by any third party, unless outside intellectual property counsel to the Company advises that there is no reasonable basis for such action. The Company shall be entitled to the proceeds, or other legal remedies, of any such action. The Company may also institute such actions where not requested by Licensor in the event the Company determines that the protection of the Lifestyle Intangible Asset or the Derived Marks reasonably requires such action. In the event that the Company learns of any infringement or other violation of rights in or to the Lifestyle Intangible Asset, it shall promptly notify Licensor thereof.

     (d) At Licensor’s request, the Company shall execute all documents reasonably requested by Licensor to confirm Martha Stewart’s ownership of rights in and to the Lifestyle Intangible Asset. The Company shall cooperate at Licensor’s reasonable request in connection with the filing and prosecution of applications to register intellectual property rights in the Lifestyle Intangible Asset and in connection with the maintenance and renewal of such registrations as may issue. Licensor and the Company shall cooperate in good faith, taking into account their respective interests in and rights to the Lifestyle Intangible Asset, to determine whether or not such applications are filed and prosecuted and registrations are maintained. The Company shall pay all costs and expenses of any such filings or proceedings.

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     (e) If one party hereto reasonably requests of the other to take an action in connection with the foregoing, the other party shall cooperate in connection with any such action, including, without limitation, by being a plaintiff or co-plaintiff and by causing its officers, directors, and employees to execute documents and to testify. If the Company desires to take action with respect to a violation or infringement of the Lifestyle Intangible Asset, it shall consult with Licensor and shall not take actions which Licensor reasonably requests not to be taken. All costs and expenses of the actions described in this Section 7(e) shall be borne by the Company.

     (f) The Company shall take actions to protect the Derived Marks and the goodwill related thereto consistent with the provisions of this Section.

     8. Indemnity.

     (a) The Company hereby saves and holds Licensor, its successors and assigns, and Martha Stewart, her heirs, estate, successors and assigns (the “Indemnified Parties”) harmless of and from, and indemnifies and agrees to defend them against any and all losses, liability, damages and expenses (including, without limitation, reasonable attorney’s fees and expenses) which they may incur or be compelled to pay, or for which they may become liable or be compelled to pay in any action, claim or proceeding against any of the Indemnified Parties, for or by reason of any acts, whether of omission or commission, that may be committed or suffered by the Company or any of its officers, directors, employees, agents or servants (other than the Indemnified Parties) in connection with the Company’s performance of its obligations under this Agreement, the use (including sublicensing) of the Lifestyle Intangible Asset and the Derived Marks or the breach by the Company of any covenant contained herein. The indemnification rights provided for herein shall also apply to any use by the Company of the Lifestyle Intangible Asset or any Derived Marks prior to the date hereof.

     (b) In the event that an Indemnified Party receives notice of a claim as to which indemnification is sought, such party shall reasonably promptly notify the Company thereof, except that the failure to so notify shall not exempt the Company from its obligations hereunder, except to the extent that such failure has actually prejudiced the Company’s legal position with respect to the claim. Upon receipt of notice, the Company shall advise the Indemnified Party that it has assumed the defense thereof. The Indemnified Party shall have the right, at the expense of the Company, to retain legal counsel to participate in and monitor the defense of the claim, provided that the Company shall have the right to direct and control such defense. The Company shall not, without Licensor’s written consent, settle or compromise any claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party of a release from all liability in respect of such claim, nor shall the Company settle or compromise any claim relating to the Lifestyle Intangible Asset or the Derived Marks which would limit the use by Licensor of the Lifestyle Intangible Asset in any manner whatsoever without Licensor’s consent.

     (c) The Company shall maintain in effect at all times errors and omissions insurance, in customary amounts taking into account the size of the Company, the value of the Lifestyle Intangible Asset and the obligations of the Company hereunder, and shall name Martha Stewart, Licensor and the other Indemnified Parties hereunder as beneficiaries thereof for purposes of this Agreement.

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     9. Sale or Purchase of Real Properties.

     (a) At any time during the term of this Agreement, Licensor, Martha Stewart and any entity she directly or indirectly controls may sell any of the Real Properties without the consent of the Company. Subject to the next sentence of this subsection 9(a), such sale shall not affect the obligations of the Company under Section 3 of this Agreement. Notwithstanding the foregoing, in the event that Licensor, Martha Stewart or any entity she directly or indirectly controls sells a significant portion (based on the Company’s use of such Real Properties) of the Real Properties and, due to such sale, the Company is required to pay money for the use of additional locations owned by other parties to conduct its business, Licensor and the Company shall, in good faith, agree to adjust the Annual License Fee, taking into account any increased costs incurred by the Company and any increased use (compared to such use on the date hereof) by the Company of (i) the remaining Real Properties that on the date hereof were owned directly or indirectly by Martha Stewart and (ii) any Elective Real Properties.

     (b) If at any time during the term of this Agreement, Martha Stewart directly or indirectly, including through Licensor, acquires any real property (each a “Subsequently-Acquired Real Property”), Licensor may in its sole discretion offer the Company the right to include such Subsequently-Acquired Real Property within the Lifestyle Intangible Asset by giving the Company written notice of such offer. Upon receipt of such notice, the Company shall have the right in its sole discretion to accept the offer to include such Subsequently-Acquired Real Property within the Lifestyle Intangible Asset by giving Licensor written notice of such acceptance (in the event of such an offer and acceptance, such Subsequently-Acquired Real Property shall be referred to herein as an “Elective Real Property”). In the event a Subsequently-Acquired Real Property becomes an Elective Real Property as set forth in the preceding sentence, Licensor and the Company shall, in good faith, agree to adjust the Annual License Fee to reflect the additional value derived by Company from access to the Elective Real Property. It is expressly understood and agreed that Martha Stewart is under no obligation to either directly or indirectly, including through Licensor, acquire any additional real property or to offer to include any Subsequently-Acquired Real Property within the Lifestyle Intangible Asset if acquired and the Company is under no obligation to accept an offer by Licensor to include any Subsequently-Acquired Real Property within the Lifestyle Intangible Asset.

     10. Termination. Notwithstanding Section 2, the term of this Agreement shall terminate upon any termination of Martha Stewart’s employment with the Company. If the Company terminates Martha Stewart’s employment other than for Cause (as defined in the Employment Agreement dated as of September 17, 2004 between Martha Stewart and the Company or any replacement or successor agreement thereto (the “Employment Agreement”), or if Martha Stewart terminates her employment for Good Reason (as defined in the Employment Agreement) (such a termination, a “Termination Trigger”), then all sums otherwise due to Licensor under this Agreement during the remainder of the term specified in Section 2 shall accelerate and become immediately payable by the Company and this Agreement shall terminate. If the Company terminates Martha Stewart’s employment for Cause (as defined in the Employment Agreement), or Martha Stewart terminates her employment other than for Good Reason (as defined in the Employment Agreement), then this Agreement shall immediately terminate and the Company shall owe no amounts pursuant to Section 3 hereof with respect to any time period from and after the date of such termination (and in the event any such amount was paid in advance, Licensor shall promptly (and in any event within thirty (30) days of such

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termination) return such amount to the Company). Termination of this Agreement for any reason shall not affect (i) the indemnity and other obligations of the Company hereunder that reasonably should be understood to survive the termination of this Agreement, nor (ii) obligations of Licensor hereunder that reasonably should be understood to survive the termination of this Agreement, including those set forth in Sections 4(b), 5 and 8(b).

     11. Certain Remedies. The parties agree that the remedies at law for any material breach or threatened material breach of this Agreement, including monetary damages, are inadequate compensation for any loss and that the non-breaching party shall be entitled to seek specific performance of this Agreement. The parties hereto waive any defense to such claim that a remedy at law would be adequate. In the event of any actual or threatened material default in, or material breach of, any of the terms hereof, the party aggrieved thereby shall have the right to seek specific performance and injunctive or other equitable relief with respect to its rights hereunder, in addition to any remedies available at law.

     12. Miscellaneous.

     (a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives.

     (b) This Agreement is assignable by the Company to any successor of the Company which acquires all or substantially all of the assets or businesses of the Company or to an acquiror, whether by sale, merger, recapitalization or other business combination, of all or substantially all of the assets or businesses of the Company without Licensor’s consent, provided that any such successor or assignee shall provide Licensor with a written agreement that it shall be bound by all the terms of this Agreement. This Agreement shall be assignable by Licensor to any entity controlled by Martha Stewart, her heirs, or her estate and inure to the benefit of and be binding upon the successors, legal representatives, and assigns of Licensor. Except as specified in this subsection 12(b), this Agreement is not assignable.

     (c) All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Licensor:

MS Real Estate Management Company
[Address Omitted]
Attention: Heidi DeLuca

If to the Company:

Martha Stewart Living Omnimedia, Inc.
20 West 43^rd Street
New York, New York 10036
Attention: General Counsel

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or to such other address as either party furnishes to the other in writing in accordance with this Section. Notices and communications shall be effective when actually received by the addressee.

     (d) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law.

     (e) Licensor and the Company acknowledge that this Agreement supersedes any other agreement between them concerning the subject matter hereof; provided that this Agreement does not amend or modify in any respect any terms of the Employment Agreement or the IP License Agreement.

     (f) This Agreement may be executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument.

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     IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.

MS REAL ESTATE MANAGEMENT COMPANY
By:	/s/ Martha Stewart
	Name:	Martha Stewart
	Title:
MARTHA STEWART LIVING OMNIMEDIA, INC.
By:	/s/ Wenda Harris Millard
	Name:	Wenda Harris Millard
	Title:	Co-Chief Executive Officer
By:	/s/ Robin Marino
	Name:	Robin Marino
	Title:	Co-Chief Executive Officer

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SCHEDULE A

Security System — Cost for security system upgrade, repairs and monitoring

Security Personnel — Costs for physical security personnel at the properties for the protection of Martha Stewart, personally

Phone System — Costs for phone system upgrade, repairs and monthly use

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Charles Koppelmen, 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: August 11, 2008
	/s/ Charles Koppelman
	Charles Koppelman
	Principal 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: August 11, 2008
	/s/ Howard Hochhauser
	Howard Hochhauser
	Chief Financial Officer

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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 June 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “report”), we, Charles Koppelman and Howard Hochhauser, Principal 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: August 11 , 2008	/s/ Charles Koppelman
	Charles Koppelman
	Principal Executive Officer
Dated: August 11, 2008	/s/ Howard Hochhauser
	Howard Hochhauser
	Chief Financial Officer

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