10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended September 30, 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 November 4, 2008
Class A, $0.01 par value		28,274,192
Class B, $0.01 par value		26,690,125
Total		54,964,317

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		13
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29
Item 4. Controls and Procedures		29
Part II. Other Information
Item 1. Legal Proceedings		30
Item 1A. Risk Factors		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3. Defaults Upon Senior Securities		36
Item 4. Submission of Matters to a Vote of Security Holders		36
Item 5. Other Information		36
Item 6. Exhibits		37
Signatures		38
EX-10.1: SECURITY AGREEMENT
EX-10.2: EMPLOYMENT AGREEMENT
EX-10.3: EMPLOYMENT AGREEMENT
EX-10.4: EMPLOYMENT AGREEMENT
EX-10.5: RESTRICTED STOCK GRANT AGREEMENT
EX-10.6: STOCK OPTION GRANT AGREEMENT
EX-10.7: RESTRICTED STOCK GRANT AGREEMENT
EX-10.8: STOCK OPTION GRANT AGREEMENT
EX-10.9: RESTRICTED STOCK GRANT AGREEMENT
EX-10.10: STOCK OPTION GRANT 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)

	September 30,			December 31,
	2008			2007
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	72,949		$	30,536
Short-term investments		—			26,745
Accounts receivable, net		44,603			94,195
Inventories		7,833			4,933
Deferred television production costs		4,386			5,316
Income taxes receivable		9			513
Other current assets		5,008			3,921
Total current assets		134,788			166,159
PROPERTY, PLANT AND EQUIPMENT, net		14,514			17,086
GOODWILL AND OTHER INTANGIBLE ASSETS, net		104,979			53,605
INVESTMENT IN EQUITY INTEREST, net		3,867			—
OTHER NONCURRENT ASSETS		21,995			18,417
Total assets	$	280,143		$	255,267
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	30,746		$	27,425
Accrued payroll and related costs		15,404			13,863
Income taxes payable		428			1,246
Current portion of deferred subscription revenue		21,549			25,578
Current portion of other deferred revenue		8,679			5,598
Current portion loan payable		1,500			—
Total current liabilities		78,306			73,710
DEFERRED SUBSCRIPTION REVENUE		7,155			9,577
OTHER DEFERRED REVENUE		13,809			14,482
LOAN PAYABLE		21,000			—
OTHER NONCURRENT LIABILITIES		2,881			1,969
Total liabilities		123,151			99,738
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Class A common stock, $.01 par value, 350,000 shares authorized; 27,714 and 26,738 shares outstanding in 2008 and 2007, respectively		277			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		281,895			272,132
Accumulated deficit		(124,015	)		(116,362	)
Accumulated other comprehensive loss		(657	)		—
		157,767			156,304
Less: Class A treasury stock - 59 shares at cost		(775	)		(775	)
Total shareholders’ equity		156,992			155,529
Total liabilities and shareholders’ equity	$	280,143		$	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						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
REVENUES
Publishing	$	34,544		$	46,215		$	121,602		$	134,311
Merchandising		14,616			10,951			43,931			34,904
Internet		3,032			3,270			9,686			11,983
Broadcasting		14,320			8,820			36,236			28,208
Total revenues		66,512			69,256			211,455			209,406
OPERATING COSTS AND EXPENSES
Production, distribution and editorial		32,334			35,060			105,090			113,718
Selling and promotion		15,194			19,800			51,959			62,203
General and administrative		20,974			17,684			56,329			52,874
Depreciation and amortization		1,542			1,623			4,422			5,863
Total operating costs and expenses		70,044			74,167			217,800			234,658
OPERATING LOSS		(3,532	)		(4,911	)		(6,345	)		(25,252	)
OTHER INCOME / (EXPENSE)
Interest income, net		—			774			540			2,321
Other income / (expense)		366			—			(765	)		432
Loss in equity interest		(272	)		—			(486	)		—
Total other income / (expense)		94			774			(711	)		2,753
LOSS BEFORE INCOME TAXES		(3,438	)		(4,137	)		(7,056	)		(22,499	)
Income tax provision		(309	)		(277	)		(597	)		(520	)
NET LOSS	$	(3,747	)	$	(4,414	)	$	(7,653	)	$	(23,019	)
LOSS PER SHARE — BASIC AND DILUTED
Net Loss	$	(0.07	)	$	(0.08	)	$	(0.14	)	$	(0.44	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted		53,590			52,479			53,256			52,415

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

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MARTHA STEWART LIVING OMNIMEDIA, INC.
Consolidated Statement of Shareholders’ Equity
For the Nine Months Ended September 30, 2008
(unaudited, in thousands)

	Class A				Class B													Class A
	common stock				common stock										Accumulated			treasury stock
															other
										Capital in excess		Accumulated			comprehensive
	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		—		—		—			—		—		(7,653	)		—			—			—			(7,653	)
Other comprehensive loss:
Unrealized loss on investment		—		—		—			—		—		—			(657	)		—			—			(657	)
Total comprehensive loss		—		—		—			—		—		—			—			—			—			(8,310	)
Shares returned on a net treasury basis		—		—		(32	)		—		—		—			—			—			—			—
Issuance of shares in conjunction with stock option exercises		6		—		—			—		44		—			—			—			—			44
Issuance of shares of stock and restricted stock, net of cancellations and tax withholdings		970		10		—			—		3,334		—			—			—			—			3,344
Non-cash equity compensation		—		—		—			—		6,385		—			—			—			—			6,385
Balance at September 30, 2008		27,714	$	277		26,690		$	267	$	281,895	$	(124,015	)	$	(657	)		(59	)	$	(775	)	$	156,992

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

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

	Nine Months Ended
	September 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(7,653	)	$	(23,019	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		4,422			5,863
Amortization of deferred television production costs		15,393			15,445
Non-cash equity compensation		6,549			15,441
Other non-cash charges, net		283			(955	)
Changes in operating assets and liabilities		28,435			5,325
Net cash provided by operating activities		47,429			18,100
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business		(46,309	)		—
Investment in equity interest		(4,353	)		—
Investment in other noncurrent assets		—			(10,150	)
Capital expenditures		(1,266	)		(4,254	)
Purchases of short-term investments		—			(145,741	)
Sales of short-term investments		26,745			140,720
Net cash used in investing activities		(25,183	)		(19,425	)
CASH FLOWS FROM FINANCING ACTIVITIES
Debt issuance costs		(721	)		—
Proceeds from long-term debt		30,000			—
Repayment of long-term debt		(7,500	)		—
Proceeds received from stock option exercises		44			305
Issuance of stock and restricted stock, net of cancellations and tax liabilities		(1,656	)		(3,025	)
Net cash provided by (used in) financing activities		20,167			(2,720	)
Net increase (decrease) increase in cash		42,413			(4,045	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		30,536			28,528
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	72,949		$	24,483
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 therein. 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 2008, several new significant accounting policies were adopted to reflect certain transactions that occurred during the fiscal year:

Principles of Consolidation

     The consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries. Equity investments over 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 acquired 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 accumulated other comprehensive income/(loss) within 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 and results of operations upon adoption of SFAS 157 for nonfinancial assets and nonfinancial liabilities as deferred by this FSP.

     In December 2007, the FASB issued SFAS 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 prohibited. These standards will change our accounting treatment for business combinations on a prospective basis. These standards will have no impact on the previous acquisitions recorded by the Company in the financial statements.

     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 No. 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. SFAS 161 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.

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 $2.5 million to its deferred tax asset (“DTA”) and valuation allowance in the first nine months of 2008, resulting in a cumulative balance for both its DTA and valuation allowance of $65.8 million as of September 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.

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          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 September 30, 2008, the Company had a FIN 48 liability balance of $0.5 million, of which $0.3 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 Class A 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 Class A 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 had an agreement with Martha Stewart whereby she periodically returned 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. As of the first quarter of 2008, all shares of Class B Common Stock due to the Company pursuant to this agreement have been returned. No options remain outstanding under the 1997 Option Plan and no further awards will be made from the 1997 Option 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.”

     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 balances at September 30, 2008 and December 31, 2007 were $7.8 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. The shares issued in connection with this acquisition were not covered by the Company’s existing equity plans. 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

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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, $0.9 million of the value, representing the excess purchase price over the fair market value of the assets acquired, was apportioned to goodwill. To the extent that the certain operating metrics are achieved in 2011 and 2012, the potential additional payment will be allocated to the acquisition and will be recognized as goodwill.

     Of the intangible assets acquired, only the television content library is subject to amortization over a six-year period. For the three and nine month periods ended September 30, 2008, approximately $0.2 and $0.4 million, respectively, 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 September 30,						Nine Months Ended September 30,
(unaudited, in thousands, except per share amounts)	2008			2007			2008			2007
Net revenues		66,512			72,422			214,674			218,904
Net loss		(3,747	)		(3,433	)		(6,755	)		(20,150	)
Net loss per share — basic and diluted	$	(0.07	)	$	(0.06	)	$	(0.13	)	$	(0.38	)

     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 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.

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 43% 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 $0.6 million of the purchase price to intangible assets related to the commercial agreement and the remaining $4.4 million to investment in equity interest. The intangible asset was determined to have a life of three years and is being 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,

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2008, the Borrower borrowed a $30 million term loan from Bank of America, the material terms of which were disclosed in the 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. In the third quarter of 2008, the cash collateral was replaced by collateral consisting of substantially all of the assets of the Emeril business that were acquired by the Company. 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 a floating rate of 1-month LIBOR plus 2.85% when the cash collateral securing the loan was replaced with assets of the Emeril business that were acquired by the Company. During the third quarter of 2008, in addition to the quarterly payment on September 30, 2008, the Company prepaid $4.5 million in principal representing the amounts due on December 31, 2008, March 31, 2009 and June 30, 2009. In the next 12 months, $1.5 million in principal payment will be due on September 30, 2009.

     The loan terms include financial covenants, failure with which to comply would result in an event of default and would permit Bank of America to accelerate and demand repayment of the loan in full. As of September 30, 2008, the Company was compliant with all the financial covenants. A summary of the most significant financial covenants is as follows:

Financial Covenant	Required at September 30, 2008
Tangible Net Worth	Greater than $40.0 million
Funded Debt to EBITDA (a)	Less than 2.0
Parent Guarantor (the Company) Basic Fixed Charge Coverage Ratio (b)	Greater than 2.5
Quick Ratio	Greater than 1.0

(a)	EBITDA is earnings before interest, taxes, depreciation and amortization as defined in the loan agreement.
(b)	Basic Fixed Charge Coverage is the ratio of EBITDA for the trailing four quarters to the sum of interest expense for the trailing four quarters and the current portion of long-term debt at the covenant testing date.

     The loan agreement also contains a variety of other customary affirmative and negative covenants that, among other things, limit the Company and its 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 in the ordinary course of business, make capital expenditures, merge into or acquire other entities or liquidate. The negative covenants expressly permit the Company 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 the Company’s 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 the Company 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 the Company 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 the Company can carry over any unspent amount to any subsequent fiscal year (but in no event may the Company make more than $15 million in capital expenditures in any fiscal year); sell one of the Company’s investments (or any asset the Company 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 the Company’s consolidated shareholders’ equity, provided the Company receives 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 the new flowers program with 1-800-Flowers.com which began in the second quarter of 2008. The Internet segment

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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 the direct-to-consumer floral business, Martha Stewart Flowers. The Broadcasting segment consists of the Company’s television production operations which produce television programming and other licensing revenue from programs that air 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 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 September 30, 2008 and 2007 is as follows:

(in thousands)	Publishing		Merchandising		Internet			Broadcasting			Corporate			Consolidated
2008
Revenues	$	34,544	$	14,616	$	3,032		$	14,320		$	—		$	66,512
Non-cash equity compensation		791		161		22			143			1,451			2,568
Depreciation and amortization		93		23		433			290			703			1,542
Operating income/(loss)		2,088		8,581		(1,509	)		2,546			(15,238	)		(3,532	)
2007
Revenues	$	46,215	$	10,951	$	3,270		$	8,820		$	—		$	69,256
Non-cash equity compensation		1,192		377		85			(407	)		1,323			2,570
Depreciation and amortization		298		92		342			248			643			1,623
Operating income/(loss)		6,246		3,578		(2,147	)		(850	)		(11,738	)		(4,911	)

     Segment information for the nine months ended September 30, 2008 and 2007 is as follows:

(in thousands)	Publishing		Merchandising		Internet			Broadcasting			Corporate			Consolidated
2008
Revenues	$	121,602	$	43,931	$	9,686		$	36,236		$	—		$	211,455
Non-cash equity compensation		2,214		897		173			603			2,662			6,549
Depreciation and amortization		286		73		1,302			700			2,061			4,422
Operating income/(loss)		10,922		23,595		(5,725	)		3,575			(38,712	)		(6,345	)
Total assets		85,268		55,937		10,929			45,011			82,998			280,143
2007
Revenues	$	134,311	$	34,904	$	11,983		$	28,208		$	—		$	209,406
Non-cash equity compensation		3,410		1,090		249			6,640			4,052			15,441
Depreciation and amortization		886		285		847			1,947			1,898			5,863
Operating income/(loss)		12,597		13,805		(6,794	)		(7,819	)		(37,041	)		(25,252	)
Total assets		87,607		21,358		6,470			20,000			77,508			212,943

Note: The third quarter of 2008 includes corporate cash and non-cash charges related to severance and other one-time expenses which negatively impacted operating loss by $3.5 million.

11. Related Party Transactions

     The Company previously had 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 had been Chairman of the Board and a Director of the Company since the execution of the agreement.

     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. An employment agreement was executed with Mr. Koppelman in September 2008. In accordance with the employment agreement, the consulting agreement with CAK Entertainment was terminated. The balance of cash fees and outstanding equity awards due to CAK Entertainment were paid and became fully vested, which resulted in a cash charge of $1.0 million and a non-cash charge of $0.5 million in the third quarter of 2008.

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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:

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

o a loss of the services of Ms. Stewart or Mr. Lagasse;

o a loss of the services of other key personnel;

o a further softening of or increased competition in the domestic advertising market;

o a continued or further downturn in the economy, including particularly the housing market and other developments that limit consumers’ discretionary spending;

o loss or failure of merchandising and licensing programs;

o failure in acquiring or developing new brands;

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

o failure to protect our intellectual property;

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

o increases in paper costs;

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

o the receptivity of consumers to our new product introductions;

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

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

     These and other factors are discussed in 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 third quarter of 2008, total revenues decreased approximately 4% due primarily to lower advertising revenue in the Publishing segment as well as the absence of revenue from Blueprint, a publication that we discontinued at the end of 2007. These declines were partially offset by revenues from Emeril Lagasse’s brand which contributed to both the Broadcasting and Merchandising segments and from the addition of new Merchandising initiatives in 2008. The third quarter of 2008 included a company-wide reorganization to reduce costs which resulted in cash and non-cash Corporate charges of $3.5 million related to severance and other one-time expenses.

Media Update. In the third quarter, revenues from our media platforms declined largely due to decreased advertising revenues in our Publishing segment as the result of lower pages and the absence of Blueprint. The declines in Publishing were partially offset by Emeril Lagasse’s contributions to our Broadcasting segment and advertising gains in the Internet segment. Based on our current outlook, we expect to experience continued declines in Publishing segment advertising revenues for the fourth quarter.

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Publishing

     Advertising revenues declined due to a decrease in pages partially offset by higher rates per page driven in part by a higher circulation rate base and a change in advertiser category mix. Revenues also declined due to the elimination of Blueprint and a shift in timing of special issues. The decline in revenues was partially offset by cost savings from the closure of Blueprint, as well as decreases in circulation, paper and distribution expenses.

Internet

     In the third quarter of 2008, we continued to experience growth from our online audience with page views increasing, on average, over 50% from the prior year period and advertising revenue increasing 35%. For the fourth quarter, while we expect continued year-over-year growth in online advertising revenue, our ability to predict trends is limited.

Broadcasting

     Distribution of the fourth season of The Martha Stewart Show has resulted in a national clearance of approximately 95% to date. In the third quarter, the Broadcasting segment benefited from programming related to a new original series on Planet Green featuring Chef Emeril Lagasse 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 third quarter, the Merchandising segment continued to benefit from Emeril Lagasse’s licensing business. In addition, Merchandising segment revenues grew due to stronger sales from new and existing partners. We experienced continued growth from EK Success for our line of broadly-distributed crafts products, including the expansion of our crafts line into Wal-Mart; our program with 1-800-Flowers.com; the agreement with Macy’s for our Martha Stewart Collection products; and the increase in our minimum guarantee from Martha Stewart Everyday at Sears Canada, an agreement which recently expired in the third quarter of 2008. We expect the ongoing 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 income 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 September 30, 2008 to Three Months Ended September 30, 2007

PUBLISHING SEGMENT

	2008		2007
(in thousands)	(unaudited)		(unaudited)		Variance
Publishing Segment Revenues
Advertising	$	20,419	$	26,394	$	(5,975	)
Circulation		12,977		17,138		(4,161	)
Books		878		2,237		(1,359	)
Other		270		446		(176	)
Total Publishing Segment Revenues		34,544		46,215		(11,671	)
Publishing Segment Operating Costs and Expenses
Production, distribution and editorial		19,391		22,928		3,537
Selling and promotion		11,225		15,015		3,790
General and administrative		1,747		1,728		(19	)
Depreciation and amortization		93		298		205
Total Publishing Segment Operating Costs and Expenses		32,456		39,969		7,513
Operating Income	$	2,088	$	6,246	$	(4,158	)

     Publishing revenues decreased 25% for the three months ended September 30, 2008 from the prior year period. Advertising revenue decreased $6.0 million due to a decrease in pages for Martha Stewart Living, Everyday Food and Body + Soul, as well as the inclusion in the prior year quarter of revenue from Blueprint, a publication that we discontinued at the end of 2007. The decrease in advertising pages was partially offset by higher advertising rates across all titles. Circulation revenue decreased $4.2 million due to lower subscription rate per copy and higher agency commissions in the 2008 period for Martha Stewart Living and Everyday Food. Circulation revenue was also negatively impacted compared to the prior year contribution of Blueprint and a shift in the timing of our special interest publications. These decreases were partially offset by higher volume of subscription sales for Martha Stewart Living, Everyday Food and Body + Soul. Revenue related to our books business decreased $1.4 million primarily due to the timing of delivery and acceptance of manuscripts related to our multi-book agreement with Clarkson Potter/Publishers.

Magazine Publication Schedule

	Third Quarter 2008	Third Quarter 2007
Martha Stewart Living	Three Issues	Three Issues
Everyday Food	Two Issues	Two Issues
Body + Soul	Two Issues	Two Issues
Special Interest Publications	No 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 decreased $3.5 million, primarily due to lower volume of pages and savings related to the discontinuation of Blueprint, partially offset by higher rates related to paper and printing. Selling and promotion expenses decreased $3.8 million due to the absence of costs of Blueprint, lower fulfillment rates associated with Everyday Food and Martha Stewart Living and lower compensation costs related to Martha Stewart Weddings. Prior year period selling and promotion expenses also included costs associated with three special interest publications as compared to no special interest publications in the current quarter.

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MERCHANDISING SEGMENT

	Three Months Ended September 30,
	2008		2007
(in thousands)	(unaudited)		(unaudited)		Variance
Merchandising Segment Revenues
Kmart earned royalty	$	3,927	$	5,231	$	(1,304	)
Other		10,689		5,720		4,969
Total Merchandising Segment Revenues		14,616		10,951		3,665
Merchandising Segment Operating Costs and Expenses
Production, distribution and editorial		2,766		3,515		749
Selling and promotion		1,214		1,625		411
General and administrative		2,032		2,141		109
Depreciation and amortization		23		92		69
Total Merchandising Segment Operating Costs and Expenses		6,035		7,373		1,338
Operating Income	$	8,581	$	3,578	$	5,003

     Merchandising revenues, other than Kmart royalties, increased 87% for the three months ended September 30, 2008 from the prior year period. Other revenues increased primarily due to contributions from Emeril Lagasse’s brand. The increase in other revenues was also the result of our expanded crafts line with EK Success in Wal-Mart stores as well as our newly-launched flowers program with 1-800-Flowers.com. Revenue from Macy’s for our Martha Stewart Collection products benefited from a full quarter of sales as compared to a partial quarter of sales in the prior year period due to the September 2007 product launch at Macy’s. In addition, revenue from our Martha Stewart Everyday collection at Sears Canada increased due to higher minimum guarantees in the 2008 period. Our contract with Sears Canada expired at the end of August 2008. Actual retail sales of our products at Kmart declined 26% on a comparable store and total store basis.

     Production, distribution and editorial expenses decreased $0.7 million due to lower compensation costs. Selling and promotion expenses decreased $0.4 million due to a decrease in services that we provide to our partners for creative services projects which have included KB Home model merchandising and other related projects. Selling and promotion expenses also decreased due to lower compensation costs, partially offset by an increase in 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 decreased $0.1 million due to lower legal and professional fees, partially offset by additional expenses related to our Emeril Lagasse brand.

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INTERNET SEGMENT

	Three Months Ended September 30,
(in thousands)	2008 (unaudited)			2007 (unaudited)			Variance
Internet Segment Revenues
Advertising	$	3,030		$	2,237		$	793
Product		2			1,033			(1,031	)
Total Internet Segment Revenues		3,032			3,270			(238	)
Internet Segment Operating Costs and Expenses
Production, distribution and editorial		1,910			2,731			821
Selling and promotion		1,487			1,402			(85	)
General and administrative		711			942			231
Depreciation and amortization		433			342			(91	)
Total Internet Segment Operating Costs and Expenses		4,541			5,417			876
Operating Loss	$	(1,509	)	$	(2,147	)	$	638

     Internet revenues decreased 7% for the three months ended September 30, 2008 from the prior year period. Advertising revenue increased $0.8 million primarily due to an increase in advertising volume, as well as an increase in rates. Product revenue decreased $1.0 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 $0.8 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 are reported in the Merchandising segment.

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BROADCASTING SEGMENT

	Three Months Ended September 30,
	2008		2007
(in thousands)	(unaudited)		(unaudited)			Variance
Broadcasting Segment Revenues
Advertising	$	5,959	$	3,940		$	2,019
Radio		1,875		1,875			—
Licensing and other		6,486		3,005			3,481
Total Broadcasting Segment Revenues		14,320		8,820			5,500
Broadcasting Segment Operating Costs and Expenses
Production, distribution and editorial		8,264		5,886			(2,378	)
Selling and promotion		1,268		1,758			490
General and administrative		1,952		1,778			(174	)
Depreciation and amortization		290		248			(42	)
Total Broadcasting Segment Operating Costs and Expenses		11,774		9,670			2,104
Operating Income/(Loss)	$	2,546	$	(850	)	$	3,396

     Broadcasting revenues increased 62% for the three months ended September 30, 2008 from the prior year period. Licensing revenue increased $3.5 million primarily due to a new original series on Planet Green featuring Chef Emeril Lagasse as well as from the Essence of Emeril on the Food Network and the rebroadcast of Emeril Live! on the Fine Living Network. In addition, licensing revenues increased from the new marketing agreement with TurboChef, as well as the new series Whatever Martha! These increases were partially offset by the exchange of season 3 license fees for additional advertising inventory related to The Martha Stewart Show. 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) and higher revenue from integrations partially offset by a decline in household ratings.

     Production, distribution and editorial expenses increased $2.4 million due to 2008 distribution costs which were reported net of licensing revenues in 2007. Production costs were higher in the 2008 period due to timing of expenses related to the new season of The Martha Stewart Show as well as costs related to the new series Whatever Martha! Budgeted production costs for season 4 of The Martha Stewart Show are expected to be flat with season 3 production costs. The prior-year period also included a non-cash benefit associated with the vesting of a portion of a warrant granted in connection with the production of The Martha Stewart Show. Selling and promotion expenses decreased $0.5 million primarily due to lower marketing costs associated with the launch of season 4 of The Martha Stewart Show as compared to the costs of the season 3 launch.

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CORPORATE

	Three Months Ended September 30,
	2008			2007
(in thousands)	(unaudited)			(unaudited)			Variance
Corporate Operating Costs and Expenses
General and administrative	$	14,535		$	11,095		$	(3,440	)
Depreciation and amortization		703			643			(60	)
Total Corporate Operating Costs and Expenses		15,238			11,738			(3,500	)
Operating Loss	$	(15,238	)	$	(11,738	)	$	(3,500	)

     Corporate operating costs and expenses increased 30% for the three months ended September 30, 2008 from the prior year period. General and administrative expenses increased $3.5 million primarily due to cash and non-cash charges related to a company-wide reorganization that resulted in severance and other one-time expenses.

OTHER ITEMS

Interest Income, net. Interest income, net, was zero for the quarter ended September 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. Interest income decreased due to lower rates.

Other Income. Other income was $0.4 million for the quarter ended September 30, 2008. The current period income is the result of marking certain assets to fair value in accordance with accounting principles governing derivative instruments.

Loss in equity interest. The loss in equity interest was $0.3 million for the quarter ended September 30, 2008 related to our equity investment in WeddingWire. We record our proportionate share of the results of WeddingWire one quarter in arrears. Therefore, this loss represents our portion of the second quarter 2008 results of WeddingWire.

Income tax expense. Income tax expense was $0.3 million for both the three months ended September 30, 2008 and September 30, 2007.

Net Loss. Net loss was $3.7 million for the quarter ended September 30, 2008, compared to a net loss of $4.4 million for the quarter ended September 30, 2007, as a result of the factors described above.

19

Comparison of Nine Months Ended September 30, 2008 to Nine Months Ended September 30, 2007

PUBLISHING SEGMENT

	2008		2007
(in thousands)	(unaudited)		(unaudited)		Variance
Publishing Segment Revenues
Advertising	$	71,404	$	75,603	$	(4,199	)
Circulation		46,330		53,560		(7,230	)
Books		2,895		3,831		(936	)
Other		973		1,317		(344	)
Total Publishing Segment Revenues		121,602		134,311		(12,709	)
Publishing Segment Operating Costs and Expenses
Production, distribution and editorial		65,573		67,917		2,344
Selling and promotion		39,802		49,420		9,618
General and administrative		5,019		3,491		(1,528	)
Depreciation and amortization		286		886		600
Total Publishing Segment Operating Costs and Expenses		110,680		121,714		11,034
Operating Income	$	10,922	$	12,597	$	(1,675	)

     Publishing revenues decreased 9% for the nine months ended September 30, 2008 from the prior year period. Advertising revenue decreased $4.2 million due to the inclusion in the prior year period of revenue from Blueprint, a publication that we discontinued at the end of 2007, as well as a decrease in pages for Martha Stewart Living, Everyday Food and Body + Soul. The decrease in advertising pages was partially offset by higher advertising rates across all titles, as well as an extra issue of Body + Soul and an increase in advertising pages in Martha Stewart Weddings. Circulation revenue decreased $7.2 million due to lower subscription rate per copy and higher agency commissions in the 2008 period for Martha Stewart Living and Everyday Food. Circulation revenue was negatively impacted compared to the prior year contribution of Blueprint and a shift in the timing of our special interest publications. 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. Revenue related to our books business decreased $0.9 million primarily due to the timing of delivery and acceptance of manuscripts related to our multi-book agreement with Clarkson Potter/Publishers.

Magazine Publication Schedule

	Nine Months ended September 2008	Nine months ended September 2007
Martha Stewart Living	Nine Issues	Nine Issues
Everyday Food	Eight Issues	Eight Issues
Martha Stewart Weddings	Three Issues	Three Issues
Body + Soul	Seven Issues	Six Issues
Special Interest Publications	Four Issues	Five Issues
Blueprint (a)	N/A	Four 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 decreased $2.3 million, primarily due to savings related to the discontinuation of Blueprint and lower volume of pages, partially offset by higher print order and higher rates related to physical costs to distribute the magazines. Selling and promotion expenses decreased $9.6 million due to the absence of costs of Blueprint, lower circulation marketing costs and lower fulfillment rates associated with Martha Stewart Living and Everyday Food. Prior year period selling and promotion expenses also included non-recurring employee-related separation charges as well as costs associated with five special interest publications. General and administrative expenses increased $1.5 million primarily due to higher compensation costs.

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MERCHANDISING SEGMENT

	Nine Months Ended September 30,
	2008		2007
(in thousands)	(unaudited)		(unaudited)		Variance
Merchandising Segment Revenues
Kmart earned royalty	$	14,690	$	17,977	$	(3,287	)
Kmart minimum true-up		3,806		2,648		1,158
Other		25,435		14,279		11,156
Total Merchandising Segment Revenues		43,931		34,904		9,027
Merchandising Segment Operating Costs and Expenses
Production, distribution and editorial		8,527		9,949		1,422
Selling and promotion		5,293		5,232		(61	)
General and administrative		6,443		5,633		(810	)
Depreciation and amortization		73		285		212
Total Merchandising Segment Operating Costs and Expenses		20,336		21,099		763
Operating Income	$	23,595	$	13,805	$	9,790

     Merchandising revenues, other than Kmart royalties, increased 78% for the nine months ended September 30, 2008 from the prior year period. Other revenues increased primarily due to contributions from Emeril Lagasse’s brand and our new agreement with Macy’s for our Martha Stewart Collection products. The increase in other revenues was also due to our partnership with 1-800-Flowers.com for our newly-launched flowers program and from the expansion of our crafts line with EK Success into Wal-Mart. In addition, revenue from our Martha Stewart Everyday collection at Sears Canada increased due to higher minimum guarantees in the current period. Our contract with Sears Canada expired at the end of August 2008. The increases from these new initiatives were partially offset by the inclusion in the 2007 period of revenues from an 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 18% on a comparable store and total store basis. 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 $1.4 million due to lower compensation costs. Selling and promotion expenses increased $0.1 million as a result of media expenditures made on behalf of our partners, a substantial majority of which are paid by our partners and recorded to revenue. The increase was fully offset by a decrease in services that we provide to our partners for creative services projects which have included KB Home model merchandising and other related projects. General and administrative costs increased $0.8 million reflecting the additional Merchandising segment expenses of our Emeril Lagasse brand.

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INTERNET SEGMENT

	Nine Months Ended September 30,
	2008			2007
(in thousands)	(unaudited)			(unaudited)			Variance
Internet Segment Revenues
Advertising	$	8,583		$	6,483		$	2,100
Product		1,103			5,500			(4,397	)
Total Internet Segment Revenues		9,686			11,983			(2,297	)
Internet Segment Operating Costs and Expenses
Production, distribution and editorial		7,200			10,592			3,392
Selling and promotion		4,163			4,408			245
General and administrative		2,746			2,930			184
Depreciation and amortization		1,302			847			(455	)
Total Internet Segment Operating Costs and Expenses		15,411			18,777			3,366
Operating Loss	$	(5,725	)	$	(6,794	)	$	1,069

     Internet revenues decreased 19% for the nine months ended September 30, 2008 from the prior year period. Advertising revenue increased $2.1 million due to an increase in advertising volume and higher rates. Product revenue decreased $4.4 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 $3.4 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 were partially offset by an increase in headcount and related compensation costs. All costs related to the new flowers program are reported in the Merchandising segment. Depreciation and amortization expenses increased $0.5 million due to the 2007 launch of the redesigned website and the related depreciation costs.

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BROADCASTING SEGMENT

	Nine Months Ended September 30,
	2008		2007
(in thousands)	(unaudited)		(unaudited)			Variance
Broadcasting Segment Revenues
Advertising	$	19,796	$	11,291		$	8,505
Radio		5,625		5,625			—
Licensing and other		10,815		11,292			(477	)
Total Broadcasting Segment Revenues		36,236		28,208			8,028
Broadcasting Segment Operating Costs and Expenses
Production, distribution and editorial		23,790		25,260			1,470
Selling and promotion		2,701		3,143			442
General and administrative		5,470		5,677			207
Depreciation and amortization		700		1,947			1,247
Total Broadcasting Segment Operating Costs and Expenses		32,661		36,027			3,366
Operating Income/(Loss)	$	3,575	$	(7,819	)	$	11,394

     Broadcasting revenues increased 28% for the nine months ended September 30, 2008 from the prior year period. Advertising revenue increased $8.5 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 $0.5 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 a new original series on Planet Green featuring Chef Emeril Lagasse as well as from the Essence of Emeril on the Food Network and the rebroadcast of Emeril Live! on the Fine Living Network. Also offsetting the decline in licensing revenue was 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, a new marketing agreement with TurboChef and the new series Whatever Martha!

     Production, distribution and editorial expenses decreased $1.5 million due principally to a 2007 non-cash charge 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 as well as costs related to the new series Whatever Martha! Selling and promotion expenses decreased $0.4 million primarily due to lower marketing costs associated with the launch of season 4 of The Martha Stewart Show as compared to the costs of the season 3 launch. Depreciation and amortization decreased $1.2 million as the set for The Martha Stewart Show was fully depreciated as of the second quarter of 2007.

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CORPORATE

	Nine Months Ended September 30,
	2008			2007
(in thousands)	(unaudited)			(unaudited)			Variance
Corporate Operating Costs and Expenses
General and administrative	$	36,651		$	35,143		$	(1,508	)
Depreciation and amortization		2,061			1,898			(163	)
Total Corporate Operating Costs and Expenses		38,712			37,041			(1,671	)
Operating Loss	$	(38,712	)	$	(37,041	)	$	(1,671	)

     Corporate operating costs and expenses increased 5% for the nine months ended September 30, 2008 from the prior year period. General and administrative expenses increased $1.5 million primarily due to cash and non-cash charges of $3.5 million related to a company-wide reorganization that resulted in severance and other one-time expenses. General and administrative expenses also increased due to $1.4 million in costs associated with a new intangible asset agreement partially offset by savings of $3.4 million from lower non-cash compensation, lower headcount and lower incentive cash compensation.

OTHER ITEMS

Interest Income, net. Interest income, net, was $0.5 million for the nine months ended September 30, 2008 compared to $2.3 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. Interest income decreased due to lower rates.

Other (Expense) / Income. Other expense was $0.8 million for the nine months ended September 30, 2008 compared to other income of $0.4 million for the period ended September 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.

Loss in equity interest. The loss in equity interest was $0.5 million for the nine months ended September 30, 2008 related to our equity investment in WeddingWire. We record our proportionate share of the results of WeddingWire one quarter in arrears. Therefore, this loss represents our portion of prorated first-half of 2008 results of WeddingWire.

Income tax expense. Income tax expense for the nine months ended September 30, 2008 was $0.6 million, compared to a $0.5 million expense in the prior year period.

Net Loss. Net loss was $7.7 million for the nine months ended September 30, 2008 compared to a net loss of $23.0 million for the nine months ended September 30, 2007, as a result of the factors described above.

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Liquidity and Capital Resources

Overview

     During the first nine months of 2008, our overall cash and cash equivalents increased $42.4 million from December 31, 2007. The increase was due to the satisfaction of our 2007 year-end receivable due from Kmart in the amount of $47.6 million as well as $26 million from the sales of short-term investments and $22.5 million representing the net proceeds of our term loan with Bank of America. These increases to cash were partially offset by the $46.3 million cash payment related to the Emeril Lagasse acquisition as well as the payment of 2007 bonuses and our investments in WeddingWire. Cash, cash equivalents and short-term investments were $72.9 million and $57.3 million at September 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 together with continued positive cash flow from operations, will be sufficient to meet our recurring cash needs for working capital and capital expenditures for the remainder of 2008 including our debt service obligations.

Cash Flows from Operating Activities

     Cash flows provided by operating activities were $47.4 million and $18.1 million for the nine months ended September 30, 2008 and 2007, respectively. In 2008, cash flow from operations was primarily due to the changes in operating assets and liabilities of $28.4 million, the majority of which was the result of the satisfaction of the 2007 year-end receivable due from Kmart. Other cash generated from our normal course of business was partially offset by the payment of 2007 bonuses.

     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 is expected to provide compensation in the form of shares of TurboChef stock and a warrant to purchase shares of TurboChef stock for an aggregate value of $10 million over a three-year term. As of the 2008 third 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 issuance was approximately $5 million and deferred accordingly. Total revenue of $10 million will be recognized evenly over the three-year term and is an adjustment to the cash flows from operations. 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 comprehensive income on the balance sheet. Any adjustment to our warrant affects the investment balance and flows through other income/(expense) 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 $25.2 million and $19.4 million for the nine months ended September 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 $4.4 million was used in investing activities and $0.6 million was used in operating activities. These cash payments were partially offset by sales of short-term investments of $26.3 million in advance of the Emeril Lagasse acquisition.

Cash Flows from Financing Activities

     Cash flows provided by / (used in) financing activities were $20.2 million and $(2.7) million for the nine months ended September 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 partially offset by the accelerated repayment of the term loan in the third quarter of 2008. Cash flows used in

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financing activities during 2008 were also due to the remittance of 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 September 30, 2008. We had no outstanding borrowings under this facility as of September 30, 2008 and had letters of credit 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. During the third quarter of 2008, in addition to our quarterly payment on September 30, 2008, we prepaid $4.5 million in principal representing the amounts due on December 31, 2008, March 31, 2009 and June 30, 2009. In the next 12 months, $1.5 million in principal payment will be due on September 30, 2009. The interest rate on the loan is a floating rate of 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 with which to comply would result in an event of default and would permit Bank of America to accelerate and demand repayment of the loan in full. As of September 30, 2008, we were compliant with all the financial covenants. A summary of the most significant financial covenants is as follows:

Financial Covenant	Required at September 30, 2008
Tangible Net Worth	Greater than $40.0 million
Funded Debt to EBITDA (a)	Less than 2.0
Parent Guarantor (the Company) Basic Fixed Charge Coverage Ratio (b)	Greater than 2.5
Quick Ratio	Greater than 1.0

(a)	EBITDA is earnings before interest, taxes, depreciation and amortization as defined in the loan agreement.
(b)	Basic Fixed Charge Coverage is the ratio of EBITDA for the trailing four quarters to the sum of interest expense for the trailing four quarters and the current portion of long-term debt at the covenant testing date.

     The loan agreement also contains a variety of other 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 in the ordinary course of business, 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

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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 Martha Stewart Flowers 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 this revenue is generally recognized when services are performed.

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 account for the deliverables as a combined unit of accounting rather than separate units of accounting. In this case, revenue is 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 other contracts contain minimum guarantees that are earned evenly over the fiscal year. Revenue related to our agreement with Kmart is

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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 sales of advertisements which are 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. 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

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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.

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 with Bank of America that we entered into on April 2, 2008 under which we borrowed $30.0 million to fund a portion of 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 2.85%. 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 had outstanding borrowings of $22.5 million on the term loan at September 30, 2008 at an average rate of 4.76% for the quarter. A one percent increase in the interest rate would have increased interest expense by $0.1 million for both the three and nine months ended September 30, 2008.

     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 September 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 September 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 decreased interest income by $0.2 million and $0.5 million for the three and nine months ended September 30, 2008, respectively.

Investment Risk

     We are exposed to market rate risk due to changes in fair value of the publicly-traded securities of TurboChef that underlie our warrant with TurboChef to purchase 454,000 shares. The value of this warrant was originally determined to be $2.0 million. Through September 30, 2008, we recognized an expense of $0.8 million related to the decrease in fair value of the TurboChef stock, subject to the warrant. Our maximum exposure is an additional loss of approximately $1.2 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”))

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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.

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 third 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. Like other companies, we are susceptible to macroeconomic downturns that may affect the general economic climate and our performance, the performance of those with whom we do business, and the appetite of consumers for products and publications. Similarly, the price of our stock is subject to volatility due to fluctuations in general market conditions, differences in results of operations from estimates and projections, and other factors beyond our control. 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, balance sheet 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

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

     Reduction in the availability of credit, a continued downturn in the housing market, and other negative economic developments, including increased unemployment and negative performance in the stock market in general, have occurred and could become more pronounced in the future. Each of these developments has and could further limit consumers’ discretionary spending or further affect their confidence. These and other adverse consumer trends have 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. The trends may continue or worsen, which would materially adversely impact our business, financial condition and prospects.

     Our businesses are largely dependent on revenues from advertising 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 which represents approximately half of our total revenues. We cannot control how much or where companies choose to advertise. We have seen a downturn in advertising dollars generally in the marketplace, and more competition for the reduced dollars, which has hurt our publications. 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, website or broadcasts, our revenues and business will be materially adversely affected.

     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. As advertising dollars have diminished, the competition for advertising dollars has intensified. 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 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.

     We could incur non-cash charges due to the impairment of goodwill and intangible assets.

     We test our goodwill and intangible assets for impairment during the fourth quarter of every fiscal year and on an interim basis if indicators of impairment exist. If the fair value of a reporting unit or an intangible asset declines, a potentially material non-cash impairment charge could be incurred.

     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 businesses.

31

     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.

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

     For the contract years ending January 31, 2009 and January 31, 2010 (the final two years of the contract), the minimum guarantees from Kmart are substantially lower than the $65.0 million minimum guarantee we received for the year ended January 31, 2008 (we anticipate they will be $20.0 million and $15.0 million, respectively). We expect that the revenue we receive from Kmart will decline significantly because our actual earned royalties have not exceeded 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 operating results and business 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.

     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 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. Furthermore, we cannot be certain that our licensees are not adversely impacted by general economic or market conditions, including decreased consumer spending and reduced availability of credit. 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 the licensing revenue that 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. A ratings decline further than we anticipate could

32

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. There has been a reduction in advertising dollars generally available in the industry and more competition for the reduced dollars. While we currently benefit from our ability to sell advertising on our television programs, if adverse changes occur, we cannot assure you 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.

     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 assure you that those changes will enable us to sustain growth for our site in the long term. In addition, the competition for advertising dollars has intensified as the availability of advertising dollars has diminished. 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 you 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, content 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, programming, content and products. The strength of our brands and our business units

33

depends in part on our ability to influence 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 products 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 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.

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

     We rely on certain principal vendors in our Publishing business, 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 costs.

     In our Publishing business, 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.

     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

34

security measures and contractual provisions attempting to limit our liability in these areas may not be successful or enforceable.

     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 to a large degree 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.

     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.”

35

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 September 30, 2008:

	(a)		(b)		(c)	(d)
						Maximum Number (or
					Total Number of	Approximate Dollar
					Shares (or Units)	Value) of Shares (or
	Total Number of				Purchased as Part of	Units) that may yet be
	Shares (or Units)		Average Price Paid		Publicly Announced	Purchased under the
Period	Purchased		per Share (or Unit)		Plans or Programs	Plans or Programs
Quarter ended September 30, 2008:
July 1-31, 2008(1)		25,867	$	6.66	Not applicable	Not applicable
August 1-31, 2008(1)		33,684	$	8.27	Not applicable	Not applicable
September 1-30, 2008(1)		685	$	8.36	Not applicable	Not applicable
Total for quarter ended September 30, 2008		60,236	$	7.44	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.

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

None.

ITEM 5. OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS.

     (a) Exhibits

Exhibit
Number	Exhibit Title
10.1	Security Agreement dated as of July 31, 2008 among Martha Stewart Living Omnimedia, Inc., MSLO Emeril Acquisition Sub LLC, and Bank of America, N.A. *
10.2	Employment Agreement dated as of September 17, 2008 between Martha Stewart Living Omnimedia, Inc. and Charles A. Koppelman.
10.3	Employment Agreement dated as of September 17, 2008 between Martha Stewart Living Omnimedia, Inc. and Wenda Harris Millard.
10.4	Employment Agreement dated as of September 17, 2008 between Martha Stewart Living Omnimedia, Inc. and Robin Marino.
10.5	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Restricted Stock Grant Agreement dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Charles Koppelman.
10.6	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Option Grant Agreement and form of related Notice dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Charles Koppelman.
10.7	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Restricted Stock Grant Agreement dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Wenda Harris Millard.
10.8	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Option Grant Agreement and form of related Notice dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Wenda Harris Millard.
10.9	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Restricted Stock Grant Agreement dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Robin Marino.
10.10	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Option Grant Agreement and form of related Notice dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Robin Marino.
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)

* Schedules and exhibits to this Agreement have been omitted. The Company agrees to furnish a supplemental copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.

37

SIGNATURES

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

MARTHA STEWART LIVING OMNIMEDIA, INC.
Date:	November 10, 2008
Name: Title:	/s/ Howard Hochhauser Howard Hochhauser Chief Financial Officer (Principal Financial Officer and duly authorized officer)

38

EXHIBIT INDEX

Exhibit
Number	Exhibit Title
10.1	Security Agreement dated as of July 31, 2008 among Martha Stewart Living Omnimedia, Inc., MSLO Emeril Acquisition Sub LLC, and Bank of America, N.A. *
10.2	Employment Agreement dated as of September 17, 2008 between Martha Stewart Living Omnimedia, Inc. and Charles A. Koppelman.
10.3	Employment Agreement dated as of September 17, 2008 between Martha Stewart Living Omnimedia, Inc. and Wenda Harris Millard.
10.4	Employment Agreement dated as of September 17, 2008 between Martha Stewart Living Omnimedia, Inc. and Robin Marino.
10.5	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Restricted Stock Grant Agreement dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Charles Koppelman.
10.6	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Option Grant Agreement and form of related Notice dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Charles Koppelman.
10.7	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Restricted Stock Grant Agreement dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Wenda Harris Millard.
10.8	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Option Grant Agreement and form of related Notice dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Wenda Harris Millard.
10.9	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Restricted Stock Grant Agreement dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Robin Marino.
10.10	Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan Stock Option Grant Agreement and form of related Notice dated October 1, 2008 between Martha Stewart Living Omnimedia, Inc. and Robin Marino.
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)

* Schedules and exhibits to this Agreement have been omitted. The Company agrees to furnish a supplemental copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.

39

EX-10.1

Exhibit 10.1

The following Security Agreement has been filed to provide investors with information regarding its terms. It is not intended to provide any other factual information about Martha Stewart Living Omnimedia. The representations and warranties of the parties in this Security Agreement were made to, and solely for the benefit of, the other parties. The assertions embodied in the representations and warranties are qualified by information included in disclosure schedules exchanged by the parties that may modify or create exceptions to the representations and warranties. Accordingly, investors should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise.

SECURITY AGREEMENT

dated as of

July 31, 2008

among

MARTHA STEWART LIVING OMNIMEDIA, INC.,

MSLO EMERIL ACQUISITION SUB LLC,

as Grantors

and

BANK OF AMERICA, N.A.,
as Collateral Agent

Table of Contents

	Page
ARTICLE I DEFINITIONS		1
SECTION 1.01 Loan Agreement		1
SECTION 1.02 Other Defined Terms		1
ARTICLE II SECURITY INTERESTS		5
SECTION 2.01 Security Interest		5
ARTICLE III REPRESENTATIONS WARRANTIES AND COVENANTS		8
SECTION 3.01 General Representations and Warranties		8
SECTION 3.02 Covenants		9
SECTION 3.03 Other Actions		11
ARTICLE IV CERTAIN PROVISIONS CONCERNING INTELLECTUAL PROPERTY		13
SECTION 4.01 Representations and Warranties		13
SECTION 4.02 Grant of License		13
SECTION 4.03 Protection of Collateral Agent’s Security		14
SECTION 4.04 Modifications		14
SECTION 4.05 Litigation		15
SECTION 4.06 Intellectual Property Security Agreements		15
SECTION 4.07 After-Acquired Property		15
SECTION 4.08 Assignments		16
SECTION 4.09 Power of Attorney		16
ARTICLE V CERTAIN PROVISIONS CONCERNING PLEDGED COLLATERAL		17
SECTION 5.01 Representations and Warranties		17
SECTION 5.02 Delivery of the Pledged Collateral		18
SECTION 5.03 Certification of Limited Liability Company and Limited Partnership Interests		18
SECTION 5.04 Registration in Nominee Name; Denominations		18
SECTION 5.05 Voting Rights; Dividends and Interest		18
ARTICLE VI REMEDIES		20
SECTION 6.01 Remedies Upon Default		20
SECTION 6.02 Deficiency		22
ARTICLE VII MISCELLANEOUS		22
SECTION 7.01 Notices		22
SECTION 7.02 Cumulative Rights and No Waiver		22
SECTION 7.03 Applicable Law		22

-i-

Table of Contents
(continued)

	Page
SECTION 7.04 Successor and Assigns		23
SECTION 7.05 Amendment		23
SECTION 7.06 Headings		23
SECTION 7.07 Severability		23
SECTION 7.08 Survivability		23
SECTION 7.09 Counterparts		23
SECTION 7.10 Dispute Resolution		23
SECTION 7.11 Enforcement Expenses; Indemnification		23
SECTION 7.12 Right of Set-Off		24
SECTION 7.13 Security Interest Absolute		25
SECTION 7.14 Termination or Release		25
SECTION 7.15 Collateral Agent Appointed Attorney-in-Fact		25
SECTION 7.16 General Authority of the Collateral Agent		26
SECTION 7.17 Reasonable Care		27

-ii-

Exhibits

Exhibit A-1	Form of Notice of Grant of Security Interest in Copyrights
Exhibit A-2	Form of Notice of Grant of Security Interest in Patents
Exhibit A-3	Form of Notice of Grant of Security Interest in Trademarks
Exhibit B-1	Form of Copyright Assignment
Exhibit B-2	Form of Trademark Assignment

Schedules

Schedule 1.02	Material Agreements
Schedule 3.01(b)	Grantor Information
Schedule 3.01(c)	Filings
Schedule 4.01(a)	Intellectual Property Claims
Schedule 4.01(b)	Intellectual Property
Schedule 4.01(c)	Infringements
Schedule 5.01(a)	Pledged Collateral

-iii-

     SECURITY AGREEMENT dated as of July 31, 2008 among MSLO Emeril Acquisition Sub LLC, a Delaware limited liability company (the “Borrower”), Martha Stewart Living Omnimedia, Inc., a Delaware corporation (“Parent Guarantor” and, together with the Borrower, the “Grantors”), and Bank of America, N.A., as collateral agent (in such capacity, together with any successor collateral agent, the “Collateral Agent”) for the Secured Parties (as defined below).

     Reference is made to the Loan Agreement dated as of April 4, 2008 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”), between the Borrower and Bank of America, N.A. (together with any successor or assigns, the “Bank”). The Bank has agreed to extend credit to the Borrower subject to the terms and conditions set forth in the Loan Agreement. The obligations of the Bank to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. The Borrower is a wholly owned direct Subsidiary of Parent Guarantor, who will derive substantial benefits from the extension of credit to the Borrower pursuant to the Loan Agreement and Parent Guarantor is willing to execute and deliver this Agreement in order to induce the Bank to extend such credit. Accordingly, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

     SECTION 1.01 Loan Agreement. (a) Capitalized terms used in this Agreement and not otherwise defined herein have the meanings specified in the Loan Agreement. All terms defined in the New York UCC (as defined herein) and not defined in this Agreement have the meanings specified therein; the term “instrument” shall have the meaning specified in Article 9 of the UCC. “UCC” means the New York UCC; provided that, if perfection or the effect of perfection or non-perfection or the priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

          (b) The rules of construction specified in Article I of the Loan Agreement also apply to this Agreement.

     SECTION 1.02 Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

     “Account Debtor” means any Person who is or who may become obligated to the Borrower under, with respect to or on account of an Account.

     “Agreement” means this Security Agreement, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.

     “Assignment” has the meaning assigned to such term in Section 4.08.

     “Bank” has the meaning assigned to such term in the preamble to this Agreement.

     “Bankruptcy Code” means Title 11 of the United States Code, as amended.

     “Books and Records” has the meaning assigned to such term in clause (xviii) of Section 2.01(a).

     “Borrower” has the meaning assigned to such term in the preamble to this Agreement.

     “Business” means “Acquired Business,” as such term is defined in the Loan Agreement.

     “Cash Collateral Account” means the cash collateral account (account number ending in 1406537) opened by the Borrower with Bank of America, N.A. (and any substitute account therefor maintained by the Borrower at the Collateral Agent).

     “Collateral” has the meaning assigned to such term in Section 2.01(a).

     “Collateral Agent” has the meaning assigned to such term in the preamble to this Agreement.

     “Copyrights” has the meaning assigned to such term in the definition of “Intellectual Property Collateral”.

     “Domain Names” has the meaning assigned to such term in the definition of “Intellectual Property Collateral”.

     “Employment Agreements” means, collectively, (i) the Employment Agreement dated as of April 2, 2008 between the Borrower (as assignee of Parent Guarantor) and Emeril J. Lagasse, III and (ii) the Employment Agreement dated as of April 2, 2008 between the Borrower (as assignee of Parent Guarantor) and Anthony Cruz, each as may be amended, amended and restated, supplemented or otherwise modified from time to time.

     “Equity Interests” means, with respect to any Person, all of the shares, interests, rights, participations or other equivalents (however designated) of capital stock of (or other ownership or profit interests or units in) such Person and all of the warrants, options or other rights for the purchase, acquisition or exchange from such Person of any of the foregoing (including through convertible securities).

     “Escrow Agreement” means the Escrow Agreement dated as of April 2, 2008 among Emeril J. Lagasse, III, Emeril’s Food of Love Productions, L.L.C. and emerils.com, LLC, the Borrower (as assignee of Parent Guarantor), the SPE and the escrow agent named therein, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.

2

     “Grantors” has the meaning assigned to such term in the preamble to this Agreement.

     “Guarantied Party” has the meaning assigned to such term in the Guaranty.

     “Guaranty” means the Continuing and Unconditional Guaranty dated as of April 4, 2008 made by each Guarantor in favor of the Collateral Agent, as the same may be, amended, amended and restated, modified or supplemented from time to time.

     “Indemnitees” has the meaning assigned to such term in Section 7.11(b).

     “Intellectual Property” means, collectively, the Intellectual Property Collateral and the SPE Intellectual Property.

     “Intellectual Property Collateral” means all of Borrower’s right, title and interest in and to all intellectual property rights arising from or associated with the following, whether protected, created or arising under the Laws of the United States or any other jurisdiction: (i) trade names, trademarks and service marks (registered and unregistered), trade dress and similar rights and applications to register any of the foregoing, and all goodwill associated therewith (collectively, “Marks”); (ii) Internet domain names and other Internet addresses (collectively, “Domain Names”); (iii) patents and patent applications and rights in respect of utility models or industrial designs (collectively, “Patents”); (iv) copyrights and registrations and applications therefore (collectively, “Copyrights”); (v) know-how, recipe databases, inventions, discoveries, methods, processes, technical data, specifications, research and development information, technology, data bases and other proprietary or confidential information, in each case that derives economic value (actual or potential) from not being generally know to other Persons who can obtain economic value from its disclosure, but excluding any Copyrights or Patents that cover or protect any of the foregoing (collectively, “Trade Secrets”); (vi) publicity rights and any other intellectual or industrial property rights of any kind or nature that do not comprise Marks, Domain Names, Patents, Copyrights or Trade Secrets; (vii) all license and distribution agreements, and covenants not to sue relating to any of the foregoing; and (viii) all rights to sue for past, present or future infringement of any of the foregoing.

     “Intellectual Property Security Agreement” means any of the short-form Notice of Grant of Security Interest in Copyrights, Notice of Grant of Security Interest in Patents or Notice of Grant of Security Interest in Trademarks, substantially in the form included in Exhibits A-1, A-2 and A-3, respectively, hereto.

     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any capital lease having substantially the same economic effect as any of the foregoing).

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     “Loan Agreement” has the meaning assigned to such term in the preamble to this Agreement.

     “Material Agreement” means any agreement set forth on Schedule 1.02 hereto, or any other agreement to which a Grantor is a party relating to the Acquired Business, a breach under or early termination of which could reasonably be expected to have a Material Adverse Effect.

     “New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

     “Parent Guarantor” has the meaning assigned to such term in the preamble to this Agreement.

     “Parent Guarantor Collateral” has the meaning assigned to such term in Section 2.01(b).

     “Parent Guarantor Security Interest” has the meaning assigned to such term in Section 2.01(b).

     “Permitted Liens” has the meaning assigned to such term in Section 3.01(d).

     “Pledged Collateral” means, collectively, the Collateral described in clause (xv) of Section 2.01(a) and clauses (i) through (iv) of Section 2.01(b).

     “Pledged Debt” means all debt securities owned by the Borrower and the promissory notes and any other instruments evidencing such debt securities.

     “Pledged Equity” means all Equity Interests held by the Borrower and the certificates representing such Equity Interests.

     “Pledged Securities” means any promissory notes, stock certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

     “Publicity Rights License Agreement” means the Publicity Rights License Agreement dated as of April 2, 2008 among Emeril J. Lagasse, III, the Borrower (as assignee of Parent Guarantor) and the SPE, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.

     “Purchase Agreement” means the Asset Purchase Agreement dated as of February 18, 2008 among Emeril J. Lagasse, III, Emeril’s Food of Love Productions, L.L.C. and emerils.com, LLC, as sellers, and Parent Guarantor and the SPE, as purchasers, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.

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     “Secured Obligations” means, collectively, (i) the “Obligations” as defined in the Loan Agreement, (ii) the “Guaranteed Obligations” as defined in the Guaranty and (iii) all obligations and liabilities of the Grantors hereunder.

     “Secured Parties” means, collectively, the Bank, the Collateral Agent and all other Guarantied Parties.

     “Security Interest” has the meaning assigned to such term in Section 2.01(a).

     “SPE Intellectual Property” means all of SPE’s right, title and interest in and to all intellectual property rights arising from or associated with the following, whether protected, created or arising under the Laws of the United States or any other jurisdiction: (i) Marks, including that assigned by the Sellers to the SPE pursuant to the Purchase Agreement and set forth on Schedule A to the SPE LLC Agreement; (ii) Domain Names; (iii) Patents; (iv) Copyrights; (v) Trade Secrets; and (vi) publicity rights and any other intellectual or industrial property rights of any kind or nature that do not comprise Marks, Domain Names, Patents, Copyrights or Trade Secrets.

     “SPE” means MSLO Shared IP Sub LLC, a Delaware limited liability company.

     “Trade Secrets” has the meaning assigned to such term in the definition of “Intellectual Property Collateral.”

ARTICLE II

SECURITY INTERESTS

     SECTION 2.01 Security Interest. (a) As security for the payment or performance, as the case may be, in full of the Secured Obligations, including, without limitation, obligations under the Guaranty, the Borrower hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest (collectively, with the Parent Guarantor Security Interest, the “Security Interest”) in, all right, title or interest in or to any and all its assets and properties now owned or at any time hereafter acquired by the Borrower or in which the Borrower now has or at any time in the future may acquire any right, title or interest, including, without limitation, the following (collectively, with the Parent Guarantor Collateral, the “Collateral”):

               (i) all Accounts;

               (ii) all Commercial Tort Claims;

               (iii) all Chattel Paper;

               (iv) all Documents;

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               (v) all Equipment;

               (vi) all Fixtures, but only to the extent such Fixtures constitute personal property for purposes of the UCC;

               (vii) all General Intangibles;

               (viii) all Goods;

               (ix) all Instruments;

               (x) all Intellectual Property Collateral (but excluding any United States intent-to-use trademark application prior to the filing and acceptance of a statement of use or an amendment to allege use in connection therewith to the extent that a valid security interest may not be taken on such an intent-to-use trademark application under applicable Law);

               (xi) all Inventory;

               (xii) all Investment Property;

               (xiii) all Letters of Credit and Letter-of-Credit Rights;

               (xiv) all Money and all Deposit Accounts (including, without limitation, the Cash Collateral Account);

               (xv) all Pledged Equity and Pledged Debt and all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion thereof;

               (xvi) all Supporting Obligations;

               (xvii) the Purchase Agreement, the Escrow Agreement, the Employment Agreements, the Publicity Rights License Agreement and the other Transaction Documents, and the SPE Borrower License Agreement;

               (xviii) all books and records pertaining to the Collateral including but not limited to any computer-readable memory and any computer hardware or software necessary to process such memory (“Books and Records”); and

               (xix) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing.

          (b) As security for the payment or performance, as the case may be, in full of the Secured Obligations, including, without limitation, obligations under the Guaranty, Parent Guarantor hereby assigns and pledges to the Collateral Agent,

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its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest (the “Parent Guarantor Security Interest”) in, all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by Parent Guarantor or in which Parent Guarantor now has or at any time in the future may acquire any right, title or interest (collectively, the “Parent Guarantor Collateral”):

               (i) all of the Equity Interests of the Borrower;

               (ii) all additional Equity Interests issued by the Borrower acquired from time to time acquired by Parent Guarantor in any manner;

               (iii) any certificates representing the shares referred to in clause (i) or (ii) above;

               (iv) all dividends, cash, interest, instruments and other property from time to time received or otherwise distributed in respect of or in exchange for any or all of the foregoing;

               (v) the Purchase Agreement, the Escrow Agreement, the Employment Agreements, the Publicity Rights License Agreement and the other Transaction Documents;

               (vi) all Contracts (as defined in the Purchase Agreement) to the extent such Contracts have not been assigned to the Borrower;

               (vii) all Books and Records with respect to the Parent Guarantor Collateral; and

               (viii) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing.

     Notwithstanding anything in this Agreement to the contrary, any covenants made by the Parent Guarantor under this Agreement with respect to any of its assets shall be limited to solely the Parent Guarantor Security Interest and the Parent Guarantor Collateral.

          (c) Notwithstanding anything in this Agreement to the contrary, (i) “Collateral” shall not include (A) any lease, license, contract or agreement to which the relevant Grantor is a party, any of its rights or interests thereunder or any assets subject thereto if the grant of such security interest shall constitute or result in (1) the abandonment, invalidation or unenforceability of any right, title or interest of such Grantor therein or result in any Grantor’s loss of use of such asset or (2) in a breach or termination pursuant to the terms of, or a default under, any such lease, license, contract, or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor

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provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity); (B) any lease, license, contract or agreement to which the relevant Grantor is a party, any of its rights or interests thereunder or any assets subject thereto to the extent that any applicable law prohibits the creation of a security interest thereon (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity); or (C) any asset owned by the relevant Grantor that is subject to a Lien described in Section 9.2(a)(ix) or (xi) of the Loan Agreement if the contract or other agreement in such Lien is granted prohibits or requires the consent of any Person other than a Loan Party and its Affiliates as a condition to the creation of any other Lien on such asset; and (ii) any covenants made by the Parent Guarantor under this Agreement with respect to any of its assets shall be limited to solely the Parent Guarantor Security Interest and the Parent Guarantor Collateral.

          (d) Each Grantor hereby irrevocably authorizes the Collateral Agent for the benefit of the Secured Parties at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings) with respect to the Collateral or any part thereof and amendments thereto that (i) with respect to the Borrower, indicate the Collateral as all assets of such Grantor or words of similar effect as being of an equal or lesser scope or with greater detail and (ii) contain the information required by Article 9 of the UCC or the analogous legislation of each applicable jurisdiction for the filing of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (B) in the case of a financing statement filed as a fixture filing, a sufficient description of the real property to which such Collateral relates. Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.

          (e) The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral.

ARTICLE III

REPRESENTATIONS WARRANTIES AND COVENANTS

     SECTION 3.01 General Representations and Warranties. Each Grantor jointly and severally represents and warrants to the Collateral Agent and the Secured Parties that:

          (a) Each Grantor has good and valid rights in and title to the Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in

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accordance with the terms of this Agreement, without the consent or approval of any other Person other (i) than any consent or approval that has been obtained and (ii) consents from the party (other than any Loan Party) to any contract or agreement included in the Collateral necessary to make the Security Interest in such contract or agreement enforceable against such party.

          (b) Each Grantor’s jurisdiction of organization, exact legal name, organizational identification number, if any, and the location of such Grantor’s chief executive office or sole place of business, in each case as of the date hereof, is specified on Schedule 3.01(b).

          (c) The Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations prepared by the Collateral Agent based upon such information for filing in each governmental, municipal or other office specified in Schedule 3.01(c), including the Intellectual Property Security Agreements to be executed and recorded in accordance with Section 4.06, are all the filings, recordings and registrations that are necessary to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the benefit of the Secured Parties) in respect of all Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements.

          (d) The Security Interest constitutes (i) a legal and valid security interest in all the Collateral securing the payment and performance of the Secured Obligations, (ii) subject to the filings described in Section 3.01(c), a perfected security interest in all Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the UCC and (iii) a perfected security interest in all Intellectual Property Collateral in which a security interest may be perfected upon the receipt and recording of the applicable Intellectual Property Security Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, within the three-month period (commencing as of the date hereof) pursuant to 35 U.S.C. § 261 or 15 U.S.C. § 1060 or the one month period (commencing as of the date hereof) pursuant to 17 U.S.C. § 205. The Security Interest is (to the extent such Security Interest can be perfected by filing) and shall be prior to any other Lien on any of the Collateral, other than any nonconsensual Lien that is expressly permitted pursuant to Section 9.2 of the Loan Agreement and has priority as a matter of law (“Permitted Liens”).

     SECTION 3.02 Covenants. (a) No Grantor shall change its legal name, its type of organization, its status as a registered organization (in the case of a registered organization), its jurisdiction of organization, the location of its chief executive office or sole place of business, or its organizational identification number (if any), except that any such changes shall be permitted (so long as not in violation of the applicable

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requirements of the Loan Documents and so long as same do not involve (x) a registered organization ceasing to constitute the same or (y) any Grantor changing its jurisdiction of organization or location to a jurisdiction of organization or location, as the case may be, outside the United States or a State thereof) if (i) it shall have given to the Collateral Agent not less than twenty (20) days’ prior written notice of such change, and (ii) in connection with the respective such change or changes, it shall have taken all action reasonably requested by the Collateral Agent to maintain the security interests of the Collateral Agent in the Collateral intended to be granted hereby pursuant to this Agreement at all times fully perfected and in full force and effect.

          (b) Each Grantor shall, at its own expense, maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 3.01(d) and take any and all actions reasonably necessary to defend title to the Collateral against all Persons and to defend the security interest of the Collateral Agent in the Collateral and the priority thereof against any Lien that is not a Permitted Lien.

          (c) Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith.

          (d) At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral that is not a Permitted Lien, and may pay for the maintenance and preservation of the Collateral to the extent any Grantor fails to do so as required by the Loan Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent within five (5) days after written demand for any payment made or any reasonable expense incurred by the Collateral Agent pursuant to the foregoing authorization. Nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

          (e) If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person to secure payment and performance of an Account included in the Collateral, such Grantor shall provide the Collateral Agent with prompt written notice thereof and, upon the reasonable request of the Collateral Agent, shall promptly assign such security interest to the Collateral Agent for the benefit of the Secured Parties. Such assignment need not be filed of public record

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unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest.

          (f) Each Grantor (rather than the Collateral Agent or any Secured Party) shall remain liable (as between itself and any relevant counterparty) to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance.

          (g) In the event that the proceeds of any insurance claim with respect to Collateral are paid to any Grantor after the Collateral Agent has exercised its right to foreclose in accordance with the terms of this Agreement, such proceeds shall be held in trust for the benefit of the Collateral Agent and immediately after receipt thereof shall be paid to the Collateral Agent for application in accordance with the Loan Agreement.

          (h) No Grantor shall amend, modify or waive any provision of any Material Agreement in a manner that (i) could reasonably be expected to be materially adverse to the interests of the Collateral Agent and the Secured Parties or (ii) materially reduces or delays the payments to be made to the Grantor thereunder, in each case, without the Collateral Agent’s prior written consent (which consent shall not be unreasonably conditioned, withheld or delayed).

     SECTION 3.03 Other Actions. In order to further insure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Security Interest, each Grantor represents and warrants as follows and agrees, in each case at such Grantor’s own expense, to take the following actions with respect to the following Collateral:

          (a) Instruments and Tangible Chattel Paper. As of the date hereof, no amounts payable under or in connection with any of the Collateral are evidenced by any Instrument or Tangible Chattel Paper. If at any time any amount then payable under or in connection with any of the Collateral shall be evidenced by any Instrument or Tangible Chattel Paper having a face value in excess of $25,000, the Grantor acquiring such Instrument or Tangible Chattel Paper shall promptly (but in any event within ten (10) days after receipt thereof) endorse, assign and deliver the same to the Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time specify.

          (b) Deposit Accounts. The Borrower shall not establish or maintain any Deposit Account, except with Bank of America, N.A. while it is the Collateral Agent or, if Bank of America, N.A. is not the Collateral Agent, any other bank (as defined in Section 9-102 of the UCC) whose jurisdiction (determined in accordance with Section 9-304 of the UCC) is within a State of the United States with the Collateral Agent’s prior written consent. The Borrower agrees that it shall not grant “control”

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within the meaning of Section 9-104 of the UCC of any Collateral comprised of Deposit Accounts to any Person other than the Collateral Agent.

          (c) Investment Property. If any Grantor shall at any time hold or acquire any certificated securities constituting Collateral, such Grantor shall promptly endorse, assign and deliver the same to the Collateral Agent for the benefit of the Secured Parties, accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably request. If any securities now or hereafter acquired by any Grantor and constituting Collateral are uncertificated and are issued to such Grantor or its nominee directly by the issuer thereof, such Grantor shall either (i) cause the issuer to agree to comply with instructions from the Collateral Agent as to such securities, without further consent of any Grantor or such nominee, or (ii) arrange for the Collateral Agent to become the registered owner of the securities. If any securities, whether certificated or uncertificated, or other investment property are held by any Grantor or its nominee through a securities intermediary or commodity intermediary, such Grantor shall, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause such securities intermediary or (as the case may be) commodity intermediary to agree to comply with entitlement orders or other instructions from the Collateral Agent to such securities intermediary as to such security entitlements, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Collateral Agent to such commodity intermediary, in each case without further consent of any Grantor or such nominee, or (ii) in the case of financial assets or other Investment Property held through a securities intermediary, arrange for the Collateral Agent to become the entitlement holder with respect to such Investment Property, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such Investment Property. The provisions of this paragraph shall not apply to any financial assets credited to a securities account for which the Collateral Agent is the securities intermediary. Each Grantor agrees that it shall not grant “control” within the meaning of Section 9-106 of the UCC of any Collateral comprised of Securities Accounts or Securities Entitlements to any Person other than the Collateral Agent.

          (d) Letter-of-Credit Rights. If any Grantor is at any time a beneficiary under a Letter of Credit having a face value in excess of $25,000 now or hereafter issued in respect of Collateral, such Grantor shall promptly notify the Collateral Agent thereof and such Grantor shall, at the request of the Collateral Agent, either (i) arrange for the issuer and any confirmer of such Letter of Credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the Letter of Credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of such Letter of Credit, in each case, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent.

          (e) Commercial Tort Claims. As of the date hereof, the Borrower hereby represents and warrants that it holds no Commercial Tort Claims. If the Borrower shall at any time hold or acquire a Commercial Tort Claim, it shall promptly (and in any event within ten (10) days) notify the Collateral Agent in writing signed by

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the Borrower of the details thereof and grant to the Collateral Agent in such writing a security interest therein and in the Proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Collateral Agent.

ARTICLE IV

CERTAIN PROVISIONS CONCERNING INTELLECTUAL PROPERTY

     SECTION 4.01 Representations and Warranties. Each of Parent Guarantor and Borrower jointly and severally represents and warrants to the Collateral Agent and the Secured Parties that:

        (a) The Borrower or the SPE owns, free and clear of all Liens other than Permitted Liens, or is otherwise licensed to use, all intellectual property used in or necessary for the conduct of the Business as currently conducted, all of which rights shall survive unchanged upon the consummation of the transactions contemplated by this Agreement. Except as set forth in Schedule 4.01(a), no legal proceedings are pending or, to the knowledge of such Grantor, threatened, in which any Person is challenging the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does such Grantor know of any valid basis for any such claim.

        (b) Except pursuant to the licenses entered into by the Borrower or the SPE (or their predecessors-in-interest) that are listed in Schedule 4.01(b), on and as of the date hereof (i) each of the Borrower and the SPE owns, and has done nothing to authorize or enable any other person to use, any Intellectual Property that is owned or purported to be owned by the Borrower or the SPE, as the case may be. Schedule 4.01(b) sets forth a true and complete list of all registered Intellectual Property, in each case owned or filed by the Borrower or the SPE, and all such registrations and applications for registration listed are subsisting, and, to the knowledge of such Grantor, valid.

        (c) Except as set forth on Schedule 4.01(c), to the knowledge of such Grantor, on and as of the date hereof, (i) there is no material violation by any other Person of any Intellectual Property owned by the Borrower or the SPE, (ii) neither the Borrower nor the SPE is infringing upon any intellectual property rights of any other Person, and (iii) no proceedings have been instituted or are pending against the Borrower or the SPE or threatened, and no claim against Borrower or SPE has been received by Borrower or SPE, alleging any such violation.

     SECTION 4.02 Grant of License. For the purpose of enabling the Collateral Agent, upon the occurrence and during the continuance of an Event of Default, to exercise rights and remedies under Article VI hereof at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, the Borrower hereby grants to the Collateral Agent an irrevocable, non-exclusive license, exercisable only after an Event of Default has occurred and is continuing and without payment of royalty or other compensation to the Borrower, to use, license or sublicense any of the Intellectual Property Collateral, or assign any of the Intellectual

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Property Collateral now owned or hereafter acquired by the Borrower, wherever the same may be located, including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout hereof, in each case, subject to the applicable provisions of Article VI hereof and Part 6 of Article 9 of the New York UCC.

     SECTION 4.03 Protection of Collateral Agent’s Security. On a continuing basis, the Borrower shall, at its sole cost and expense, (i) within thirty (30) days of its becoming aware thereof, notify the Collateral Agent of (A) any adverse final determination in any proceeding in the United States Patent and Trademark Office or the United States Copyright Office with respect to any Mark, Copyright or Patent included in the Intellectual Property that is material to the Business, or (B) the institution of any proceeding or any adverse determination in any federal, state or local court or administrative body regarding the Borrower’s or the SPE’s claim of ownership in or right to use any of the Intellectual Property that is material to the Business, its right to register such Intellectual Property or its right to keep and maintain such registration in full force and effect, (ii) maintain and protect, and cause the SPE to maintain and protect, the Intellectual Property material to the Business, (iii) not permit to lapse or become abandoned any Intellectual Property material to the Business as presently used and operated and as contemplated, and not settle or compromise any pending or future litigation or administrative proceeding with respect to such Intellectual Property, in each case except as shall be consistent with commercially reasonable business judgment, (iv) within thirty (30) days of the Borrower obtaining knowledge thereof, notify the Collateral Agent in writing of any event which would reasonably expected to materially and adversely affect the value or utility of the Intellectual Property or any portion thereof material to the use and operation of the Business, the ability of the Borrower or the Collateral Agent to dispose of the Intellectual Property Collateral or any portion thereof or the rights and remedies of the Collateral Agent in relation thereto including, without limitation, by means of a levy or threat of levy or any legal process against the Intellectual Property or any portion thereof, (v) not, without the prior consent of the Collateral Agent (which consent shall not be unreasonably withheld, delayed or conditioned), (A) license the Intellectual Property Collateral (including any sublicense under the SPE Borrower License Agreement) other than pursuant to the Trademark License Agreement and licenses entered into by the Borrower in, or incidental to, the ordinary course of business, on arms’ length terms, or (B) amend or permit the amendment of any of the licenses in a manner that materially and adversely affects the right to receive payments thereunder, or in any manner that would materially impair the value of the Intellectual Property or the Lien on and security interest in the Intellectual Property Collateral intended to be granted to the Collateral Agent for the benefit of the Secured Parties, (vi) diligently keep adequate records respecting the Intellectual Property and (vii) furnish to the Collateral Agent from time to time upon the Collateral Agent’s reasonable request therefor detailed statements and amended schedules further identifying and describing the Intellectual Property and such other materials evidencing or reports pertaining to the Intellectual Property as the Collateral Agent may from time to time reasonably request.

     SECTION 4.04 Modifications. Borrower authorizes the Collateral Agent to modify this Agreement by amending Schedule 4.01(b) to include any Intellectual Property

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Collateral acquired or arising after the date hereof of Borrower including, without limitation, any of the items listed in Section 4.07.

     SECTION 4.05 Litigation. Unless any Event of Default shall have occurred and be continuing, Borrower and the SPE shall have the right to commence and prosecute in their own names, as the party in interest, for their own benefit and at their sole cost and expense, such applications for protection of the Intellectual Property and suits, proceedings or other actions to prevent the infringement, counterfeiting, unfair competition, dilution, diminution in value or other damage as are necessary to protect the Intellectual Property. Upon the occurrence and during the continuance of any Event of Default, the Collateral Agent shall have the right but shall in no way be obligated to file applications for protection of the Intellectual Property in the name of Borrower or the SPE, as applicable, and/or bring suit in the name of Borrower, the SPE (subject to the rights granted to Emeril’s Food of Love Productions, L.L.C. and the Emeril Lagasse Foundation pursuant to Section 4.05 of the Trademark License Agreement and to the applicable terms of the SPE Borrower License Agreement) the Collateral Agent or the Secured Parties to enforce the Intellectual Property and any license thereunder (subject to the applicable terms of the SPE Borrower License Agreement). In the event of such suit, Borrower shall, or shall cause the SPE to, at the reasonable request of the Collateral Agent, do any and all lawful acts and execute any and all documents requested by the Collateral Agent in aid of such enforcement and Borrower shall promptly reimburse and indemnify the Collateral Agent, as the case may be, for all reasonable costs and expenses incurred by the Collateral Agent in the exercise of its rights under this Section 4.05. In the event that the Collateral Agent shall elect not to bring suit to enforce the Intellectual Property upon the occurrence and during the continuance of any Event of Default, Borrower agrees, at the reasonable request of the Collateral Agent, to, or shall cause the SPE to, take all commercially reasonable actions necessary, whether by suit, proceeding or other action, to prevent the infringement, counterfeiting, unfair competition, dilution, diminution in value of or other damage to any of the Intellectual Property by others and for that purpose agrees to diligently maintain any suit, proceeding or other action against any person so infringing necessary to prevent such infringement.

     SECTION 4.06 Intellectual Property Security Agreements. With respect to the registered Copyrights, applications to register Copyrights, Marks, applications to register Marks and Patents included in the Intellectual Property Collateral, Borrower agrees to execute a Copyright Grant, a Patent Grant and a Trademark Grant in the forms attached hereto as Exhibits A-1, A-2 and A-3, for recording the security interest granted hereunder in such Intellectual Property Collateral with the United States Patent and Trademark Office and the United States Copyright Office and Borrower agrees to execute any other document reasonably requested by the Collateral Agent for recording with any other Governmental Authority necessary to perfect the security interest granted hereunder in such Intellectual Property Collateral.

     SECTION 4.07 After-Acquired Property. If Borrower shall, at any time before the Secured Obligations have been paid in full, (i) obtain any rights to any additional Intellectual Property or (ii) become entitled to the benefit of any additional Intellectual Property or any renewal or extension thereof, including any reissue, division, continuation, or

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continuation-in-part of any Intellectual Property, or any improvement on any Intellectual Property, the provisions hereof shall automatically apply thereto and any such item enumerated in clause (i) or (ii) of this Section 4.07 with respect to Borrower shall automatically constitute Intellectual Property Collateral if such would have constituted Intellectual Property Collateral at the time of execution hereof and be subject to the Lien and security interest created by this Agreement without further action by any party. Borrower shall within thirty (30) days of acquiring an item of Intellectual Property enumerated in clause (i) or (ii) of this Section 4.07, provide to the Collateral Agent with written notice of any of the foregoing and (ii) if Borrower, confirm the attachment of the Lien and security interest created by this Agreement to any rights described in clauses (i) and (ii) of the immediately preceding sentence of this Section 4.07 by execution of an instrument in form reasonably acceptable to the Collateral Agent. If the SPE, at any time before the Secured Obligations have been paid in full, shall file with the United States Patent and Trademark Office an application to register any Mark or if any registration of a Mark is granted by the United States Patent and Trademark Office to the SPE, the Borrower will use commercially reasonable efforts to provide written notice to the Collateral Agent of such filing or registration within thirty (30) days thereafter.

     SECTION 4.08 Assignments. Borrower has delivered to the Collateral Agent a copyright assignment and trademark assignment with respect to the Copyrights and Marks included in the Intellectual Property Collateral in the form attached to this Agreement as Exhibits B-1 and B-2 (collectively, the “Assignment”), which Assignment shall be held by the Collateral Agent and shall not be effective until the Collateral Agent has foreclosed upon the Copyrights and/or Marks included in the Collateral in accordance with the terms of this Agreement and applicable law. In connection with the Collateral Agent’s exercise of its rights and remedies with respect to Intellectual Property Collateral and subject to applicable law, if any Event of Default has occurred and is continuing, upon the foreclosure upon and sale of the Collateral (or the acceptance of Intellectual Property Collateral by the Secured Parties in full or partial satisfaction of the Secured Obligations) the Collateral Agent may complete the Assignment, update Schedule 1 thereto to set forth a complete list of the Copyrights and Marks included in the Collateral and file or cause to be filed such completed Assignment with the United States Copyright Office or the United States Patent and Trademark Office, as applicable, to evidence the applicable sale or assignment of the Intellectual Property Collateral.

     SECTION 4.09 Power of Attorney. Borrower hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of an Event of Default, any document which may be required by the United States Patent and Trademark Office, United States Copyright Office or any other Governmental Authority in order to effect an absolute assignment of all right, title and interest in or to any Intellectual Property Collateral, and record the same.

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ARTICLE V

CERTAIN PROVISIONS CONCERNING PLEDGED COLLATERAL

     SECTION 5.01 Representations and Warranties. Each Grantor jointly and severally represents and warrants to the Collateral Agent and the Secured Parties that:

          (a) As of the date hereof, Schedule 5.01(a) correctly sets forth the percentage of the issued and outstanding units of each class of the Equity Interests of the issuer thereof represented by the Pledged Equity and includes all Equity Interests, debt securities and promissory notes required to be pledged hereunder.

          (b) The Pledged Equity and Pledged Debt have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Equity, are fully paid and nonassessable and (ii) in the case of Pledged Debt, are, to the knowledge of such Grantor, legal, valid and binding obligations of the issuers thereof (except as may be limited by the application of bankruptcy, insolvency and other laws affecting creditors’ rights generally and by application of principles of equity, regardless of whether considered in an action or proceeding brought in equity or at law).

          (c) Except for restrictions and limitations imposed by the Loan Documents or applicable law generally, the Pledged Collateral is and will continue to be freely transferable and assignable, and none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect in any manner material and adverse to the Secured Parties the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;

          (d) each of the Grantors has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated;

          (e) no consent or approval of any Governmental Authority, any securities exchange or any other Person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect);

          (f) by virtue of the execution and delivery by the Grantors of this Agreement, when any Pledged Securities are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain a legal, valid and perfected lien upon and security interest in such Pledged Securities as security for the payment and performance of the Secured Obligations; and

          (g) the pledge effected hereby is effective to vest in the Collateral Agent, for the benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral as set forth herein.

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     SECTION 5.02 Delivery of the Pledged Collateral. (a) Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent, for the benefit of the Secured Parties, any and all Pledged Securities (other than any uncertificated securities, but only for so long as such securities remain uncertificated). (b) Upon delivery to the Collateral Agent, (i) any Pledged Securities shall be accompanied by stock powers duly executed in blank or other instruments of transfer reasonably satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request.

     SECTION 5.03 Certification of Limited Liability Company and Limited Partnership Interests. Each interest in any limited liability company or limited partnership that is represented by a certificate controlled by any Grantor and pledged under Section 2.01 shall be a “security” within the meaning of Article 8 of the New York UCC and shall be governed by Article 8 of the New York UCC.

     SECTION 5.04 Registration in Nominee Name; Denominations. If an Event of Default shall occur and be continuing, (a) the Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral Agent and each Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Grantor and (b) the Collateral Agent shall have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

     SECTION 5.05 Voting Rights; Dividends and Interest. (a) Unless and until an Event of Default shall have occurred and be continuing:

               (i) Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose not inconsistent with the terms of this Agreement, the Loan Agreement and the other Loan Documents.

               (ii) The Collateral Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to such Grantor, all such proxies, powers of attorney and other instruments as any Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to paragraph (i) above.

               (iii) Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or

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distributed in accordance with, the terms and conditions of the Loan Agreement, the other Loan Documents and applicable law; provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged Equity or Pledged Debt, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall be held in trust for the benefit of the Collateral Agent and the Secured Parties and shall be promptly delivered to the Collateral Agent in the same form as so received (with any necessary endorsement reasonably requested by the Collateral Agent). So long as no Default or Event of Default has occurred and is continuing, the Collateral Agent agrees that it will cooperate with the applicable Grantor to promptly deliver any Pledged Securities in its possession to the issuer of such Pledged Securities in connection with any exchange or redemption of such Pledged Securities pursuant to arrangements reasonably satisfactory to the Collateral Agent intended to maintain the Collateral Agent’s perfected lien in such Pledged Securities and any consideration received in exchange therefor or in redemption thereof.

          (b) Upon the occurrence of and during the continuance of an Event of Default, all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 5.05 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 5.05 shall be held in trust for the benefit of the Collateral Agent, and shall be promptly delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement reasonably requested by the Collateral Agent). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in a cash collateral account upon receipt of such money or other property and shall be applied in accordance with the Loan Documents.

          (c) Upon the occurrence and during the continuance of an Event of Default, then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 5.05, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 5.05, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers.

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ARTICLE VI

REMEDIES

     SECTION 6.01 Remedies Upon Default. If an Event of Default shall occur and be continuing, it is agreed that the Collateral Agent shall have the right to exercise any and all rights afforded to a secured party with respect to the Secured Obligations under the UCC or other applicable law and also may (i) require each Grantor to, and each Grantor agrees that it will at its expense and upon request of the Collateral Agent promptly, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place and time to be designated by the Collateral Agent that is reasonably convenient to both parties; (ii) occupy any premises owned or, to the extent lawful and permitted, leased by any of the Grantors where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation; provided that the Collateral Agent shall provide the applicable Grantor with notice thereof prior to or promptly after such occupancy (but the failure of the Collateral Agent to provide such notice shall not limit the Collateral Agent’s rights with respect thereto); (iii) exercise any and all rights and remedies of any of the Grantors under or in connection with the Collateral, or otherwise in respect of the Collateral; provided that the Collateral Agent shall provide the applicable Grantor with notice thereof prior to or promptly after such exercise (but the failure of the Collateral Agent to provide such notice shall not limit the Collateral Agent’s rights with respect thereto); and (iv) subject to the mandatory requirements of applicable Law and the notice requirements described below, sell or otherwise dispose of all or any part of the Collateral securing the Secured Obligations at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale of securities (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any sale of Collateral shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Notwithstanding the foregoing, unless and until a “Statement of Use” or an “Amendment to Allege Use” has been filed and accepted in the United States Patent and Trademark Office, it is agreed that the Collateral Agent’s right to assign, transfer or convey any Collateral consisting of Marks for which an application is pending under Section 1(b) of the Lanham Act, 15 U.S.C. § 1051(b), or any of its successors or counterparts, shall only be exercised if any such assignment, transfer or conveyance occurs in connection with the transfer of the business (or the portion of the business) to which such Collateral consisting of Marks pertains and is made to the successor of that business.

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     The Collateral Agent shall give the applicable Grantors ten (10) days’ written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by applicable law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by applicable law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Secured Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 6.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.

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     Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor’s true and lawful agent (and attorney-in-fact) for the purpose of (i) making, settling and adjusting claims in respect of Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance, (ii) making all determinations and decisions with respect thereto and (iii) obtaining or maintaining the policies of insurance required by Section 7.10 of the Loan Agreement or to pay any premium in whole or in part relating thereto, in each case only upon the occurrence and during the continuance of an Event of Default. All sums disbursed by the Collateral Agent in connection with this paragraph, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, within five (5) days of written demand therefor, by the Grantors to the Collateral Agent and shall be additional Secured Obligations secured hereby.

     SECTION 6.02 Deficiency. Each Grantor shall remain liable for any deficiency if the proceeds of any sale of other disposition of the Collateral are insufficient to pay the Secured Obligations and the fees and expenses of any Person employed by the Collateral Agent or any other Secured Party to collect such deficiency in accordance with Section 7.11.

ARTICLE VII

MISCELLANEOUS

     SECTION 7.01 Notices. All notices and other communications hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 12 of the Loan Agreement or Section 18 of the Guaranty.

     SECTION 7.02 Cumulative Rights and No Waiver. Each and every right granted to the Collateral Agent and the Secured Parties under any Loan Document, or allowed it by law or equity shall be cumulative of each other and may be exercised in addition to any and all other rights of the Collateral Agent or the Secured Parties, and no delay in exercising any right shall operate as a waiver thereof, nor shall any single or partial exercise by the Collateral Agent or the Secured Parties of any right preclude any other or future exercise thereof or the exercise of any other right. Each Grantor expressly waives any presentment, demand, protest or other notice of any kind, including but not limited to notice of intent to accelerate and notice of acceleration, except in the event and to the extent that any such notice is expressly required by the terms of any Loan Document. No notice to or demand on any Grantor in any case shall, of itself, entitle such Grantor to any other or future notice or demand in similar or other circumstances.

     SECTION 7.03 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. To the extent that the Collateral Agent or any Secured Party has greater rights or remedies under federal law, whether as a national bank or otherwise, this paragraph shall not be deemed to deprive such Person of such rights and remedies as may be available under federal law.

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     SECTION 7.04 Successor and Assigns. This Agreement is binding on each Grantor and its successors and assignees and shall inure to the benefit of the Collateral Agent and each other Secured Party and their successors and assigns; provided that no Grantor may assign any of its rights or obligations under this Agreement without the Collateral Agent’s prior written consent (and any purported assignment in violation of this Section 7.04 shall be null and void).

     SECTION 7.05 Amendment. No modification, consent, amendment or waiver of any provision of this Agreement, nor consent to any departure by any Grantor therefrom, shall be effective unless the same shall be in writing and signed by the Collateral Agent and each Grantor.

     SECTION 7.06 Headings. Section and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of this Agreement.

     SECTION 7.07 Severability. If any part of this Agreement is not enforceable, the rest of the Agreement may be enforced.

     SECTION 7.08 Survivability. All covenants, agreements, representations and warranties made by any Grantor herein or in the other Loan Documents to which such Grantor is a party shall survive the making of the Loan and shall continue in full force and effect so long as the Secured Obligations, or any portion thereof, are outstanding.

     SECTION 7.09 Counterparts. This Agreement may be executed in as many counterparts as necessary or convenient, and by the different parties on separate counterparts each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same agreement. Signatures may be delivered via telecopy or in PDF format via electronic mail and signatures delivered by such means shall be deemed originals for all purposes.

     SECTION 7.10 Dispute Resolution. The Dispute Resolution Provision as set forth under Section 13.13 of the Loan Agreement shall apply. By agreeing to binding arbitration, the parties irrevocably and voluntarily waive any right they may have to a trial by jury in respect of any Claim. Furthermore, without intending in any way to limit this Agreement to arbitrate, to the extent any Claim is not arbitrated, the parties irrevocably and voluntarily waive any right they may have to a trial by jury in respect of such Claim. This waiver of jury trial shall remain in effect even if the Class Action Waiver is limited, voided or found unenforceable. WHETHER THE CLAIM IS DECIDED BY ARBITRATION OR BY TRIAL BY A JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT IS THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW.

     SECTION 7.11 Enforcement Expenses; Indemnification. (a) Each Grantor, jointly and severally, agrees to pay or reimburse (i) all costs and reasonable attorney’s

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fees incurred by the Collateral Agent and the Secured Parties in connection with the enforcement, collection or protection of its rights in connection with this Agreement and the other Loan Documents to which such Grantor is party, including its rights under this Section and (ii) all reasonable costs and expenses incurred by the Collateral Agent in the administration of this Agreement and the other Loan Documents to which such Grantor is a party. As used in this paragraph, “attorneys’ fees” includes the allocated costs of in-house counsel. In addition, each Grantor agrees to, upon reasonable notice from the Collateral Agent, pay any and all stamp and other taxes or fees payable or determined to be payable in connection with the execution and delivery of this Agreement and the other documents to be delivered hereunder, and agrees to save the Collateral Agent harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees.

          (b) Each Grantor, jointly and severally, agrees to indemnify and hold the Collateral Agent and the other Secured Parties and their parent entities, Subsidiaries and all of their directors, officers, employees, agents, successors, attorneys, and assigns (collectively, the “Indemnitees”), harmless from any loss, liability, damages, judgments, and costs of any kind relating to or arising directly or indirectly out of (a) this Agreement or any other Loan Document, the Security Interest or the Collateral and (b) any litigation or proceeding related to or arising out of this Agreement, any such document, the Security Interest or the Collateral, in each case other than arising as a result of any such Indemnitee’s gross negligence or willful misconduct. This indemnity includes but is not limited to reasonable attorneys’ fees (including the allocated cost of in-house counsel). Under no circumstances shall any of the Indemnitees have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith.

          (c) Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby. The provisions of this Section 7.11 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Secured Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 7.11 shall be payable upon demand.

     SECTION 7.12 Right of Set-Off. In addition to any rights and remedies of the Secured Parties provided by applicable law, upon the occurrence and during the continuance of any Event of Default, each Secured Party is authorized at any time and from time to time, without prior notice to any Grantor, any such notice being waived by each Grantor to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Secured Party to or for the credit or the account of the respective Loan Parties and their Subsidiaries against any and all Secured Obligations owing to such Secured Party hereunder or under any other Loan Document, now or hereafter existing, irrespective of whether or not such Secured Party

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or Affiliate shall have made demand under this Agreement or any other Loan Document and although such obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or indebtedness. Each Secured Party agrees promptly to notify Parent Guarantor and the Collateral Agent in writing after any such set off and application made by such Secured Party; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Collateral Agent and each Secured Party under this Section 7.12 are in addition to other rights and remedies (including other rights of setoff) that the Collateral Agent and such Secured Party may have.

     SECTION 7.13 Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Loan Agreement, any other Loan Document, any agreement with respect to any of the Secured Obligations or any other agreement or instrument relating to any of the foregoing, (b) any increase in, or any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Loan Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Secured Obligations or (d) subject to the terms of Section 7.14, any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Secured Obligations or this Agreement.

     SECTION 7.14 Termination or Release. (a) This Agreement and the Security Interest shall terminate with respect to all Secured Obligations when all the outstanding Secured Obligations have been indefeasibly paid in full and the Secured Parties have no further commitment under the Loan Agreement or other agreements evidencing the Secured Obligations.

          (b) Upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 13.6 of the Loan Agreement, the security interest in such Collateral shall be automatically released.

          (c) In connection with any termination or release pursuant to paragraph (a) or (b) above, the Collateral Agent shall execute and deliver to any Grantor, at such Grantor’s expense, all documents that such Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 7.14 shall be without recourse to or warranty by the Collateral Agent.

     SECTION 7.15 Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby appoints the Collateral Agent the attorney-in-fact of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof at any time after an Event of Default has occurred and is continuing, which appointment is irrevocable and coupled with an interest. Without

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limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuation of an Event of Default, with full power of substitution either in the Collateral Agent’s name or in the name of such Grantor (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct or that of any of their Affiliates, directors, officers, employees, counsel, agents or attorneys-in-fact.

     SECTION 7.16 General Authority of the Collateral Agent. By acceptance of the benefits of this Agreement and any other Loan Documents, each Secured Party (whether or not a signatory hereto) shall be deemed irrevocably (a) to consent to the appointment of the Collateral Agent as its agent hereunder and under such other Loan Documents, (b) to confirm that the Collateral Agent shall have the authority to act as the exclusive agent of such Secured Party for the enforcement of any provisions of this Agreement and such other Loan Documents against any Grantor, the exercise of remedies hereunder or thereunder and the giving or withholding of any consent or approval hereunder or thereunder relating to any Collateral or any Grantor’s obligations with respect thereto, (c) to agree that it shall not take any action to enforce any provisions of this Agreement or any other Loan Document against any Grantor, to exercise any remedy hereunder or thereunder or to give any consents or approvals hereunder or thereunder except as expressly provided in this Agreement or any other Loan Document and (d) to agree to be bound by the terms of this Agreement and any other Loan Documents. The Collateral Agent may resign at any time by giving written notice thereof to the Secured Parties and the Borrower. Upon any such resignation, the Bank shall appoint a successor Collateral Agent who shall be willing to accept, and accepts, such appointment within thirty (30) days after the retiring Collateral Agent shall have given notice of resignation

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(such appointment to be subject to the prior written approval of the Borrower, which approval may not be unreasonably withheld or delayed and shall not be required upon the occurrence and during the continuance of an Event of Default). Upon the acceptance of such appointment by the successor Collateral Agent, such successor Collateral Agent shall succeed to and become vested with all the rights, powers and privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents (but shall continue to have the benefit of Sections 7.10, 7.11 and 7.17 hereof).

     SECTION 7.17 Reasonable Care. The Collateral Agent is required to exercise reasonable care in the custody and preservation of any of the Collateral in its possession; provided, that the Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral if such Collateral is accorded treatment substantially similar to that which the Collateral Agent accords its own property, it being understood that neither the Collateral Agent nor any of the Secured Parties shall have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Investment Property, whether or not the Collateral Agent or any other Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any Person with respect to any Collateral.

[This space left intentionally blank.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed as of the date first above written.

MARTHA STEWART LIVING OMNIMEDIA, INC.
By:	/s/ Howard Hochhauser
	Name:	Howard Hochhauser
	Title:	Chief Financial Officer

MSLO EMERIL ACQUISITION SUB LLC
By:	/s/ Howard Hochhauser
	Name:	Howard Hochhauser
	Title:	Vice President

BANK OF AMERICA, N.A. as Collateral Agent
By:	/s/ Jane Heller
	Name:	Jane Heller
	Title:	Senior Vice President

[Signature page to Security Agreement]

EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of September 17, 2008 (the “Effective Date”), by and between Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”), and Charles A. Koppelman (the “Executive”).

     WHEREAS, the Executive has been serving since June 2005 as Chairman of the Board of Directors of the Company (the “Chairman” of the “Board”); and

     WHEREAS, the Company entered into a Separation Agreement dated as of June 10, 2008 with its former Chief Executive Officer (“CEO”) and on June 11, 2008, appointed two co-CEOs and determined that the co-CEOs should report to the Chairman; and

     WHEREAS, on July 25, 2008 (the “Starting Date”), the Board appointed the Executive as Executive Chairman of the Company; and

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

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

     1. Employment Term. Subject to the provisions of Section 7 of this Agreement, the Company hereby agrees to employ the Executive hereunder, and the Executive hereby agrees to be employed by the Company hereunder, in each case subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on December 31, 2012 (such period, as it may be extended in accordance with the terms of the following sentence, the “Employment Term”). Unless the Company or the Executive has theretofore provided notice in writing to the other party of its intention not to extend the Employment Term, on June 30, 2012 and on each succeeding June 30, this Agreement shall automatically be extended for an additional 12 months from the then scheduled expiration date.

     2. Duties.

          (a) During the Employment Term, the Executive shall serve as the Executive Chairman of the Company. The Executive shall be the senior-most executive officer of the Company and shall have the duties and responsibilities customarily exercised by an individual serving in that position in a corporation of the size and nature of the Company. In his capacity as Executive Chairman, the Executive shall use his best energies and abilities in the performance of his duties, services and responsibilities for the Company. In performing such duties, services and responsibilities, the Executive will report directly to the Board.

     (b) During the Employment Term, the Executive shall devote substantially all of his business time and attention to the businesses of the Company and its subsidiaries and affiliates and shall not engage in any activity inconsistent with the foregoing, whether or not such activity shall be engaged in for pecuniary profit, unless approved by the Board; provided, however, that, to the extent such activities do not violate, or substantially interfere with his performance of his duties, services and responsibilities under, this Agreement, the Executive shall be permitted to manage his personal, financial and legal affairs and serve on civic or charitable boards and committees of such boards. The parties understand and agree that the Executive may continue to serve on corporate, civic and charitable boards on which he sits as of the date of this Agreement (including the Executive’s service as the Chairman of FAO Schwartz Inc.; a director of the Board of Governors of New York Hospital; a member of the Dean’s Council of Hofstra Law School; a director of the Arts Board of Tufts University; a stockholder and director of SFNY, Inc, and a trustee of the United States Gypsum Asbestos Personal Injury Settlement Trust) (such activities, together, and as may be amended pursuant to this paragraph, the “Non-Company Activities”). Executive shall not permit the Non-Company Activities to interfere with the Executive’s performance on behalf of the Company under this Agreement, and Executive agrees that, subject to the first sentence of this paragraph, he shall only accept new or additional responsibilities related to businesses other than the Company’s (such new or additional responsibilities constituting Non-Company Activities) to the extent Executive gives up a Non-Company Activity requiring a commensurate amount of time and effort. During the Employment Term, the Executive’s principal location of employment shall be at the Company’s executive offices in New York City, New York, except for customary business travel on behalf of the Company and its subsidiaries and affiliates.

          (c) Upon any termination of the Executive’s employment with the Company, the Executive shall be deemed to have resigned from all other positions he then holds as an employee or director or other independent contractor of the Company or any of its subsidiaries or affiliates, unless otherwise agreed by the Company and the Executive. Any such termination shall constitute a “separation of service” with the Company for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”).

     3. Base Salary; Bonus.

          (a) During the Employment Term, in consideration of the performance by the Executive of the Executive’s obligations during the Employment Term (including any service in any position with any subsidiary or affiliate of the Company), the Company shall pay the Executive a base salary (the “Base Salary”) at an annual rate of $900,000, subject to increase but not decrease in the discretion of the Board, based on the Board’s annual review of Executive’s compensation, payable in accordance with the normal payroll practices of the Company in effect from time to time. The Base Salary at the rate of $75,000 per month will be payable to Employee retroactively to the Starting Date, provided that such amount will be reduced by any payments made to CAK Entertainment, Inc. under the terms of the Consulting Agreement (as defined below) for the period from the Starting Date through October 21, 2008 (at the rate of $60,000 per month), such that on the date hereof, Employee shall be entitled to receive $45,000 pursuant to this Agreement from the Starting Date through October 21, 2008, and CAK

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Entertainment shall be entitled to receive $60,000 pursuant to the terms of the Consulting Agreement.

          (b) During the Employment Term, in addition to the payments of the Base Salary set forth above, the Executive shall be eligible to receive, in respect of each calendar year during which the Employment Term is in effect (pro rata for 2008 and any other partial calendar year), a performance-based cash bonus of 100% of Base Salary at target and 150% of Base Salary at maximum based on achievement of goals established with respect to each calendar year by the Compensation Committee of the Board after reasonable consultation with the Executive. Such bonus, if any, shall be paid concurrently with other bonuses paid to senior executives of the Company, provided you are continuously and actively employed through such date of payment. Such bonus shall be paid in a lump sum no earlier than January 1^st and no later than March 15^th of the calendar year following the calendar year to which such bonus relates.

          (c) The consulting agreement entered into by the Company and CAK Entertainment, Inc., dated October 21, 2005, and as modified July 19, 2007 (together, the “Consulting Agreement”), is hereby terminated, as well as the Executive’s consulting services provided therewith. In order to avoid any conflicts of interest relating to Employee’s services as an employee pursuant to this Agreement, the Company shall pay CAK Entertainment, Inc. the balance of cash fees outstanding and payable in 2008 under the Consulting Agreement in the amount of $375,000, and shall accelerate the vesting of outstanding equity awards made pursuant to the Consulting Agreement, consisting of (i) 30,482 shares of restricted stock, and (ii) the vesting of the option with respect to 81,283 shares (such cash payment, together with the accelerated equity awards, the “Consulting Fee”). The Company hereby agrees to accelerate the payment of the balance of cash fees in the amount of $600,414 due to CAK Entertainment, Inc. pursuant to Section 6 of Exhibit A to the Consulting Agreement, and to provide that the payment will be paid in a lump sum to CAK Entertainment, Inc. on January 9, 2009 (the “Tail Fee”) so that the payment complies with Section 409A. The cash payment due for CAK Entertainment, Inc. in 2008 shall be paid promptly following the date hereof. The Consulting Fee and the Tail Fee shall be the total and exclusive payment for any and all payments or commissions that may be due or may become due under the Consulting Agreement. These payments satisfy all obligations of the Company in connection with the Consulting Agreement, which is rendered terminated conditioned upon the payments described in this subparagraph.

          (d) Executive shall be eligible to receive $300,000 in the event that the Company achieves adjusted EBITDA for 2008 that is 10% greater than adjusted EBITDA in 2007, which shall be paid in 2009, if at all, on March 10, 2009.

     4. Benefits.

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

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          (b) The Company shall reimburse the Executive for all reasonable business expenses incurred by the Executive in carrying out the Executive’s duties, services and responsibilities under this Agreement during the Employment Term, including, without limitation, first class transportation or travel on a private plane of the Company to the extent that such private plane is available. The Executive shall comply with generally applicable policies, practices and procedures of the Company with respect to reimbursement for, and submission of expense reports, receipts or similar documentation of, such expenses

          (c) The Company shall reimburse Executive for a driver at an hourly rate to be agreed to, provided that such expense related to a driver for Executive shall not exceed $60,000 in any year.

          (d) The Company shall, to the extent feasible and available, make an office available to one or more individuals working with the Executive on Non-Company Activities, provided that Employee shall reimburse the Company for the use of such space at the applicable rental rate.

          (e) For purposes of complying with Section 409A, any reimbursement of benefits provided under this Section 4 shall be subject to the following: (i) provision of such reimbursement or benefits provided during one calendar year shall not affect the amount of reimbursements or benefits provided during a subsequent calendar year; (ii) such reimbursements or benefit may not be exchanged or substituted for other forms of compensation to the Executive; and (iii) payments must be made no later than the last day of the calendar year immediately following the calendar year in which the expense is incurred.

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

     6. Equity Compensation.

          (a) Promptly after the execution and delivery of this Agreement by the parties, the Company shall grant the Executive 425,000 shares of restricted Class A common stock, par value $0.01 per share (“Stock”), of the Company, pursuant to the Restricted Stock Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”) and the Company’s policy on equity issuances,. The Restricted Stock Agreement shall provide that (i) 25,000 shares of the Stock shall vest on the first anniversary of the date of grant; (ii) 200,000 shares of the Stock shall vest in approximately equal tranches on the first, second and third anniversaries of the date of grant; (iii) 100,000 shares of the Stock shall vest if and only if the Fair Market Value of the Common Stock (as such terms are defined in the Company’s Omnibus Stock and Option Compensation Plan) has been at least $15 on each of the immediately preceding 60 consecutive trading days during the initial Employment Term; and (iv) 100,000 shares of the Stock shall vest if and only if the Fair Market Value of the Common Stock has been at least $25 on each of the immediately preceding 60 consecutive trading days during the initial Employment Term (items (iii) and (iv) hereof, together, the “Performance Shares”).

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          (b) Promptly after the execution and delivery of this Agreement by the parties, the Company shall grant the Executive a non-qualified option to purchase 600,000 shares of Stock of the Company pursuant to the Company’s policy on equity issuances. The option shall vest in three approximately equal tranches with a seven (7) year term, pursuant to the Stock Option Agreement attached hereto as Exhibit B (the “Stock Option Agreement” and, together with the Restricted Stock Agreement, the “Equity Agreements”). It is expected that, in the discretion of the Board (or the Compensation Committee of the Board), the Executive may from time to time be granted additional equity awards during the Employment Term.

          (c) Upon a Change in Control of the Company, all unvested equity awards held by the Executive shall become fully vested and (in the case of stock options) exercisable.

     7. Termination of the Employment Term.

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

               (i) the death of the Executive;

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

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

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

               (v) the expiration of the Employment Term.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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     8. Termination Procedures.

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

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

     9. Termination Payments.

          (a) Upon any termination of the Executive’s employment, he shall be entitled to payment of any earned but unpaid portion of the Base Salary, bonus, benefits and unreimbursed business expenses, in each case with respect to the period ending on the Date of Termination. In addition, upon termination of Executive’s employment without Cause or a termination by Executive with Good Reason, Executive will be entitled to a pro-rated bonus for the year of termination (calculated at the end of the fiscal year and then pro rated through the date of termination) provided that applicable performance targets have been met and bonuses are paid generally to similarly situated executives at the Company. Such payments shall be made in accordance with the provisions of Section 3 and Section 4 of this Agreement.

          (b) In addition to the payments and benefits provided in Section 9(a), if the Executive’s employment is terminated (x) by the Company without Cause or (y) by the Executive for Good Reason, (i) outstanding equity awards (excluding, however, the Performance Shares if such Performance Shares have not vested by their own terms) held by the Executive shall vest and/or become exercisable, (ii) the Company shall pay the Executive the Severance Payment and (iii) the Company shall provide the Executive with continued medical coverage at active-employee rates for two years or, if earlier, until the Executive receives subsequent employer-provided coverage. For purposes of this Section 9(b), the “Severance Payment” shall be a lump-sum cash payment equal to eighteen (18) months’ of the Executive’s Base Salary. The Severance Payment shall be paid no later than 60 days following the Date of Termination; provided the Executive has executed the release referred to below and any waiting period with respect to such release has elapsed. In addition, (i) provision of continued medical coverage to the Executive pursuant to this Section 9(b) during any one calendar year shall not affect the amount of such coverage provided during a subsequent calendar year; and (ii) provision of such

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continued medical coverage may not be exchanged or substituted for other forms of compensation to the Executive.

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

     10. Confidential Information; Noncompetition; Nonsolicitation; Nondisparagement.

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

          (b) Noncompetition. During the Employment Term and (unless this Agreement terminates pursuant to clause (v) of Section 7(a) or is terminated by the Executive for “Good Reason” as defined in Section 7(b)(iv)) until the eighteen (18) month anniversary of the Executive’s Date of Termination, the Executive shall not engage in or become associated with any Competitive Activity. For purposes of this Section 10(b), a “Competitive Activity” shall mean any business or other endeavor that engages in any country in which the Company has significant business operations to a significant degree in a business that directly competes with all or any substantial part of any of the Company’s businesses of (i) producing radio, television and other video programs, (ii) designing, developing, licensing, promoting and selling merchandise through catalogs, direct marketing, Internet commerce and retail stores of the product categories in which the Company so participates using the name, likeness, image, or voice of any Company employee (without limitation, Company employees for the purposes of this Section 10(b) shall be deemed to include Martha Stewart and Emeril Lagasse) to promote or market any such product or service, (iii) the creation, publication or distribution of regular or special issues of magazines and operation of websites, and (iv) any other business in which the Company is engaged during the term of this Agreement (it being understood that a media business shall not be deemed to engage in Competitive Activity if the content produced by such media business does not compete with the content of the such programs (in the case of clause (i)) or magazines or websites (in the case of clause (iii)). The Executive shall be considered to have become “associated with a Competitive Activity” if he becomes involved as an owner, employee, officer, director, independent contractor, agent, partner, advisor, or in any other capacity calling for the rendition of the Executive’s personal services, with any individual, partnership, corporation or other organization that is engaged in a Competitive Activity and his

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involvement relates to a significant extent to the Competitive Activity of such entity; provided, however, that the Executive shall not be prohibited from (a) owning less than two percent of any publicly traded corporation, whether or not such corporation is in competition with the Company or (b) serving as a director of a corporation or other entity the primary business of which is not a Competitive Activity; and provided, further, however, that the Executive shall not be deemed to have become associated with a Competitive Activity if the Executive becomes chief executive officer of an organization that engages in one or more Competitive Activities so long as (i) less than 10% of the annual revenue of such organization is derived from Competitive Activities and (ii) the Executive does not actively participate in the management or operation of the part of such organization that engages in any Competitive Activity. If, at any time, the provisions of this Section 10(b) shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to area, duration or scope of activity, this Section 10(b) shall be considered divisible and shall become and be immediately amended to only such area, duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter; and the Executive agrees that this Section 10(b) as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein.

          (c) Nonsolicitation. During the Employment Term, and for twenty-four (24) months after the Executive’s Date of Termination, the Executive shall not, directly or indirectly, (1) solicit for employment by other than the Company any person (other than any personal secretary or assistant hired to work directly for the Executive) employed by the Company or its affiliated companies as of the Date of Termination, (2) solicit for employment by other than the Company any person known by the Executive (after reasonable inquiry) to be employed at the time by the Company or its affiliated companies as of the date of the solicitation or (3) solicit any customer or other person with a business relationship with the Company or any of its affiliated companies to terminate, curtail or otherwise limit such business relationship.

          (d) Non-disparagement. During the Employment Term and thereafter, (i) the Executive shall not, directly or indirectly, make or publish any disparaging statements (whether written or oral) regarding the Company or any of its affiliated companies or businesses, or the affiliates, directors, officers, agents, principal stockholders or customers of any of them and (ii) neither the Company nor any of its affiliated companies or businesses or their affiliates, directors, or officers shall directly or indirectly, make or publish any disparaging statements (whether written or oral) regarding the Executive. Executive shall not author, co-author, or assist in the production or authorship of any story, book, show, script or other work about the Company or Martha Stewart without the Company’s prior review of such work and the Company’s written consent as to the production and content thereof.

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

     11. Reimbursement of Legal Fees. If any contest or dispute shall arise between the Company and the Executive regarding any provision of this Agreement, the Company shall

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reimburse the Executive for all legal fees and expenses reasonably incurred by the Executive in connection with such contest or dispute, but only if the Executive prevails to a substantial extent with respect to the Executive’s claims brought and pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company receives written evidence of such fees and expenses. In addition, the Company shall reimburse the Executive for all reasonable legal fees and expenses incurred in connection with the negotiation and execution of this Agreement.

     12. Indemnification.

          (a) General. The Company agrees that if the Executive is made a party or is threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that the Executive is or was a trustee, director or officer of the Company or any of its affiliates or is or was serving at the request of the Company or any of its affiliates as a trustee, director, officer, member, employee or agent of another corporation or a partnership, joint venture, limited liability company, trust or other enterprise, including, without limitation, service with respect to employee benefit plans, whether or not the basis of such Proceeding is alleged action in an official capacity as a trustee, director, officer, member, employee or agent while serving as a trustee, director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by Delaware law, as the same exists or may hereafter be amended, against all Expenses incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if the Executive has ceased to be a trustee, director, officer, member, employee or agent, or is no longer employed by the Company and shall inure to the benefit of his heirs, executors and administrators.

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          (b) Expenses. As used in this Agreement, the term “Expenses” shall include, without limitation, damages, losses, judgments, liabilities, fines, penalties, excise taxes, settlements, and costs, attorneys’ fees, accountants’ fees, and disbursements and costs of attachment or similar bonds, investigations, and any expenses of establishing a right to indemnification under this Agreement.

          (c) Enforcement. If a claim or request under this Section 12 is not paid by the Company or on its behalf, within thirty (30) days after a written claim or request has been received by the Company, the Executive may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim or request and if successful in whole or in part, the Executive shall be entitled to be paid also the expenses of prosecuting such suit. All obligations for indemnification hereunder shall be subject to, and paid in accordance with, applicable Delaware law.

          (d) Partial Indemnification. If the Executive is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Executive for the portion of such Expenses to which the Executive is entitled.

          (e) Advance of Expenses. Expenses incurred by the Executive in connection with any Proceeding shall be paid by the Company in advance upon request of the Executive that the Company pay such Expenses, but only in the event that the Executive shall have delivered in writing to the Company (i) an undertaking to reimburse the Company for Expenses with respect to which the Executive is not entitled to indemnification and (ii) a statement of his good faith belief that the standard of conduct necessary for indemnification by the Company has been met.

          (f) Notice of Claim. The Executive shall give to the Company notice of any claim made against him for which indemnification will or could be sought under this Agreement. In addition, the Executive shall give the Company such information and cooperation as it may reasonably require and as shall be within the Executive’s power and at such times and places as are convenient for the Executive.

          (g) Defense of Claim. With respect to any Proceeding as to which the Executive notifies the Company of the commencement thereof:

                    (i) The Company will be entitled to participate therein at its own expense;

                    (ii) Except as otherwise provided below, to the extent that it may wish, the Company will be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Executive, which in the Company’s sole discretion may be regular counsel to the Company and may be counsel to other officers and directors of the Company or any subsidiary. The Executive also shall have the right to employ his own counsel in such action, suit or proceeding if he reasonably concludes that failure to do so would involve a conflict of interest between the Company and the Executive, and under such circumstances the fees and expenses of such counsel shall be at the expense of the Company.

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                    (iii) The Company shall not be liable to indemnify the Executive under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty that would not be paid directly or indirectly by the Company or limitation on the Executive without the Executive’s written consent. Neither the Company nor the Executive will unreasonably withhold or delay their consent to any proposed settlement.

          (h) Non-Exclusivity. The right to indemnification and the payment of expenses incurred in defending a Proceeding in advance of its final disposition conferred in this Section 12 shall not be exclusive of any other right which the Executive may have or hereafter may acquire under any statute or certificate of incorporation or by-laws of the Company or any subsidiary, agreement, vote of shareholders or disinterested directors or trustees or otherwise.

          (i) Insurance. The Executive shall be covered by the directors’ and officers’ insurance policies maintained by the Company on the same basis as other directors and officers of the Company.

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

     14. Representations.

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

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

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     15. Successors; Binding Agreement.

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

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

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

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

a copy to:

Howard Jacobs, Esq.
Katten Muchin Rosenman, LLP
575 Madison Avenue
New York, NY 10022
Tel: (212) 940-8505
Fax: (212) 894-5505

If to the Company:

Martha Stewart Living Omnimedia, Inc.
11 West 42nd Street
New York, NY 10036

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Attention: General Counsel
Tel: (212) 827-8362
Fax: (212) 827-8188;

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

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

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

     19. Section 409A.

     (a) The intent of the parties is that payments and benefits under this Agreement comply with Section 409A and, accordingly, to the maximum extent permitted, all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. Executive is hereby advised to seek independent advice from your tax advisor(s) with respect to any payments or benefits under this Agreement. Notwithstanding the foregoing, the Company does not guarantee the tax treatment of any payments or benefits provided under this Agreement, whether pursuant to the Code, federal, state, local or foreign tax laws and regulations.

     (b) If the Executive is deemed on the date of termination of his “separation from service” with the Company to be a “specified employee”, each within the meaning of Section 409A(a)(2)(B) of the Code, then with regard to any payment or the providing of any benefit under this Agreement, and any other payment or the provision of any other benefit that is required to be delayed in compliance with Section 409A(a)(2)(B) of the Code, such payment or benefit shall not be made or provided prior to the earlier of (i) the expiration of the six-month period measured from the date of the Executive’s separation from service or, (ii) the date of the Executive’s death if and to the extent such six-month delay is required to comply with Section

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409A(a)(2)(B) of the Code. In such event, on or promptly after the first business day following the six-month delay period, all payments delayed pursuant to this Section19 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

     (c) If under this Agreement, an amount is to be paid in installments, each installment shall be treated as a separate payment for purposes of Treasury Regulations Section 1.409A-2(b)(2)(iii).

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

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

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

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

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

     25. Governing Law; Survival The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without regard to its conflicts of law principles. Each of the parties agrees that if any dispute is not resolved by the parties pursuant to Section 13, such dispute shall be resolved only in the courts of the State of New York sitting in the County of New York or the United States District Court for the Southern District of New York and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, each of the parties irrevocably and unconditionally (a) submits for itself in any Proceeding relating to this Agreement, or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the courts of the State of New York sitting in the County of New York, the court of the United States of America for the Southern District of New York, and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such Proceeding shall be heard and determined in such New York State court or, to the extent permitted by law, in such federal court; (b) consents that any such Proceeding may and shall be brought in such courts and waives any objection that it may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding

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was brought in an inconvenient court and agrees not to plead or claim the same; (c) waives all right to trial by jury in any Proceeding (whether based on contract, tort or otherwise) arising out of or relating to this Agreement, or its performance under or the enforcement of this Agreement; (d) agrees that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address as provided in Section 16; and (e) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of New York. The provisions of Section 10 that are intended to survive the Employment Term shall remain in full force and effect for their respective periods of duration; it being understood that the provisions of Section 10(d) shall be perpetual.

          26. Contemporaneous Execution of Letter Terminating of Consulting Term. Contemporaneously with the execution hereof, the parties each shall execute, and the Executive shall cause CAK Entertainment Inc. to execute, the letter agreement attached hereto as Exhibit C.

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

MARTHA STEWART LIVING OMNIMEDIA, INC.
By:	/s/ Howard Hochhauser
Name:	Howard Hochhauser
Title:	Chief Financial Officer

/s/ Charles Koppelman  

Charles A. Koppelman 

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Exhibit C

MARTHA STEWART LIVING OMNIMEDIA, INC.
11 West 42^nd Street
New York, New York 10036

CAK Entertainment Inc.
37 East 64^th Street, Suite 1607
New York, New York 10021
Attn: Charles A. Koppelman

Re: Consulting Agreement dated as of October 21, 2005, as amended, between CAK Entertainment Inc. and Martha Stewart Living Omnimedia, Inc. (the “Consulting Agreement”)

Dear Charles:

     The parties to the above-referenced Consulting Agreement hereby agree that, for good and valuable consideration as provided and evidenced by the payment to CAK Entertainment Inc. pursuant to Sections 3(a) and 3(c) of the Employment Agreement between Martha Stewart Living Omnimedia, Inc. and Charles A. Koppelman of even date herewith, the Consulting Agreement is terminated in all respects as of the date hereof (the “Termination Date”), and is of no further force or effect, and no further consulting services have been or will be provided pursuant to the Consulting Agreement following the Termination Date..

Very truly yours,
MARTHA STEWART LIVING OMNIMEDIA, INC.
By:	/s/ Howard Hochhauser
Name:	Howard Hochhauser
Title:	Chief Financial Officer

ACCEPTED AND AGREED:

CAK ENTERTAINMENT INC.

By:	/s/ Charles Koppelman
	Charles A. Koppelman
	President
	/s/ Charles Koppelman
Charles A. Koppelman

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EX-10.3

Exhibit 10.3

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of September 17, 2008, by and between Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”), and Wenda Harris Millard (the “Executive”).

     WHEREAS, the Executive has been serving as the President — Media of the Company, and effective June 11, 2008 (the “Effective Date”) was elevated to Co-Chief Executive Officer (“Co-CEO”), and the Executive is willing to be so employed, in each case on the terms and conditions set forth herein;

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

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

     2. Duties.

          (a) During the Employment Term, the Executive shall serve as the President — Media of the Company and as the Company’s Co-CEO. The Executive shall continue to have the Pre-Effective Date Duties and Responsibilities (as defined in Section 7), and shall also have the duties and responsibilities customarily exercised by an individual serving in such a position in a corporation of the size and nature of the Company; provided, however, that Executive’s Post-Effective Date Duties and Responsibilities (as defined in Section 7) shall be those duties and responsibilities as the Company’s Board of Directors (the “Board”), upon notice to Executive, may specify from time to time in its sole and absolute discretion (which specifications may increase, decrease or otherwise alter the scope or nature of such duties and responsibilities). In such capacities, the Executive shall use her best energies and abilities in the performance of her duties, services and responsibilities for the Company as further detailed by the Board. In performing such duties, services and responsibilities, the Executive will report directly to the Chairman of the Board (the “Chairman”) in his role as principal executive officer of the Company or, as the Board may direct, to a committee of the Board or to the full Board. Executive acknowledges and agrees that the Company may determine that (i) the Chairman (or his successor) is, the “principal executive officer” of the Company as such term is defined in any applicable laws, rules and regulations (collectively, “Applicable Law”); or (ii) Executive, alone or jointly with any other officer(s) of the Company, is the “principal executive officer” of the Company as such term is defined in any Applicable Law and/or is the “chief executive officer . . . (or equivalent thereof)” of the Company as such term is defined in any Applicable Law and/or serves in any similar role with respect to which a person may have duties under any Applicable Law.

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

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

          (d) The Company will recommend to the Board that the Executive be appointed to the Board as soon as practicable but in no event later than twelve (12) months following the Effective Date. The Executive acknowledges that appointment to the Board shall be determined by the Board in its sole and absolute discretion and agrees that, provided the Company has made the recommendation set forth in the immediately preceding sentence, any failure by the Board to appoint Executive to the Board shall not be deemed a breach of this Agreement. In no event will the other Co-CEO be appointed to the Board unless Executive is also appointed to the Board. Following the Effective Date, whether or not a Board member, Executive shall be invited to and entitled to attend all meetings of the Board; provided, however, that Executive shall be excluded from such portions of Board meetings as the Company deems appropriate, including discussions related to her or the other Co-CEO, or their respective performance, compensation or related issues.

     3. Base Salary; Bonus.

          (a) During the Employment Term, in consideration of the performance by the Executive of the Executive’s obligations during the Employment Term (including any service in any position with any subsidiary or affiliate of the Company), the Company shall pay the Executive a base salary (the “Base Salary”) at an annual rate of $650,000, subject to increase but not decrease in the discretion of the Board, payable in accordance with the normal payroll practices of the Company in effect from time to time.

          (b) During the Employment Term, in addition to the payments of the Base Salary set forth above, the Executive shall be eligible to receive, in respect of each calendar year during which the Employment Term is in effect, a performance-based cash bonus of 100% of Base Salary at target (the “Target Bonus”) and 150% of Base Salary at maximum based on achievement of goals established each year by the Compensation Committee after reasonable consultation with Executive; provided that with respect to calendar year 2008, the Target Bonus shall be $557,000. Such bonus, if any, shall be paid concurrently with other bonuses paid to senior executives of the Company, provided you are continuously and actively employed through such date of payment.

          (c) The Company shall reimburse Executive for reasonable legal fees in connection with the negotiation and execution of this Agreement in an amount not to exceed $15,000.

     4. Benefits.

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

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

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

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     6. Equity Compensation.

          (a) Promptly after the execution and delivery of this Agreement by both parties, the Company shall grant the Executive 50,000 shares of restricted Class A common stock, par value $0.01 per share (the “Stock”) of the Company pursuant to the Company’s policy on equity issuances (the “Stock Grant”). The Stock Grant shall vest in three approximately equal tranches on the first, second and third anniversaries of the date of the Stock Grant pursuant to the Company’s form of Restricted Stock Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”).

          (b) Promptly after the execution and delivery of this Agreement by both parties, the Company shall grant the Executive a non-qualified option to acquire 100,000 shares of Stock pursuant to the Company’s policy on equity issuances; provided, however that the Option Grant shall vest in three approximately equal tranches on the first, second and third anniversaries of the date of the Option Grant, with a seven (7) year term pursuant to the Company’s form of Option Agreement attached hereto as Exhibit B (the “Option Agreement” and together with the Restricted Stock Agreement, the “Equity Agreements”).

          (c) The Executive will continue to participate in the Company’s annual stock incentive program, receiving awards as determined by the Compensation Committee from time to time.

          (d) Upon a Change in Control (as defined hereinafter), all unvested shares of restricted stock and option awards held by the Executive, other than the option granted to Executive on approximately March 3, 2008, (the “March 2008 Option Grant”) shall become fully vested and (in the case of Stock Options) exercisable, with outstanding stock options remaining exercisable for a period of not less than five years after such Change in Control (but in no event beyond the original term of the stock options). For the avoidance of doubt, this Agreement does not alter, and a Change of Control shall not cause to vest the then-unvested portion of, the March 2008 Option Grant.

     7. Termination of the Employment Term.

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

               (i) the death of the Executive;

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

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

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

               (v) the expiration of the Employment Term.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                    (1) a material diminution of, or material reduction or material adverse alteration in, the Executive’s title (except as may occur in response to a comment from a regulatory or governmental agency), reporting status or authority to exercise Pre-Effective Date Duties, and Responsibilities (as defined below), or the assignment to the Executive of duties inconsistent with those set forth in Section 2(a) (or as subsequently amended in accordance with Section 18 with the consent of the Executive) resulting in a materially adverse change to the Executive’s duties and responsibilities; provided, however, that the following shall not constitute Good Reason pursuant to this Section 7(b)(iv)(1): the assignment to, or exercise by, the Chairman, the Company’s other Co-CEO and/or any other officer(s) appointed by the Chairman or the Board, as the case may be, of (and any related diminution, reduction, alteration or elimination of Executive’s authority to exercise) any Post-Effective Date Duties and Responsibilities, regardless of whether Executive has exercised any such Post-Effective Date Duties and Responsibilities; and provided further that any diminution, reduction or adverse alteration in Executive’s authority to exercise any Pre-Effective Date Duties and Responsibilities (the “Reduced Pre-Effective Date Duties and Responsibilities”) shall be disregarded for the purposes of this Section 7(b)(iv)(1) to the extent that Executive has authority to exercise any Post-Effective Date Duties and Responsibilities that are of approximately comparable importance to the Company as the Reduced Pre-Effective Date Duties and Responsibilities;

                    (2) a material dimunition, material reduction or materially adverse alteration to Executive’s Post-Effective Date Duties and Responsibilities as exercised by the Executive in the ordinary course prior to the date of this Agreement;

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

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

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

“Pre-Effective Date Duties and Responsibilities” shall mean duties and responsibilities exercised by Executive in her capacity as President – Media of the Company prior to the Effective Date with respect to assets owned by the Company prior to the Effective Date. “Post-Effective Date Duties and Responsibilities” shall mean duties and responsibilities other than Pre-Effective Date Duties and Responsibilities, and notwithstanding anything to the contrary may include, without limitation, any duties and responsibilities related to any assets or operations that were or may be acquired by the Company on or after the Effective Date at the discretion of the Board.

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

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     8. Termination Procedures.

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

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

     9. Termination Payments.

          (a) Upon any termination of the Executive’s employment, she shall be entitled to payment of any earned but unpaid portion of the Base Salary, bonus, benefits and unreimbursed business expenses, in each case with respect to the period ending on the Date of Termination. In addition, upon termination of Executive’s employment without Cause or a termination by Executive with Good Reason, Executive will be entitled to a pro-rated bonus for the year of termination (calculated at the end of the fiscal year and then pro rated through the date of termination) provided that applicable performance targets have been met and bonuses are paid generally to similarly situated executives at the Company. Any payments due pursuant to this Section shall be paid in a lump sum at the time the Company pays other bonuses, subject to Section 18 hereof (if applicable).

          (b) In addition to the payments and benefits provided in Section 9(a), if the Executive’s employment is terminated (x) by the Company without Cause or (y) by the Executive for Good Reason, (i) outstanding equity awards consisting of restricted stock and stock options held by the Executive other than the March 2008 Option Grant shall vest and/or become exercisable, (ii) the Company shall pay the Executive the Severance Payment and (iii) the Company shall provide the Executive with continued medical coverage at active-employee rates for eighteen months or, if earlier, until the Executive receives subsequent employer-provided coverage. For purposes of this Section 9(b), the “Severance Payment” shall be a lump-sum cash payment equal to 18 months’ salary. The Severance Payment shall be paid no later than 60 days following the Date of Termination; provided the Executive has executed the release referred to below and any waiting period with respect to such release has elapsed. Payment of the Severance Payment shall be conditioned upon the Executive’s execution of a general release in form satisfactory to the Company and the Executive within sixty (60) days of the date of termination; provided, however, that such release shall not contain post-termination restrictions that are more onerous for the Executive than those contained in this Agreement.

          (c) Executive understands and agrees that she shall, effective upon the full execution of this Agreement, cease to be a participant in, or eligible for any benefits or claims under, the Company’s 2008 Executive Severance Pay Plan.

     10. Confidential Information; Noncompetition; Nonsolicitation; Nondisparagement.

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

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information, knowledge or data relating to the Company, its affiliates or any businesses or investments of the Company or its affiliates, obtained by the Executive during the Executive’s services to the Company that is not generally available public knowledge or known within the Company’s industry (other than by acts by the Executive in violation of this Agreement).

          (b) Noncompetition. The Executive hereby agrees that during her employment with the Company and (unless this Agreement expires pursuant to Clause (v) of Section 7(a) hereof) during any Tail Period (as defined below), if any, Executive shall not engage in or become associated with a Competitive Activity (as defined below). A “Competitive Activity” shall mean any business which develops or produces lifestyle-based content aimed primarily at adult female audiences (e.g., Oprah Magazine, iVillage, the WE Network). Executive shall be deemed to be “engaged in or associated with a Competitive Activity” if she is or becomes an owner, employee, officer, director, independent contractor, agent, partner, advisor, or renders personal services in any other capacity, with or for any individual, partnership, corporation or other organization (collectively, an “Enterprise”) that is engaged in a Competitive Activity, provided, however, that Executive shall not be prohibited from (a) owning less than five percent of the stock in any publicly traded Enterprise engaging in a Competitive Activity, or (b) being an employee, independent contractor or otherwise providing services to an Enterprise that is engaged in a Competitive Activity so long as Executive’s services relate to (x) an aspect or endeavor of such Enterprise that is distinct from, and unrelated to, and Executive has no influence or control over, such Enterprise’s pursuit of a Competitive Activity or (y) the overall operation or management of the Enterprise (or any portion thereof) provided that the Competitive Activity is not the primary component of such Enterprise (or portion thereof). “Tail Period” shall mean the period, if any, commencing on the Date of Termination and ending on the 18-month anniversary of such date. If, at any time, the provisions of this paragraph shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to area, duration or scope of activity, this paragraph shall be considered divisible and shall become and be immediately amended to only such area, duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter. The Executive agrees that this paragraph as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein. The Executive further agrees that the remedies at law for any breach or threat of breach by her of this paragraph will be inadequate, and that, in addition to any other remedy to which the Company may be entitled at law or in equity, the Company will be entitled to seek a temporary or permanent injunction or injunctions or temporary restraining order or orders to prevent breaches thereof. The Executive’s agreement shall not be deemed to prohibit her from opposing such relief on the basis of a dispute of facts related to any such application.

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

          (d) Non-disparagement. During her employment with the Company, and thereafter, (i) the Executive shall not, directly or indirectly, make or publish any disparaging statements (whether written or oral) regarding the Company or any of its affiliated companies or businesses, or the affiliates, directors, officers, agents, principal stockholders or customers of any of them and (ii) neither the Company nor any of its affiliated companies or businesses or their affiliates, directors, or officers shall directly or indirectly, make or publish any disparaging statements (whether written or oral) regarding the Executive. Executive shall not author, co-author, or assist in the production or authorship of any story, book, show, script or other work about the Company or Martha Stewart without the Company’s prior review of such work and the Company’s written consent as to the production and content thereof.

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

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

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

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

     14. Representations.

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

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

     15. Successors; Binding Agreement.

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

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

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

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

     With a copy to:

Gavin McElroy, Esq.
Frankfurt, Kurnit, Klein & Selz PC
488 Madison Avenue
New York, NY 10022
Tel: (212) 826-5541
Fax: (347) 438-2111

     If to the Company:

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

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

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

     18. Section 409A.

(a) The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Code as amended, and the regulations and guidance promulgated thereunder (collectively “Section 409A”) and, accordingly, to the maximum extent permitted, all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. You are hereby advised to seek independent advice from your tax advisor(s) with respect to any payments or benefits under this Agreement. Notwithstanding the foregoing, the Company does not guarantee the tax treatment of any payments or benefits provided under this Agreement, whether pursuant to the Code, federal, state, local or foreign tax laws and regulations.

(b) If the Executive is deemed on the date of termination of her “separation from service” with the Company to be a “specified employee”, each within the meaning of Section 409A(a)(2)(B) of the Code, then with regard to any payment or the providing of any benefit under this Agreement, and any other payment or the provision of any other benefit that is required to be

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delayed in compliance with Section 409A(a)(2)(B) of the Code, such payment or benefit shall not be made or provided prior to the expiration of the six-month period measured from the date of the Executive’s separation from service (or, if earlier, the date of the Executive’s death) if and to the extent such six-month delay is required to comply with Section 409A(a)(2)(B) of the Code. In such event, on or promptly after the first business day following the six-month delay period, all payments delayed pursuant to this Section 18)(ii) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

(c) If under this Agreement, an amount is to be paid in installments, each installment shall be treated as a separate payment for purposes of Treasury Regulations Section 1.409A-2(b)(2)(iii).

     19. Modification; Waiver. No provision of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing and signed by the Executive and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged; provided, however, that the Board may in its sole and absolute discretion, upon written notice to Executive, increase, decrease or otherwise alter the scope or nature of the Post-Effective Date Duties and Responsibilities; provided however, that such alteration does not override the definition of “Good Reason” contained in Section 7(b)(iv) of this Agreement. No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

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

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

     22. Entire Agreement. This Agreement and the Equity Agreements set forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties (including without limitation that agreement between the parties dated as of June 25, 2007), whether oral or written, by any officer, employee or representative of any party hereto in respect of such subject matter.

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

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

     25. Governing Law; Survival. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without regard to its conflicts of law principles. Each of the parties agrees that if any dispute is not resolved by the parties pursuant to Section 13, such dispute shall be resolved only in the courts of the State of New York sitting in the County of New York or the United States District Court for the Southern District of New York and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, each of the parties irrevocably and unconditionally (a) submits for itself in any action or proceeding relating to this Agreement, or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the courts of the State of New York sitting in the County of New York, the United States District Court for the Southern District of New York, and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such action or proceeding shall be heard and determined in such New York State court or, to the extent permitted by law, in such federal court; (b) consents that any such action or proceeding may and shall be brought in such courts and waives any objection that it may now or thereafter have to the venue or jurisdiction of any such action or

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proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) waives all right to trial by jury in any action or proceeding (whether based on contract, tort or otherwise) arising out of or relating to this Agreement, or its performance under or the enforcement of this Agreement; (d) agrees that service of process in any such action or proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address as provided in Section 16; and (e) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of New York. The provisions of Section 10 that are intended to survive the Employment Term shall remain in full force and effect for their respective periods of duration; it being understood that the provisions of Section 10(d) shall be perpetual.

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

MARTHA STEWART LIVING OMNIMEDIA, INC.
By:	/s/ Charles Koppleman
	Name:	Charles A. Koppelman
	Title:	Chairman of the Board of Directors

EXECUTIVE:
	/s/ Wenda Harris Millard
	Name:	Wenda Harris Millard

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EX-10.4

Exhibit 10.4

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of September 17, 2008, by and between Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”), and Robin Marino (the “Executive”).

     WHEREAS, the Executive has been serving as the President — Merchandising of the Company, and effective June 11, 2008 (the “Effective Date”) was elevated to Co-Chief Executive Officer (“Co-CEO”), and the Executive is willing to be so employed, in each case on the terms and conditions set forth herein;

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

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

     2. Duties.

          (a) During the Employment Term, the Executive shall serve as the President — Merchandising of the Company and as the Company’s Co-CEO. The Executive shall continue to have the Pre-Effective Date Duties and Responsibilities (as defined in Section 7), and shall also have the duties and responsibilities customarily exercised by an individual serving in such a position in a corporation of the size and nature of the Company; provided, however, that Executive’s Post-Effective Date Duties and Responsibilities (as defined in Section 7) shall be those duties and responsibilities as the Company’s Board of Directors (the “Board”), upon notice to Executive, may specify from time to time in its sole and absolute discretion (which specifications may increase, decrease or otherwise alter the scope or nature of such duties and responsibilities). In such capacities, the Executive shall use her best energies and abilities in the performance of her duties, services and responsibilities for the Company as further detailed by the Board. In performing such duties, services and responsibilities, the Executive will report directly to the Chairman of the Board (the “Chairman”) in his role as principal executive officer of the Company or, as the Board may direct, to a committee of the Board or to the full Board. Executive acknowledges and agrees that the Company may determine that (i) the Chairman (or his successor) is, the “principal executive officer” of the Company as such term is defined in any applicable laws, rules and regulations (collectively, “Applicable Law”); or (ii) Executive, alone or jointly with any other officer(s) of the Company, is the “principal executive officer” of the Company as such term is defined in any Applicable Law and/or is the “chief executive officer . . . (or equivalent thereof)” of the Company as such term is defined in any Applicable Law and/or serves in any similar role with respect to which a person may have duties under any Applicable Law.

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

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

          (d) The Company will recommend to the Board that the Executive be appointed to the Board as soon as practicable but in no event later than twelve (12) months following the Effective Date. The Executive acknowledges that appointment to the Board shall be determined by the Board in its sole and absolute discretion and agrees that, provided the Company has made the recommendation set forth in the immediately preceding sentence, any failure by the Board to appoint Executive to the Board shall not be deemed a breach of this Agreement. In no event will the other Co-CEO be appointed to the Board unless Executive is also appointed to the Board. Following the Effective Date, whether or not a Board member, Executive shall be invited to and entitled to attend all meetings of the Board; provided, however, that Executive shall be excluded from such portions of Board meetings as the Company deems appropriate, including discussions related to her or the other Co-CEO, or their respective performance, compensation or related issues.

     3. Base Salary; Bonus.

          (a) During the Employment Term, in consideration of the performance by the Executive of the Executive’s obligations during the Employment Term (including any service in any position with any subsidiary or affiliate of the Company), the Company shall pay the Executive a base salary (the “Base Salary”) at an annual rate of $650,000, subject to increase but not decrease in the discretion of the Board, payable in accordance with the normal payroll practices of the Company in effect from time to time.

          (b) During the Employment Term, in addition to the payments of the Base Salary set forth above, the Executive shall be eligible to receive, in respect of each calendar year during which the Employment Term is in effect, a performance-based cash bonus of 100% of Base Salary at target (the “Target Bonus”) and 150% of Base Salary at maximum based on achievement of goals established each year by the Compensation Committee after reasonable consultation with Executive; provided that with respect to calendar year 2008, the Target Bonus shall be $557,000. Such bonus, if any, shall be paid concurrently with other bonuses paid to senior executives of the Company, provided you are continuously and actively employed through such date of payment.

          (c) The Company shall reimburse Executive for reasonable legal fees in connection with the negotiation and execution of this Agreement in an amount not to exceed $15,000.

     4. Benefits.

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

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

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

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     6. Equity Compensation.

          (a) Promptly after the execution and delivery of this Agreement by both parties, the Company shall grant the Executive 50,000 shares of restricted Class A common stock, par value $0.01 per share (the “Stock”) of the Company pursuant to the Company’s policy on equity issuances (the “Stock Grant”). The Stock Grant shall vest in three approximately equal tranches on the first, second and third anniversaries of the date of the Stock Grant pursuant to the Company’s form of Restricted Stock Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”).

          (b) Promptly after the execution and delivery of this Agreement by both parties, the Company shall grant the Executive a non-qualified option to acquire 100,000 shares of Stock pursuant to the Company’s policy on equity issuances; provided, however that the Option Grant shall vest in three approximately equal tranches on the first, second and third anniversaries of the date of the Option Grant, with a seven (7) year term pursuant to the Company’s form of Option Agreement attached hereto as Exhibit B (the “Option Agreement” and together with the Restricted Stock Agreement, the “Equity Agreements”).

          (c) The Executive will continue to participate in the Company’s annual stock incentive program, receiving awards as determined by the Compensation Committee from time to time.

          (d) Upon a Change in Control (as defined hereinafter), all unvested shares of restricted stock and option awards held by the Executive, other than the option granted to Executive on approximately March 3, 2008, (the “March 2008 Option Grant”) shall become fully vested and (in the case of Stock Options) exercisable, with outstanding stock options remaining exercisable for a period of not less than five years after such Change in Control (but in no event beyond the original term of the stock options). For the avoidance of doubt, this Agreement does not alter, and a Change of Control shall not cause to vest the then-unvested portion of, the March 2008 Option Grant.

     7. Termination of the Employment Term.

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

               (i) the death of the Executive;

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

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

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

               (v) the expiration of the Employment Term.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                    (1) a material diminution of, or material reduction or material adverse alteration in, the Executive’s title (except as may occur in response to a comment from a regulatory or governmental agency), reporting status or authority to exercise Pre-Effective Date Duties, and Responsibilities (as defined below), or the assignment to the Executive of duties inconsistent with those set forth in Section 2(a) (or as subsequently amended in accordance with Section 18 with the consent of the Executive) resulting in a materially adverse change to the Executive’s duties and responsibilities; provided, however, that the following shall not constitute Good Reason pursuant to this Section 7(b)(iv)(1): the assignment to, or exercise by, the Chairman, the Company’s other Co-CEO and/or any other officer(s) appointed by the Chairman or the Board, as the case may be, of (and any related diminution, reduction, alteration or elimination of Executive’s authority to exercise) any Post-Effective Date Duties and Responsibilities, regardless of whether Executive has exercised any such Post-Effective Date Duties and Responsibilities; and provided further that any diminution, reduction or adverse alteration in Executive’s authority to exercise any Pre-Effective Date Duties and Responsibilities (the “Reduced Pre-Effective Date Duties and Responsibilities”) shall be disregarded for the purposes of this Section 7(b)(iv)(1) to the extent that Executive has authority to exercise any Post-Effective Date Duties and Responsibilities that are of approximately comparable importance to the Company as the Reduced Pre-Effective Date Duties and Responsibilities;

                    (2) a material dimunition, material reduction or materially adverse alteration to Executive’s Post-Effective Date Duties and Responsibilities as exercised by the Executive in the ordinary course prior to the date of this Agreement;

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

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

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

“Pre-Effective Date Duties and Responsibilities” shall mean duties and responsibilities exercised by Executive in her capacity as President – Merchandising of the Company prior to the Effective Date with respect to assets owned by the Company prior to the Effective Date. “Post-Effective Date Duties and Responsibilities” shall mean duties and responsibilities other than Pre-Effective Date Duties and Responsibilities, and notwithstanding anything to the contrary may include, without limitation, any duties and responsibilities related to any assets or operations that were or may be acquired by the Company on or after the Effective Date at the discretion of the Board.

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

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     8. Termination Procedures.

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

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

     9. Termination Payments.

          (a) Upon any termination of the Executive’s employment, she shall be entitled to payment of any earned but unpaid portion of the Base Salary, bonus, benefits and unreimbursed business expenses, in each case with respect to the period ending on the Date of Termination. In addition, upon termination of Executive’s employment without Cause or a termination by Executive with Good Reason, Executive will be entitled to a pro-rated bonus for the year of termination (calculated at the end of the fiscal year and then pro rated through the date of termination) provided that applicable performance targets have been met and bonuses are paid generally to similarly situated executives at the Company. Any payments due pursuant to this Section shall be paid in a lump sum at the time the Company pays other bonuses, subject to Section 18 hereof (if applicable).

          (b) In addition to the payments and benefits provided in Section 9(a), if the Executive’s employment is terminated (x) by the Company without Cause or (y) by the Executive for Good Reason, (i) outstanding equity awards consisting of restricted stock and stock options held by the Executive other than the March 2008 Option Grant shall vest and/or become exercisable, (ii) the Company shall pay the Executive the Severance Payment and (iii) the Company shall provide the Executive with continued medical coverage at active-employee rates for eighteen months or, if earlier, until the Executive receives subsequent employer-provided coverage. For purposes of this Section 9(b), the “Severance Payment” shall be a lump-sum cash payment equal to 18 months’ salary. The Severance Payment shall be paid no later than 60 days following the Date of Termination; provided the Executive has executed the release referred to below and any waiting period with respect to such release has elapsed. Payment of the Severance Payment shall be conditioned upon the Executive’s execution of a general release in form satisfactory to the Company and the Executive within sixty (60) days of the date of termination; provided, however, that such release shall not contain post-termination restrictions that are more onerous for the Executive than those contained in this Agreement.

          (c) Executive understands and agrees that she shall, effective upon the full execution of this Agreement, cease to be a participant in, or eligible for any benefits or claims under, the Company’s 2008 Executive Severance Pay Plan.

     10. Confidential Information; Noncompetition; Nonsolicitation; Nondisparagement.

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

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information, knowledge or data relating to the Company, its affiliates or any businesses or investments of the Company or its affiliates, obtained by the Executive during the Executive’s services to the Company that is not generally available public knowledge or known within the Company’s industry (other than by acts by the Executive in violation of this Agreement).

          (b) Noncompetition. The Executive hereby agrees that during her employment with the Company and (unless this Agreement expires pursuant to Clause (v) of Section 7(a) hereof) during any Tail Period (as defined below), if any, Executive shall not engage in or become associated with a Competitive Activity (as defined below). A “Competitive Activity” shall mean any business which designs, manufactures, licenses, sells or develops products based on or related to either lifestyle-based content aimed primarily at adult female audiences (e.g., Oprah Magazine, iVillage, Better Homes and Garden) or a national celebrity or designer (e.g., Calvin Klein, Ralph Lauren, Oprah Winfrey) in a similar product line as offered or marketed by the Company during the Employment Term. By way of example, home goods, linens, furniture or carpet for a designer or lifestyle brand would be a Competitive Activity as of the date hereof, whereas fashion would not be a Competitive Activity unless or until the Company pursues fashion products during the Employment Term. Executive shall be deemed to be “engaged in or associated with a Competitive Activity” if she is or becomes an owner, employee, officer, director, independent contractor, agent, partner, advisor, or renders personal services in any other capacity, with or for any individual, partnership, corporation or other organization (collectively, an “Enterprise”) that is engaged in a Competitive Activity, provided, however, that Executive shall not be prohibited from (a) owning less than five percent of the stock in any publicly traded Enterprise engaging in a Competitive Activity, or (b) being an employee, independent contractor or otherwise providing services to an Enterprise that is engaged in a Competitive Activity so long as Executive’s services relate to (x) an aspect or endeavor of such Enterprise that is distinct from, and unrelated to, and Executive has no influence or control over, such Enterprise’s pursuit of a Competitive Activity or (y) the overall operation or management of the Enterprise (or any portion thereof) provided that the Competitive Activity is not the primary component of such Enterprise (or portion thereof). “Tail Period” shall mean the period, if any, commencing on the Date of Termination and ending on the 18-month anniversary of such date. If, at any time, the provisions of this paragraph shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to area, duration or scope of activity, this paragraph shall be considered divisible and shall become and be immediately amended to only such area, duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter. The Executive agrees that this paragraph as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein. The Executive further agrees that the remedies at law for any breach or threat of breach by her of this paragraph will be inadequate, and that, in addition to any other remedy to which the Company may be entitled at law or in equity, the Company will be entitled to seek a temporary or permanent injunction or injunctions or temporary restraining order or orders to prevent breaches thereof. The Executive’s agreement shall not be deemed to prohibit her from opposing such relief on the basis of a dispute of facts related to any such application.

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

          (d) Non-disparagement. During her employment with the Company, and thereafter, (i) the Executive shall not, directly or indirectly, make or publish any disparaging statements (whether written or oral) regarding the Company or any of its affiliated companies or businesses, or the affiliates, directors, officers, agents, principal stockholders or customers of any of them and (ii) neither the Company nor any of its affiliated companies or businesses or their affiliates, directors, or officers shall directly or indirectly, make or publish any disparaging statements (whether written or oral) regarding the Executive. Executive shall not author, co-author, or assist in the production or authorship of any story, book, show, script or other work about the Company or Martha Stewart without the Company’s prior review of such work and the Company’s written consent as to the production and content thereof.

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

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

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

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

     14. Representations.

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

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

     15. Successors; Binding Agreement.

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

          (b) Executive’s Successors. No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than her rights to payments or benefits hereunder, which may be transferred only by will or the laws of descent and distribution. Upon the Executive’s death, this Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s beneficiary or beneficiaries, personal or legal representatives, or estate, to the extent any such person succeeds to the Executive’s interests under this Agreement. If the Executive should die following her Date of Termination while

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any amounts would still be payable to her hereunder if she had continued to live, all such amounts unless otherwise provided herein shall be paid in accordance with the terms of this Agreement to such person or persons so appointed in writing by the Executive, or otherwise to her legal representatives or estate.

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

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

     With a copy to:

Lawrence Shire, Esq.
Eric Sacks, Esq.
Grubman Indursky & Shire, P.C.
Carnegie Hall Tower
152 West 57^th Street
New York, NY 10019
Tel: (212) 554-0400
Fax: (212) 554-0444

     If to the Company:

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

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

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

     18. Section 409A.

(a) The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Code as amended, and the regulations and guidance promulgated thereunder (collectively “Section 409A”) and, accordingly, to the maximum extent permitted, all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. You are hereby advised to seek independent advice from your tax advisor(s) with respect to any payments or benefits under this Agreement. Notwithstanding the foregoing, the Company does not guarantee the tax treatment of any payments or benefits provided under this Agreement, whether pursuant to the Code, federal, state, local or foreign tax laws and regulations.

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(b) If the Executive is deemed on the date of termination of her “separation from service” with the Company to be a “specified employee”, each within the meaning of Section 409A(a)(2)(B) of the Code, then with regard to any payment or the providing of any benefit under this Agreement, and any other payment or the provision of any other benefit that is required to be delayed in compliance with Section 409A(a)(2)(B) of the Code, such payment or benefit shall not be made or provided prior to the expiration of the six-month period measured from the date of the Executive’s separation from service (or, if earlier, the date of the Executive’s death) if and to the extent such six-month delay is required to comply with Section 409A(a)(2)(B) of the Code. In such event, on or promptly after the first business day following the six-month delay period, all payments delayed pursuant to this Section 18)(ii) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

(c) If under this Agreement, an amount is to be paid in installments, each installment shall be treated as a separate payment for purposes of Treasury Regulations Section 1.409A-2(b)(2)(iii).

     19. Modification; Waiver. No provision of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing and signed by the Executive and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged; provided, however, that the Board may in its sole and absolute discretion, upon written notice to Executive, increase, decrease or otherwise alter the scope or nature of the Post-Effective Date Duties and Responsibilities; provided however, that such alteration does not override the definition of “Good Reason” contained in Section 7(b)(iv) of this Agreement. No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

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

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

     22. Entire Agreement. This Agreement and the Equity Agreements set forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties (including without limitation those certain letter agreements between the parties dated as of May 2, 2005, October 24, 2006, and April 30, 2007, respectively), whether oral or written, by any officer, employee or representative of any party hereto in respect of such subject matter.

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

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

     25. Governing Law; Survival. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without regard to its conflicts of law principles. Each of the parties agrees that if any dispute is not resolved by the parties pursuant to Section 13, such dispute shall be resolved only in the courts of the State of New York sitting in the County of New York or the United States District Court for the Southern District of New York and the appellate courts having jurisdiction of appeals in such

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courts. In that context, and without limiting the generality of the foregoing, each of the parties irrevocably and unconditionally (a) submits for itself in any action or proceeding relating to this Agreement, or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the courts of the State of New York sitting in the County of New York, the United States District Court for the Southern District of New York, and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such action or proceeding shall be heard and determined in such New York State court or, to the extent permitted by law, in such federal court; (b) consents that any such action or proceeding may and shall be brought in such courts and waives any objection that it may now or thereafter have to the venue or jurisdiction of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) waives all right to trial by jury in any action or proceeding (whether based on contract, tort or otherwise) arising out of or relating to this Agreement, or its performance under or the enforcement of this Agreement; (d) agrees that service of process in any such action or proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address as provided in Section 16; and (e) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of New York. The provisions of Section 10 that are intended to survive the Employment Term shall remain in full force and effect for their respective periods of duration; it being understood that the provisions of Section 10(d) shall be perpetual.

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

MARTHA STEWART LIVING OMNIMEDIA, INC.
By:	/s/ Charles Koppelman
	Name:	Charles A. Koppelman
	Title:	Chairman of the Board of Directors

EXECUTIVE:
	/s/ Robin Marino
	Name:	Robin Marino

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EX-10.5

Exhibit 10.5

MARTHA STEWART LIVING OMNIMEDIA, INC.

OMNIBUS STOCK AND OPTION COMPENSATION PLAN

RESTRICTED STOCK GRANT AGREEMENT

     This Restricted Stock Grant Agreement (the “Agreement”) is made and entered into as of October 1, 2008 by and between Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”), and Charles Koppelman pursuant to the Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan (the “Plan”). To the extent any capitalized terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the Plan, which is attached to, and made a part of, this Agreement. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of this Agreement, the Plan terms and provisions shall prevail.

     In consideration of the mutual agreements herein contained and intending to be legally bound hereby, the parties agree as follows:

     1. Restricted Shares. Pursuant to the Plan, the Company hereby transfers to you, and you hereby accept from the Company, a Stock Grant consisting of 425,000 Shares (the “Restricted Shares”), on the terms and conditions set forth herein and in the Plan.

     2. Vesting of Restricted Shares. So long as your Service continues, the Restricted Shares shall vest in accordance with the following schedule: (i) 100,000 of the Restricted Shares shall become vested on the day immediately following a period in which the Fair Market Value of the Company’s Shares has been at least equal to fifteen (15) dollars a Share on each of the immediately preceding sixty (60) consecutive trading days (the “Milestone 15”), provided that the Milestone 15 must be achieved between July 25, 2008 and December 31, 2012 (the “Performance Period”); (ii) 100,000 of the Restricted Shares shall become vested on the day immediately following a period in which the Fair Market Value of the Company’s Shares has been at least equal to twenty-five (25) dollars a Share on each of the immediately preceding sixty (60) consecutive trading days (the “Milestone 25”), provided that the Milestone 25 must be achieved during the Performance Period; (iii) 91,667 of the Restricted Shares shall become vested on October 1, 2009; (iv) 66,667 of the Restricted Shares shall become vested on October 1, 2010; (v) and 66,666 of the Restricted Shares shall become vested on October 1, 2011. Notwithstanding Section 3 of this Agreement, if some or all of the Restricted Shares referred to in subsections (i) and (ii) herein (together the “Performance Shares”) do not vest in accordance with such subsections above, all of such Restricted Shares that do not vest as of December 31, 2012 shall be immediately forfeited without consideration.

Notwithstanding the foregoing, upon the earlier of: (a) a Change in Control (defined below) during your Service; (b) the Company’s termination of your employment without Cause (defined below); or (c) your resignation for Good Reason (defined below), all Restricted Shares (other than the Performance Shares) shall fully vest immediately. For the avoidance of doubt, the

Performance Shares can only become vested if Milestone 15 and/or Milestone 25 are achieved during the Performance Period.

For purposes of this Agreement, a Change in Control shall mean:

     (a) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) or “group” (as such term is used in Section 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the Voting Stock (as defined below) of the Company (as such term is defined below for purposes of this definition); provided that this subsection (a) shall not apply with respect to a stockholder of the Company who beneficially owns more than 50% of the Voting Stock of the Company on July 25, 2008;

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

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

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

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

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

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right to exercise more than 50% of the votes entitled to be cast in the election of directors of a corporation.

For purposes of this Agreement, Cause shall mean that the Board has made a good faith determination, after providing you with reasonably detailed written notice and a reasonable opportunity to be heard on the issues at a Board meeting, that any of the following has occurred:

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

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

     (c) you have been convicted of a felony; or

     (d) you have engaged in fraud against the Company or misappropriated Company property (other than incidental property).

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

For purposes of this Agreement, Good Reason shall mean the occurrence, without your express prior written consent, of any one or more of the following:

     (a) a material diminution of, or material reduction or material adverse alteration in, your positions, titles, duties, or responsibilities from, or the assignment to you of duties inconsistent with, those set forth in your employment agreement dated as of September, 2008 (the “Employment Agreement”);

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

     (c) the Company’s requiring you to be based at a location in excess of 35 miles from the location of your principal job location or office specified in your Employment Agreement, except for required travel on the Company’s business to an extent substantially consistent with your position; or

     (d) a reduction by the Company of your base salary or target annual bonus percentage as in effect on the effective date of your Employment Agreement, or as the same shall be increased from time to time.

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

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     3. Termination of Service. Except as set forth in Section 2 above, in the event of the termination of your Service for any reason, all unvested Restricted Shares, including (without limitation) the Performance Shares, shall be immediately forfeited without consideration. For purposes of facilitating the enforcement of the provisions of this Section 3, you agree that the Company may issue stop-transfer instructions on the Restricted Shares to the Company’s transfer agent, may require that Restricted Shares be held by a broker designated by the Company, or may otherwise hold the Restricted Shares in escrow, until the Restricted Shares have vested and you have satisfied all applicable obligations with respect to the Restricted Shares, including any applicable tax obligations set forth in Section 5 below. Any new, substituted or additional securities or other property which is issued or distributed with respect to the unvested Restricted Shares shall be subject to the same terms and conditions as are applicable to the unvested Restricted Shares under this Agreement and the Plan.

     4. Election to Recognize Income in the Year of Grant. Under Section 83 of the Code, the Fair Market Value of the Restricted Shares on the date the Restricted Shares vest will be taxable as ordinary income at that time. You understand and acknowledge that you may elect to be taxed at the time the Restricted Shares are acquired in an amount equal to the Fair Market Value of the Restricted Shares at that time, rather than the date the Restricted Shares vest, by filing an election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days after the date of this Agreement. YOU ACKNOWLEDGE AND AGREE THAT IT IS YOUR SOLE RESPONSIBILITY, AND NOT THE COMPANY’S RESPONSIBILITY, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF YOU REQUEST THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON YOUR BEHALF.

     5. Taxes. You agree to make arrangements satisfactory to the Company for the satisfaction of any applicable tax obligations that arise in connection with the Restricted Shares which, at the sole discretion of the Committee, may include (i) having the Company withhold Shares from the Restricted Shares held in escrow, or (ii) tendering Shares to the Company, in either case, equal in value to the amount necessary to satisfy any such tax obligation. The Company shall not be required to release the Restricted Shares from the stop-transfer instructions or escrow unless and until such obligations are satisfied.

     6. Tax Advice. You represent, warrant, and acknowledge that the Company has made no warranties or representations to you with respect to the income tax consequences of the transactions contemplated by this Agreement, and you are in no manner relying on the Company or the Company’s representatives for an assessment of such tax consequences. YOU UNDERSTAND THAT THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING ANY STOCK GRANT AWARD. NOTHING STATED HEREIN IS INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING TAXPAYER PENALTIES.

     7. Non-Transferability of Restricted Shares. Restricted Shares which have not vested pursuant to Section 2 above shall not be anticipated, assigned, attached, garnished, optioned, transferred, or made subject to any creditor’s process, whether voluntarily or involuntarily or by the operation of law. Notwithstanding the foregoing, you may at any time

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designate a beneficiary or enter into a will or any similar arrangement which, in each case, provides for the transfer of vested Restricted Shares upon your death.

     8. Restriction on Transfer. Regardless of whether the transfer or issuance of the Restricted Shares has been registered under the Securities Act or has been registered or qualified under the securities laws of any state, the Company may impose additional restrictions upon the sale, pledge, or other transfer of the Restricted Shares (including the placement of appropriate legends on stock certificates, if any, and the issuance of stop-transfer instructions to the Company’s transfer agent) if, in the judgment of the Company and the Company’s counsel, such restrictions are necessary in order to achieve compliance with the provisions of the Securities Act, the securities laws of any state, or any other law.

     9. Stock Certificate Restrictive Legends. Stock certificates evidencing the Restricted Shares, if any, may bear such restrictive legends as the Company and the Company’s counsel deem necessary under applicable law or pursuant to this Agreement.

     10. Representations, Warranties, Covenants, and Acknowledgments. You hereby agree that in the event the Company and the Company’s counsel deem it necessary or advisable in the exercise of their discretion, the transfer or issuance of the Restricted Shares may be conditioned upon you making certain representations, warranties, and acknowledgments relating to compliance with applicable securities laws.

     11. Voting and Other Rights. Subject to the terms of this Agreement, you shall have all the rights and privileges of a stockholder of the Company while the Restricted Shares are held in escrow, including the right to vote and to receive dividends (if any).

     12. Authorization to Release Necessary Personal Information. You hereby authorize and direct your employer to collect, use and transfer in electronic or other form, any personal information (the “Data”) regarding your employment, the nature and amount of your compensation and the facts and conditions of your participation in the Plan (including, but not limited to, your name, home address, telephone number, date of birth, social security number (or any other social or national identification number), salary, nationality, job title, number of shares held and the details of all Awards or any other entitlement to shares awarded, cancelled, exercised, vested, unvested or outstanding) for the purpose of implementing, administering and managing your participation in the Plan. You understand that the Data may be transferred to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties assisting in the implementation, administration and management of the Plan, including any requisite transfer to a broker or other third party assisting with the administration of this Stock Grant under the Plan or with whom shares acquired pursuant to this Stock Grant or cash from the sale of such shares may be deposited. You acknowledge that recipients of the Data may be located in different countries, and those countries may have data privacy laws and protections different from those in the country of your residence. Furthermore, you acknowledge and understand that the transfer of the Data to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties is necessary for your participation in the Plan. You may at any time withdraw the consents herein by contacting your local human resources representative in writing. You further acknowledge that withdrawal of consent may affect your ability to realize benefits from this Stock Grant, and your ability to participate in the Plan.

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     13. No Entitlement or Claims for Compensation.

          (a) Your rights, if any, in respect of or in connection with this Stock Grant or any other Award is derived solely from the discretionary decision of the Company to permit you to participate in the Plan and to benefit from a discretionary Award. By accepting this Stock Grant, you expressly acknowledge that there is no obligation on the part of the Company to continue the Plan and/or grant any additional Awards to you. This Stock Grant is not intended to be compensation of a continuing or recurring nature, or part of your normal or expected compensation, and in no way represents any portion of a your salary, compensation, or other remuneration for purposes of pension benefits, severance, redundancy, resignation or any other purpose.

          (b) Neither the Plan nor this Stock Grant or any other Award granted under the Plan shall be deemed to give you a right to become or remain an Employee, Consultant or director of the Company, a Parent, a Subsidiary, or an Affiliate. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate your Service at any time, with or without cause, and for any reason, subject to applicable laws, the Company’s Articles of Incorporation and Bylaws and a written employment agreement (if any), and you shall be deemed irrevocably to have waived any claim to damages or specific performance for breach of contract or dismissal, compensation for loss of office, tort or otherwise with respect to the Plan, this Stock Grant or any outstanding Award that is forfeited and/or is terminated by its terms or to any future Award.

     14. Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight (48) hours after being deposited in the mail, as certified or registered mail, with postage prepaid, and addressed to the Company at its principal corporate offices and to you at the address maintained for you in the Company’s records.

     15. Entire Agreement; Enforcement of Rights. This Agreement, together with the Plan, sets forth the entire agreement and understanding of the parties relating to the subject matter herein and therein and merges all prior discussions between the parties. Except as contemplated under the Plan, no modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

     16. Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed, and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

     17. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of

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this Agreement shall be interpreted as if such provision were so excluded, and (iii) the balance of this Agreement shall be enforceable in accordance with its terms.

     18. Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns. Your rights and obligations under this Agreement may not be assigned without the prior written consent of the Company.

     19. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Stock Grant under the Plan and participation in the Plan or future Awards that may be granted under the Plan by electronic means or to request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

     20. Language. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.

     21. Acceptance of Agreement. You must expressly accept the terms and conditions of your Stock Grant as set forth in this Agreement by signing and returning to the Company within 90 days after the Company sends this Agreement to you. If you do not accept your Stock Grant in the manner instructed by the Company, your Stock Grant will be subject to cancellation.

     22. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

* * * *

(Signature Page Follows)

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this day of October 1, 2008.

MARTHA STEWART LIVING OMNIMEDIA, INC.

By: /s/ Howard Hochhauser

                          (Signature)

Name:   Howard Hochhauser

Title:   Chief Financial Officer

RECIPIENT: Charles Koppelman

By: /s/ Charles Koppelman

                          (Signature)

Address:

Telephone Number:

E-mail Address:

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EX-10.6

Exhibit 10.6

MARTHA STEWART LIVING OMNIMEDIA, INC.
OMNIBUS STOCK AND OPTION COMPENSATION PLAN

NOTICE OF STOCK OPTION GRANT

Optionee:

Charles Koppelman
[address]

     You have been granted an option (the “Option”) to purchase Common Stock of Martha Stewart Living Omnimedia, Inc. (the “Company”), as follows:

Date of Grant:	October 1, 2008
Exercise Price Per Share:	$8.53
Total Number of Shares:	600,000
Total Exercise Price:	$5,118,000
Type of Option:	___ Incentive Stock Option
	X    Nonstatutory Stock Option
Expiration Date:	September 30, 2015
Vesting Schedule:	So long as your Service continues, the Shares underlying this Option shall vest and become exercisable in accordance with the following schedule:
	33% of the Total Number of Shares subject to this Option shall vest on October 1, 2009;
	33% of the Total Number of Shares subject to this Option shall vest on October 1, 2010; and
	34% of the Total Number of Shares subject to this Option shall vest on October 1, 2011.
	Notwithstanding the foregoing, all Shares subject to this Option shall fully vest and become exercisable

upon the earlier of: (1) a Change in Control (as defined below) provided you are still in Service at that time; (2)the termination of your employment by the Company without Cause; and (3) your voluntary resignation for Good Reason (as such terms are defined below).

For purposes of this Option, a Change in Control shall mean:

(1) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) or “group” (as such term is used in Section 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the Voting Stock (as defined below) of the Company (as such term is defined below for purposes of this definition); provided that this clause (1) shall not apply with respect to a stockholder of the Company who beneficially owns more than 50% of the Voting Stock of the Company on July 25, 2008;

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

(3) the Company adopts any plan of liquidation providing for the distribution of all or substantially

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all of its assets if such plan of liquidation will result in the winding-up of the business of the Company;

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

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

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

For purposes of this Option, Cause shall mean that the Board has made a good faith determination, after providing you with reasonably detailed written notice and a reasonable opportunity to be heard on the issues at a Board meeting, that any of the following has occurred:

(1) the willful and continued failure by you to substantially perform your material duties to the Company (other than due to mental or physical

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disability) after written notice specifying such failure and the manner in which you may rectify such failure in the future;

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

(3) you have been convicted of a felony; or

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

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

For purposes of this Option, Good Reason shall mean the occurrence, without your express prior written consent, of any one or more of the following:

(1) a material diminution of, or material reduction or material adverse alteration in, your positions, titles, duties or responsibilities from, or the assignment to you of duties inconsistent with, those set forth in your employment agreement dated as of September 2008 (the “Employment Agreement”) (or as subsequently amended in accordance with such agreement);

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

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

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		(4) a reduction by the Company of your base salary or target annual bonus percentage as in effect on the effective date of your Employment Agreement, or as the same shall be increased from time to time.
		Your right to terminate employment in a termination for Good Reason shall not be affected by your incapacity due to physical or mental illness. Subject to the requirements set forth above, your continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.
Termination	Period:	You may exercise this Option for 3 months after termination of your Service except as set forth in Section 4 of the Stock Option Agreement and in no event may you exercise this Option after the Expiration Date. Notwithstanding the foregoing, in the event of a Change in Control (defined above) during your Service, you may exercise this Option at any time until the date that is five (5) years after the consummation of the Change in Control or, if later, the expiration of the post-termination exercise period, as set forth in the first sentence above; provided that in no event may you exercise this Option after the Expiration Date. You are responsible for keeping track of these exercise periods following a termination of your Service for any reason. The Company will not provide further notice of such periods.

     Unless otherwise defined in this Notice of Stock Option Grant, the terms used herein shall have the meanings assigned to them in the Plan.

     By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan and the Stock Option Agreement, all of which are attached to, and made a part of, this document.

     In addition, you agree and acknowledge that your rights to any Shares underlying this Option will be earned only as you provide Service over time, that this Option is not being granted to you as consideration for services you rendered to the Company (or any Parent, Subsidiary, or Affiliate) prior to your Date of Grant, and that nothing in this Notice of Stock Option Grant or the attached documents confers upon you any right to continue your employment or consulting relationship with the Company (or any Parent,

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Subsidiary, or Affiliate) for any period of time, nor does it interfere in any way with your right or the Company’s (or any Parent’s, Subsidiary’s, or Affiliate’s) right to terminate that relationship at any time, for any reason, with or without cause.

     This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

OPTIONEE:	MARTHA STEWART LIVING OMNIMEDIA, INC.
/s/ Charles Koppelman	By: /s/ Howard Hochhauser
Signature
Charles Koppelman	Title:  Chief Financial Officer
Print Name

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MARTHA STEWART LIVING OMNIMEDIA, INC.
OMNIBUS STOCK AND OPTION COMPENSATION PLAN

STOCK OPTION AGREEMENT

     1. Grant of Option. Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”), hereby grants to the Optionee named in the Notice of Stock Option Grant attached to this Stock Option Agreement (the “Optionee”), an option (the “Option”) to purchase the total number of shares of Common Stock (the “Shares”) set forth in the Notice of Stock Option Grant (the “Notice”), at the exercise price per Share set forth in the Notice (the “Exercise Price”) subject to the terms, definitions and provisions of the Company’s Omnibus Stock and Option Compensation Plan (the “Plan”), which is incorporated in this Stock Option Agreement (the “Agreement”) by reference. Unless otherwise defined in this Agreement, the terms used in this Agreement shall have the meanings defined in the Plan.

     This Option is intended to be an Incentive Stock Option as defined in Section 422 of the Code only to the extent so designated in the Notice, and to the extent it is not so designated or to the extent this Option does not qualify as an Incentive Stock Option, it is intended to be a Nonstatutory Stock Option. Notwithstanding the foregoing, even if designated as an Incentive Stock Option, if the Shares subject to this Option (and all other incentive stock options granted to Optionee by the Company or any Parent or Subsidiary, including under other plans of the Company) that first become exercisable in any calendar year have an aggregate fair market value (determined for each Share as of the date of grant of the option covering such Share) in excess of $100,000, the Shares in excess of $100,000 shall be treated as subject to a Nonstatutory Stock Option in accordance with applicable law.

     2. Exercise of Option.

          (a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule, Termination Period and Expiration Date set forth in the Notice, Section 4 below and with the applicable provisions of the Plan. This Option may not be exercised for a fraction of a share.

          (b) Method of Exercise.

               (i) This Option shall be exercisable by execution and delivery of the Notice of Exercise attached hereto as Exhibit A or of any other form of written notice approved for such purpose by the Company which shall state Optionee’s election to exercise this Option, the number of Shares in respect of which this Option is being exercised, and such other representations and agreements as to the holder’s investment intent with respect to such Shares as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by Optionee and shall be delivered to the Company by such means as are determined by the Committee in its

discretion to constitute adequate delivery. The written notice shall be accompanied by payment of the aggregate Exercise Price for the purchased Shares.

               (ii) As a condition to the exercise of this Option and as further set forth in Section 13 of the Plan, Optionee agrees to make adequate provision for federal, state or other tax or withholding obligations, if any, which arise upon the grant, vesting or exercise of this Option, or disposition of Shares, whether by withholding, direct payment to the Company, or otherwise.

               (iii) The Company is not obligated, and will have no liability for failure, to issue or deliver any Shares upon exercise of this Option unless such issuance or delivery would comply with all applicable laws, rules and regulations, with such compliance determined by the Company in consultation with its legal counsel. This Option may not be exercised until such time as the Plan has been approved by the Company’s stockholders, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any applicable laws, rules or regulations, including any applicable U.S. federal or state securities laws or any other law or regulation, including any rule under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by applicable laws, rules or regulations. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Optionee on the date on which this Option is exercised with respect to such Shares.

               (iv) Subject to compliance with all applicable laws, rules and regulations, this Option shall be deemed to be exercised upon receipt by the Company of the appropriate written notice of exercise accompanied by the Exercise Price and the satisfaction of any applicable withholding obligations.

     3. Method of Payment. Payment of the Exercise Price shall be by any of the following, or a combination of the following, at the election of Optionee: (a) cash, (b) check, (c) Cashless Exercise, or (d) surrender of previously owned Shares.

     4. Termination of Relationship. Following the date of termination of Optionee’s Service for any reason (the “Termination Date”), Optionee may exercise this Option only as set forth in the Notice and this Section 4. If Optionee does not exercise this Option within the Termination Period set forth in the Notice or the termination periods set forth below, this Option shall terminate in its entirety. In no event may this Option be exercised after the Expiration Date set forth in the Notice. In the event of termination of Optionee’s Service other than as a result of Optionee’s Disability, death or for Cause, Optionee may, to the extent Optionee is vested in the Option Shares at the Termination Date, exercise this Option during the Termination Period set forth in the Notice. Subject to the consummation of a Change in Control, as described in the Notice, in the event of any other termination, Optionee may exercise this Option only as described below:

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          (a) Termination upon Disability of Optionee. In the event of termination of Optionee’s Service as a result of Optionee’s Disability, Optionee may, but only within 12 months from the Termination Date, exercise this Option to the extent Optionee is vested in the Option Shares.

          (b) Death of Optionee. In the event of the death of Optionee while in Service or within 3 months following the termination of Optionee’s Service, this Option may be exercised at any time within 12 months following the date of death by any beneficiary properly designated by the Optionee or, if no such beneficiary exists, by the Optionee’s estate or by a person who acquired the right to exercise this Option by bequest or inheritance, but only to the extent Optionee is vested in the Option Shares.

          (c) Termination for Cause. In the event Optionee’s Service is terminated for Cause, this Option shall terminate immediately upon such termination for Cause. In the event Optionee’s employment or consulting relationship with the Company is suspended pending investigation of whether such relationship shall be terminated for Cause, all Optionee’s rights under this Option, including the right to exercise this Option, shall be suspended during the investigation period.

     5. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution. The designation of a beneficiary does not constitute a transfer. This Option may be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee.

     6. Authorization to Release Necessary Personal Information.

          (a) Optionee hereby authorizes and directs Optionee’s employer to collect, use and transfer in electronic or other form, any personal information (the “Data”) regarding Optionee’s employment, the nature and amount of Optionee’s compensation and the facts and conditions of Optionee’s participation in the Plan (including, but not limited to, Optionee’s name, home address, telephone number, date of birth, social security number (or any other social or national identification number), salary, nationality, job title, number of shares held and the details of all Awards or any other entitlement to Shares awarded, cancelled, exercised, vested, unvested or outstanding) for the purpose of implementing, administering and managing Optionee’s participation in the Plan. Optionee understands that the Data may be transferred to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties assisting in the implementation, administration and management of the Plan, including any requisite transfer to a broker or other third party assisting with the administration of this Option under the Plan or with whom shares acquired pursuant to this Option or cash from the sale of shares underlying this Option may be deposited. Optionee acknowledges that recipients of the Data may be located in different countries, and those countries may have data privacy laws and protections different from those in the country of Optionee’s residence. Furthermore, Optionee acknowledges and understand that the transfer of the

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Data to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties is necessary for Optionee’s participation in the Plan.

          (b) Optionee may at any time withdraw the consents herein by contacting Optionee’s local human resources representative in writing. Optionee further acknowledges that withdrawal of consent may affect Optionee’s ability to exercise or realize benefits from this Option, and Optionee’s ability to participate in the Plan.

     7. No Entitlement or Claims for Compensation.

          (a) Optionee’s rights, if any, in respect of or in connection with this Option or any other Award is derived solely from the discretionary decision of the Company to permit Optionee to participate in the Plan and to benefit from a discretionary Award. By accepting this Option, Optionee expressly acknowledges that there is no obligation on the part of the Company to continue the Plan and/or grant any additional Awards to Optionee. This Option is not intended to be compensation of a continuing or recurring nature, or part of Optionee’s normal or expected compensation, and in no way represents any portion of a Optionee’s salary, compensation, or other remuneration for purposes of pension benefits, severance, redundancy, resignation or any other purpose.

          (b) Neither the Plan nor this Option or any other Award granted under the Plan shall be deemed to give Optionee a right to become or remain an Employee, Consultant or director of the Company, a Parent, a Subsidiary, or an Affiliate. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate Optionee’s Service at any time, with or without cause, and for any reason, subject to applicable laws, the Company’s Articles of Incorporation and Bylaws and a written employment agreement (if any), and Optionee shall be deemed irrevocably to have waived any claim to damages or specific performance for breach of contract or dismissal, compensation for loss of office, tort or otherwise with respect to the Plan, this Option or any outstanding Award that is forfeited and/or is terminated by its terms or to any future Award.

          (c) Optionee acknowledges that he or she is voluntarily participating in the Plan.

          (d) The future value of the underlying Shares is unknown and cannot be predicted with certainty. If the underlying Shares do not increase in value, the Option will have no value. If Optionee exercises the Option and obtains Shares, the value of the Shares acquired upon exercise may increase or decrease in value, even below the Exercise Price.

     8. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to the Option granted under and participation in the Plan or future options that may be granted under the Plan by electronic means or to request Optionee’s consent to participate in the Plan by electronic means. Optionee hereby consents to receive such documents by electronic delivery and, if requested, to agree to

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participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

     9. Translation. If this Agreement or any other document related to the Plan is translated into a language other then English and if the translated version is different from the English version, the English version will take precedence.

     10. Effect of Agreement. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof (and has had an opportunity to consult counsel regarding the Option terms), and hereby accepts this Option and agrees to be bound by its contractual terms as set forth herein and in the Plan. Optionee hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee regarding any questions relating to this Option. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of the Notice and this Agreement, the Plan terms and provisions shall prevail.

     11. Miscellaneous.

          (a) Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

          (b) Entire Agreement; Enforcement of Rights. This Agreement, together with the Notice and the Plan, sets forth the entire agreement and understanding of the parties relating to the subject matter herein and therein and merges all prior discussions between the parties. Except as contemplated under the Plan, no modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed or, if permitted by the Company, electronically accepted, by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

          (c) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms.

          (d) Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent by telegram or fax or 48 hours after being deposited in the mail, as certified or registered mail, with postage prepaid, and addressed to the Company at its principal corporate offices and to Optionee at the address maintained for Optionee in the Company’s records.

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          (e) Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. The rights and obligations of Optionee under this Agreement may not be assigned without the prior written consent of the Company.

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EXHIBIT A

NOTICE OF EXERCISE

To:	Martha Stewart Living Omnimedia, Inc.
Attn:	Administrator of the Omnibus Stock and Option Compensation Plan
Subject:	Notice of Intention to Exercise Stock Option

     This Notice of Exercise constitutes official notice that the undersigned intends to exercise Optionee’s option to purchase                                 shares of Martha Stewart Living Omnimedia, Inc. Common Stock, under and pursuant to the Company’s Omnibus Stock and Option Compensation Plan (the “Plan”) and the Notice of Stock Option Grant and Stock Option Agreement (the “Agreement”) dated                     , as follows:

Number of Shares:

Exercise Price per Share:

Total Exercise Price:

Method of Payment of Exercise Price:

The shares should be registered in the name (s) of:

                                                             and

                                                            .¹

     By signing below, I hereby agree to be bound by all of the terms and conditions set forth in the Plan and the Agreement. If applicable, proof of my right to purchase the shares pursuant to the Plan and the Agreement is enclosed.²

Dated:                                        

(Signature)	(Signature)3
(Please Print Name)	(Please Print Name)
(Full Address)	(Full Address)

1	If more than one name is listed, please specify whether the owners will hold the shares as community property or as joint tenants with the right of survivorship.
2	Applicable if someone other than the Optionee (e.g., a death beneficiary) is exercising the stock option.
3	Each person in whose name shares are to be registered must sign this Notice of Exercise.

EX-10.7

Exhibit 10.7

MARTHA STEWART LIVING OMNIMEDIA, INC.

OMNIBUS STOCK AND OPTION COMPENSATION PLAN

RESTRICTED STOCK GRANT AGREEMENT

     This Restricted Stock Grant Agreement (the “Agreement”) is made and entered into as of October 1, 2008 by and between Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”), and Wenda Harris Millard pursuant to the Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan (the “Plan”). To the extent any capitalized terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the Plan, which is attached to, and made a part of, this Agreement. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of this Agreement, the Plan terms and provisions shall prevail.

     In consideration of the mutual agreements herein contained and intending to be legally bound hereby, the parties agree as follows:

     1. Restricted Shares. Pursuant to the Plan, the Company hereby transfers to you, and you hereby accept from the Company, a Stock Grant consisting of 50,000 Shares (the “Restricted Shares”), on the terms and conditions set forth herein and in the Plan.

     2. Vesting of Restricted Shares. So long as your Service continues, the Restricted Shares shall vest in accordance with the following schedule: 33% of the total number of Restricted Shares shall vest on October 1, 2009; 33% of the total number of Restricted Shares shall vest on October 1, 2010; and 34% of the total number of Restricted Shares shall vest on October 1, 2011.

Notwithstanding the foregoing, upon the earlier of: (a) a Change in Control (defined below) during your Service; (b) the Company’s termination of your employment without Cause (defined below); or (c) your resignation for Good Reason (defined below), all Restricted Shares shall fully vest immediately.

For purposes of this Agreement, a Change in Control shall mean:

     (a) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) or “group” (as such term is used in Section 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the Voting Stock (as defined below) of the Company (as such term is defined below for purposes of this definition); provided that this subsection (a) shall not apply with respect to a stockholder of the Company who beneficially owns more than 50% of the Voting Stock of the Company on June 11, 2008;

     (b) all or substantially all of the assets or business of the Company are disposed of pursuant to a merger, consolidation or other transaction unless, immediately after such transaction, the stockholders of the Company immediately prior to the transaction own, directly

or indirectly, in substantially the same proportion as they owned the Voting Stock of the Company prior to such transaction more than 50% of the Voting Stock of the company surviving such transaction or succeeding to all or substantially all of the assets or business of the Company or the ultimate parent company of such surviving or successor company if such surviving or successor company is a subsidiary of another entity (there being excluded from the number of shares held by such stockholders, but not from the Voting Stock of the combined company, any shares received by affiliates of such other company in exchange for stock of such other company);

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

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

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

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

For purposes of this Agreement, Cause shall mean that the Board has made a good faith determination, after providing you with reasonably detailed written notice and a reasonable opportunity to be heard on the issues at a Board meeting, that any of the following has occurred:

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

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

     (c) you have been convicted of a felony; or

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     (d) you have engaged in fraud against the Company or misappropriated Company property (other than incidental property).

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

For purposes of this Agreement, Good Reason shall mean the occurrence, without your express prior written consent, of any one or more of the following:

     (a) a material diminution of, or material reduction or material adverse alteration in, your title (except as may occur in response to a comment from a regulatory or governmental agency), reporting status or authority to exercise Pre-Effective Date Duties, and Responsibilities (defined below), or the assignment to you of duties inconsistent with those set forth in your employment agreement dated as of September, 2008 (the “Employment Agreement”) (or as subsequently amended in accordance with such agreement) resulting in a materially adverse change to your duties and responsibilities; provided, however, that the following shall not constitute Good Reason: the assignment to, or exercise by, the Chairman of the Board, the Company’s other Co-CEO and/or any other officer(s) appointed by the Chairman of the Board or the Board, as the case may be, of (and any related diminution, reduction, alteration or elimination of your authority to exercise) any Post-Effective Date Duties and Responsibilities (defined below), regardless of whether you have exercised any such Post-Effective Date Duties and Responsibilities; and provided further that any diminution, reduction or adverse alteration in your authority to exercise any Pre-Effective Date Duties and Responsibilities (the “Reduced Pre-Effective Date Duties and Responsibilities”) shall be disregarded for the purposes of this subsection to the extent that you have authority to exercise any Post-Effective Date Duties and Responsibilities that are of approximately comparable importance to the Company as the Reduced Pre-Effective Date Duties and Responsibilities;

     (b) a material diminution, material reduction or materially adverse alteration to your Post-Effective Date Duties and Responsibilities as exercised by you in the ordinary course prior to the effective date of your Employment Agreement;

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

     (d) the Company’s requiring you to be based at a location in excess of 35 miles from the location of your principal job location or office specified in your Employment Agreement, except for required travel on the Company’s business to an extent substantially consistent with your position; or

     (e) a reduction by the Company of your base salary as in effect on the effective date of your Employment Agreement, or as the same shall be increased from time to time.

“Pre-Effective Date Duties and Responsibilities” shall mean duties and responsibilities exercised by you in your capacity as President — Media of the Company prior to the effective date of your Employment Agreement with respect to assets owned by the Company prior to such effective

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date. “Post-Effective Date Duties and Responsibilities” shall mean duties and responsibilities other than Pre-Effective Date Duties and Responsibilities, and notwithstanding anything to the contrary may include, without limitation, any duties and responsibilities related to any assets or operations that were or may be acquired by the Company on or after the effective date of your Employment Agreement at the discretion of the Board. Your right to terminate employment in a termination for Good Reason shall not be affected by your incapacity due to physical or mental illness. Subject to the requirements set forth above, your continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

     3. Termination of Service. Except as set forth in Section 2 above, in the event of the termination of your Service for any reason, all unvested Restricted Shares shall be immediately forfeited without consideration. For purposes of facilitating the enforcement of the provisions of this Section 3, you agree that the Company may issue stop-transfer instructions on the Restricted Shares to the Company’s transfer agent, may require that Restricted Shares be held by a broker designated by the Company, or may otherwise hold the Restricted Shares in escrow, until the Restricted Shares have vested and you have satisfied all applicable obligations with respect to the Restricted Shares, including any applicable tax obligations set forth in Section 5 below. Any new, substituted or additional securities or other property which is issued or distributed with respect to the unvested Restricted Shares shall be subject to the same terms and conditions as are applicable to the unvested Restricted Shares under this Agreement and the Plan.

     4. Election to Recognize Income in the Year of Grant. Under Section 83 of the Code, the Fair Market Value of the Restricted Shares on the date the Restricted Shares vest will be taxable as ordinary income at that time. You understand and acknowledge that you may elect to be taxed at the time the Restricted Shares are acquired in an amount equal to the Fair Market Value of the Restricted Shares at that time, rather than the date the Restricted Shares vest, by filing an election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days after the date of this Agreement. YOU ACKNOWLEDGE AND AGREE THAT IT IS YOUR SOLE RESPONSIBILITY, AND NOT THE COMPANY’S RESPONSIBILITY, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF YOU REQUEST THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON YOUR BEHALF.

     5. Taxes. You agree to make arrangements satisfactory to the Company for the satisfaction of any applicable tax obligations that arise in connection with the Restricted Shares which, at the sole discretion of the Committee, may include (i) having the Company withhold Shares from the Restricted Shares held in escrow, or (ii) tendering Shares to the Company, in either case, equal in value to the amount necessary to satisfy any such tax obligation. The Company shall not be required to release the Restricted Shares from the stop-transfer instructions or escrow unless and until such obligations are satisfied.

     6. Tax Advice. You represent, warrant, and acknowledge that the Company has made no warranties or representations to you with respect to the income tax consequences of the transactions contemplated by this Agreement, and you are in no manner relying on the Company or the Company’s representatives for an assessment of such tax consequences. YOU UNDERSTAND THAT THE TAX LAWS AND REGULATIONS ARE SUBJECT TO

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CHANGE. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING ANY STOCK GRANT AWARD. NOTHING STATED HEREIN IS INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING TAXPAYER PENALTIES.

     7. Non-Transferability of Restricted Shares. Restricted Shares which have not vested pursuant to Section 2 above shall not be anticipated, assigned, attached, garnished, optioned, transferred, or made subject to any creditor’s process, whether voluntarily or involuntarily or by the operation of law. Notwithstanding the foregoing, you may at any time designate a beneficiary or enter into a will or any similar arrangement which, in each case, provides for the transfer of vested Restricted Shares upon your death.

     8. Restriction on Transfer. Regardless of whether the transfer or issuance of the Restricted Shares has been registered under the Securities Act or has been registered or qualified under the securities laws of any state, the Company may impose additional restrictions upon the sale, pledge, or other transfer of the Restricted Shares (including the placement of appropriate legends on stock certificates, if any, and the issuance of stop-transfer instructions to the Company’s transfer agent) if, in the judgment of the Company and the Company’s counsel, such restrictions are necessary in order to achieve compliance with the provisions of the Securities Act, the securities laws of any state, or any other law.

     9. Stock Certificate Restrictive Legends. Stock certificates evidencing the Restricted Shares, if any, may bear such restrictive legends as the Company and the Company’s counsel deem necessary under applicable law or pursuant to this Agreement.

     10. Representations, Warranties, Covenants, and Acknowledgments. You hereby agree that in the event the Company and the Company’s counsel deem it necessary or advisable in the exercise of their discretion, the transfer or issuance of the Restricted Shares may be conditioned upon you making certain representations, warranties, and acknowledgments relating to compliance with applicable securities laws.

     11. Voting and Other Rights. Subject to the terms of this Agreement, you shall have all the rights and privileges of a stockholder of the Company while the Restricted Shares are held in escrow, including the right to vote and to receive dividends (if any).

     12. Authorization to Release Necessary Personal Information. You hereby authorize and direct your employer to collect, use and transfer in electronic or other form, any personal information (the “Data”) regarding your employment, the nature and amount of your compensation and the facts and conditions of your participation in the Plan (including, but not limited to, your name, home address, telephone number, date of birth, social security number (or any other social or national identification number), salary, nationality, job title, number of shares held and the details of all Awards or any other entitlement to shares awarded, cancelled, exercised, vested, unvested or outstanding) for the purpose of implementing, administering and managing your participation in the Plan. You understand that the Data may be transferred to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties assisting in the implementation, administration and management of the Plan, including any requisite transfer to a broker or other third party assisting with the administration of this Stock Grant under the Plan or

5

with whom shares acquired pursuant to this Stock Grant or cash from the sale of such shares may be deposited. You acknowledge that recipients of the Data may be located in different countries, and those countries may have data privacy laws and protections different from those in the country of your residence. Furthermore, you acknowledge and understand that the transfer of the Data to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties is necessary for your participation in the Plan. You may at any time withdraw the consents herein by contacting your local human resources representative in writing. You further acknowledge that withdrawal of consent may affect your ability to realize benefits from this Stock Grant, and your ability to participate in the Plan.

     13. No Entitlement or Claims for Compensation.

          (a) Your rights, if any, in respect of or in connection with this Stock Grant or any other Award is derived solely from the discretionary decision of the Company to permit you to participate in the Plan and to benefit from a discretionary Award. By accepting this Stock Grant, you expressly acknowledge that there is no obligation on the part of the Company to continue the Plan and/or grant any additional Awards to you. This Stock Grant is not intended to be compensation of a continuing or recurring nature, or part of your normal or expected compensation, and in no way represents any portion of a your salary, compensation, or other remuneration for purposes of pension benefits, severance, redundancy, resignation or any other purpose.

          (b) Neither the Plan nor this Stock Grant or any other Award granted under the Plan shall be deemed to give you a right to become or remain an Employee, Consultant or director of the Company, a Parent, a Subsidiary, or an Affiliate. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate your Service at any time, with or without cause, and for any reason, subject to applicable laws, the Company’s Articles of Incorporation and Bylaws and a written employment agreement (if any), and you shall be deemed irrevocably to have waived any claim to damages or specific performance for breach of contract or dismissal, compensation for loss of office, tort or otherwise with respect to the Plan, this Stock Grant or any outstanding Award that is forfeited and/or is terminated by its terms or to any future Award.

     14. Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight (48) hours after being deposited in the mail, as certified or registered mail, with postage prepaid, and addressed to the Company at its principal corporate offices and to you at the address maintained for you in the Company’s records.

     15. Entire Agreement; Enforcement of Rights. This Agreement, together with the Plan, sets forth the entire agreement and understanding of the parties relating to the subject matter herein and therein and merges all prior discussions between the parties. Except as contemplated under the Plan, no modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

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     16. Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed, and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

     17. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded, and (iii) the balance of this Agreement shall be enforceable in accordance with its terms.

     18. Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns. Your rights and obligations under this Agreement may not be assigned without the prior written consent of the Company.

     19. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Stock Grant under the Plan and participation in the Plan or future Awards that may be granted under the Plan by electronic means or to request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

     20. Language. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.

     21. Acceptance of Agreement. You must expressly accept the terms and conditions of your Stock Grant as set forth in this Agreement by signing and returning to the Company within 90 days after the Company sends this Agreement to you. If you do not accept your Stock Grant in the manner instructed by the Company, your Stock Grant will be subject to cancellation.

     22. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

* * * *

(Signature Page Follows)

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this ___day of October 1, 2008.

MARTHA STEWART LIVING OMNIMEDIA, INC.

By:	/s/ Howard Hochhauser
	(Signature)
Name:	Howard Hochhauser
Title:	Chief Financial Officer
RECIPIENT: Wenda Harris Millard
By:	/s/ Wenda Harris Millard
	(Signature)

Address:

Telephone Number:

E-mail Address:

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EX-10.8

Exhibit 10.8

MARTHA STEWART LIVING OMNIMEDIA, INC.
OMNIBUS STOCK AND OPTION COMPENSATION PLAN

NOTICE OF STOCK OPTION GRANT

Optionee:

Wenda Harris Millard
[address]

     You have been granted an option (the “Option”) to purchase Common Stock of Martha Stewart Living Omnimedia, Inc. (the “Company”), as follows:

Date of Grant:	October 1, 2008
Exercise Price Per Share:	$8.53
Total Number of Shares:	100,000
Total Exercise Price:	$853,000
Type of Option:	Incentive Stock Option
	X      Nonstatutory Stock Option
Expiration Date:	September 30, 2015
Vesting Schedule:	So long as your Service continues, the Shares underlying this Option shall vest and become exercisable in accordance with the following schedule:
	33% of the Total Number of Shares subject to this Option shall vest on October 1, 2009;
	33% of the Total Number of Shares subject to this Option shall vest on October 1, 2010; and
	34% of the Total Number of Shares subject to this Option shall vest on October 1, 2011.
	Notwithstanding the foregoing, all Shares subject to this Option shall fully vest and become exercisable

upon the earlier of: (1) a Change in Control (as defined below); provided that you are still in Service at that time; and (2) the termination of your employment by the Company without Cause or your voluntary resignation for Good Reason (as such terms are defined below).

For purposes of this Option, a Change in Control shall mean:

(1) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) or “group” (as such term is used in Section 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the Voting Stock (as defined below) of the Company (as such term is defined below for purposes of this definition); provided that this clause (1) shall not apply with respect to a stockholder of the Company who beneficially owns more than 50% of the Voting Stock of the Company on June 11, 2008;

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

(3) the Company adopts any plan of liquidation providing for the distribution of all or substantially

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all of its assets if such plan of liquidation will result in the winding-up of the business of the Company;

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

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

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

For purposes of this Option, Cause shall mean that the Board has made a good faith determination, after providing you with reasonably detailed written notice and a reasonable opportunity to be heard on the issues at a Board meeting, that any of the following has occurred:

(1) the willful and continued failure by you to substantially perform your material duties to the Company (other than due to mental or physical

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disability) after written notice specifying such failure and the manner in which you may rectify such failure in the future;

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

(3) you have been convicted of a felony; or

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

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

For purposes of this Option, Good Reason shall mean the occurrence, without your express prior written consent, of any one or more of the following:

(1) a material diminution of, or material reduction or material adverse alteration in, your title (except as may occur in response to a comment from a regulatory or governmental agency), reporting status or authority to exercise Pre-Effective Date Duties, and Responsibilities (defined below), or the assignment to you of duties inconsistent with those set forth in your employment agreement dated as of September 2008 (the “Employment Agreement”) (or as subsequently amended in accordance with such agreement) resulting in a materially adverse change to your duties and responsibilities; provided, however, that the following shall not constitute Good Reason: the assignment to, or exercise by, the Chairman of the Board, the Company’s other Co-CEO and/or any other officer(s) appointed by the Chairman of the Board or the Board, as the case may be, of (and any related diminution, reduction, alteration or

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elimination of your authority to exercise) any Post-Effective Date Duties and Responsibilities (defined below), regardless of whether you have exercised any such Post-Effective Date Duties and Responsibilities; and provided further that any diminution, reduction or adverse alteration in your authority to exercise any Pre-Effective Date Duties and Responsibilities (the “Reduced Pre-Effective Date Duties and Responsibilities”) shall be disregarded for the purposes of this subsection to the extent that you have authority to exercise any Post-Effective Date Duties and Responsibilities that are of approximately comparable importance to the Company as the Reduced Pre-Effective Date Duties and Responsibilities;

(2) a material diminution, material reduction or materially adverse alteration to your Post-Effective Date Duties and Responsibilities as exercised by you in the ordinary course prior to the effective date of your Employment Agreement;

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

(4) the Company’s requiring you to be based at a location in excess of 35 miles from the location of your principal job location or office specified in your Employment Agreement, except for required travel on the Company’s business to an extent substantially consistent with your position; or

(5) a reduction by the Company of your base salary as in effect on the effective date of your Employment Agreement, or as the same shall be increased from time to time.

“Pre-Effective Date Duties and Responsibilities” shall mean duties and responsibilities exercised by you in your capacity as President — Media of the Company prior to the effective date of your Employment Agreement with respect to assets owned by the Company prior to such effective date. “Post-Effective Date Duties and Responsibilities” shall mean duties and responsibilities other than Pre-Effective Date Duties and Responsibilities, and

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notwithstanding anything to the contrary may include, without limitation, any duties and responsibilities related to any assets or operations that were or may be acquired by the Company on or after the effective date of your Employment Agreement at the discretion of the Board. Your right to terminate employment in a termination for Good Reason shall not be affected by your incapacity due to physical or mental illness. Subject to the requirements set forth above, your continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

Termination Period:

You may exercise this Option for 3 months after termination of your Service except as set forth in Section 4 of the Stock Option Agreement and in no event may you exercise this Option after the Expiration Date. Notwithstanding the foregoing, in the event of a Change in Control (defined above) during your Service, you may exercise this Option at any time until the date that is five (5) years after the consummation of the Change in Control or, if later, the expiration of the post-termination exercise period, as set forth in the first sentence above; provided that in no event may you exercise this Option after the Expiration Date. You are responsible for keeping track of these exercise periods following a termination of your Service for any reason. The Company will not provide further notice of such periods.

     Unless otherwise defined in this Notice of Stock Option Grant, the terms used herein shall have the meanings assigned to them in the Plan.

     By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan and the Stock Option Agreement, all of which are attached to, and made a part of, this document.

     In addition, you agree and acknowledge that your rights to any Shares underlying this Option will be earned only as you provide Service over time, that this Option is not being granted to you as consideration for services you rendered to the Company (or any Parent, Subsidiary, or Affiliate) prior to your Date of Grant, and that nothing in this Notice of Stock Option Grant or the attached documents confers upon you any right to continue your employment or consulting relationship with the Company (or any Parent,

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Subsidiary, or Affiliate) for any period of time, nor does it interfere in any way with your right or the Company’s (or any Parent’s, Subsidiary’s, or Affiliate’s) right to terminate that relationship at any time, for any reason, with or without cause.

     This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

OPTIONEE:	MARTHA STEWART LIVING OMNIMEDIA, INC.
/s/ Wenda Harris Millard	By:	/s/ Howard Hochhauser
Signature
Wenda Harris Millard	Title:	Chief Financial Officer
Print Name

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MARTHA STEWART LIVING OMNIMEDIA, INC.
OMNIBUS STOCK AND OPTION COMPENSATION PLAN

STOCK OPTION AGREEMENT

     1. Grant of Option. Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”), hereby grants to the Optionee named in the Notice of Stock Option Grant attached to this Stock Option Agreement (the “Optionee”), an option (the “Option”) to purchase the total number of shares of Common Stock (the “Shares”) set forth in the Notice of Stock Option Grant (the “Notice”), at the exercise price per Share set forth in the Notice (the “Exercise Price”) subject to the terms, definitions and provisions of the Company’s Omnibus Stock and Option Compensation Plan (the “Plan”), which is incorporated in this Stock Option Agreement (the “Agreement”) by reference. Unless otherwise defined in this Agreement, the terms used in this Agreement shall have the meanings defined in the Plan.

     This Option is intended to be an Incentive Stock Option as defined in Section 422 of the Code only to the extent so designated in the Notice, and to the extent it is not so designated or to the extent this Option does not qualify as an Incentive Stock Option, it is intended to be a Nonstatutory Stock Option. Notwithstanding the foregoing, even if designated as an Incentive Stock Option, if the Shares subject to this Option (and all other incentive stock options granted to Optionee by the Company or any Parent or Subsidiary, including under other plans of the Company) that first become exercisable in any calendar year have an aggregate fair market value (determined for each Share as of the date of grant of the option covering such Share) in excess of $100,000, the Shares in excess of $100,000 shall be treated as subject to a Nonstatutory Stock Option in accordance with applicable law.

     2. Exercise of Option.

          (a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule, Termination Period and Expiration Date set forth in the Notice, Section 4 below and with the applicable provisions of the Plan. This Option may not be exercised for a fraction of a share.

          (b) Method of Exercise.

               (i) This Option shall be exercisable by execution and delivery of the Notice of Exercise attached hereto as Exhibit A or of any other form of written notice approved for such purpose by the Company which shall state Optionee’s election to exercise this Option, the number of Shares in respect of which this Option is being exercised, and such other representations and agreements as to the holder’s investment intent with respect to such Shares as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by Optionee and shall be delivered to the Company by such means as are determined by the Committee in its

discretion to constitute adequate delivery. The written notice shall be accompanied by payment of the aggregate Exercise Price for the purchased Shares.

               (ii) As a condition to the exercise of this Option and as further set forth in Section 13 of the Plan, Optionee agrees to make adequate provision for federal, state or other tax or withholding obligations, if any, which arise upon the grant, vesting or exercise of this Option, or disposition of Shares, whether by withholding, direct payment to the Company, or otherwise.

               (iii) The Company is not obligated, and will have no liability for failure, to issue or deliver any Shares upon exercise of this Option unless such issuance or delivery would comply with all applicable laws, rules and regulations, with such compliance determined by the Company in consultation with its legal counsel. This Option may not be exercised until such time as the Plan has been approved by the Company’s stockholders, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any applicable laws, rules or regulations, including any applicable U.S. federal or state securities laws or any other law or regulation, including any rule under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by applicable laws, rules or regulations. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Optionee on the date on which this Option is exercised with respect to such Shares.

               (iv) Subject to compliance with all applicable laws, rules and regulations, this Option shall be deemed to be exercised upon receipt by the Company of the appropriate written notice of exercise accompanied by the Exercise Price and the satisfaction of any applicable withholding obligations.

     3. Method of Payment. Payment of the Exercise Price shall be by any of the following, or a combination of the following, at the election of Optionee: (a) cash, (b) check, (c) Cashless Exercise, or (d) surrender of previously owned Shares.

     4. Termination of Relationship. Following the date of termination of Optionee’s Service for any reason (the “Termination Date”), Optionee may exercise this Option only as set forth in the Notice and this Section 4. If Optionee does not exercise this Option within the Termination Period set forth in the Notice or the termination periods set forth below, this Option shall terminate in its entirety. In no event may this Option be exercised after the Expiration Date set forth in the Notice. In the event of termination of Optionee’s Service other than as a result of Optionee’s Disability, death or for Cause, Optionee may, to the extent Optionee is vested in the Option Shares at the Termination Date, exercise this Option during the Termination Period set forth in the Notice. Subject to the consummation of a Change in Control, as described in the Notice, in the event of any other termination, Optionee may exercise this Option only as described below:

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          (a) Termination upon Disability of Optionee. In the event of termination of Optionee’s Service as a result of Optionee’s Disability, Optionee may, but only within 12 months from the Termination Date, exercise this Option to the extent Optionee is vested in the Option Shares.

          (b) Death of Optionee. In the event of the death of Optionee while in Service or within 3 months following the termination of Optionee’s Service, this Option may be exercised at any time within 12 months following the date of death by any beneficiary properly designated by the Optionee or, if no such beneficiary exists, by the Optionee’s estate or by a person who acquired the right to exercise this Option by bequest or inheritance, but only to the extent Optionee is vested in the Option Shares.

          (c) Termination for Cause. In the event Optionee’s Service is terminated for Cause, this Option shall terminate immediately upon such termination for Cause. In the event Optionee’s employment or consulting relationship with the Company is suspended pending investigation of whether such relationship shall be terminated for Cause, all Optionee’s rights under this Option, including the right to exercise this Option, shall be suspended during the investigation period.

     5. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution. The designation of a beneficiary does not constitute a transfer. This Option may be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee.

     6. Authorization to Release Necessary Personal Information.

          (a) Optionee hereby authorizes and directs Optionee’s employer to collect, use and transfer in electronic or other form, any personal information (the “Data”) regarding Optionee’s employment, the nature and amount of Optionee’s compensation and the facts and conditions of Optionee’s participation in the Plan (including, but not limited to, Optionee’s name, home address, telephone number, date of birth, social security number (or any other social or national identification number), salary, nationality, job title, number of shares held and the details of all Awards or any other entitlement to Shares awarded, cancelled, exercised, vested, unvested or outstanding) for the purpose of implementing, administering and managing Optionee’s participation in the Plan. Optionee understands that the Data may be transferred to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties assisting in the implementation, administration and management of the Plan, including any requisite transfer to a broker or other third party assisting with the administration of this Option under the Plan or with whom shares acquired pursuant to this Option or cash from the sale of shares underlying this Option may be deposited. Optionee acknowledges that recipients of the Data may be located in different countries, and those countries may have data privacy laws and protections different from those in the country of Optionee’s residence. Furthermore, Optionee acknowledges and understand that the transfer of the

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Data to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties is necessary for Optionee’s participation in the Plan.

          (b) Optionee may at any time withdraw the consents herein by contacting Optionee’s local human resources representative in writing. Optionee further acknowledges that withdrawal of consent may affect Optionee’s ability to exercise or realize benefits from this Option, and Optionee’s ability to participate in the Plan.

     7. No Entitlement or Claims for Compensation.

          (a) Optionee’s rights, if any, in respect of or in connection with this Option or any other Award is derived solely from the discretionary decision of the Company to permit Optionee to participate in the Plan and to benefit from a discretionary Award. By accepting this Option, Optionee expressly acknowledges that there is no obligation on the part of the Company to continue the Plan and/or grant any additional Awards to Optionee. This Option is not intended to be compensation of a continuing or recurring nature, or part of Optionee’s normal or expected compensation, and in no way represents any portion of a Optionee’s salary, compensation, or other remuneration for purposes of pension benefits, severance, redundancy, resignation or any other purpose.

          (b) Neither the Plan nor this Option or any other Award granted under the Plan shall be deemed to give Optionee a right to become or remain an Employee, Consultant or director of the Company, a Parent, a Subsidiary, or an Affiliate. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate Optionee’s Service at any time, with or without cause, and for any reason, subject to applicable laws, the Company’s Articles of Incorporation and Bylaws and a written employment agreement (if any), and Optionee shall be deemed irrevocably to have waived any claim to damages or specific performance for breach of contract or dismissal, compensation for loss of office, tort or otherwise with respect to the Plan, this Option or any outstanding Award that is forfeited and/or is terminated by its terms or to any future Award.

          (c) Optionee acknowledges that he or she is voluntarily participating in the Plan.

          (d) The future value of the underlying Shares is unknown and cannot be predicted with certainty. If the underlying Shares do not increase in value, the Option will have no value. If Optionee exercises the Option and obtains Shares, the value of the Shares acquired upon exercise may increase or decrease in value, even below the Exercise Price.

     8. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to the Option granted under and participation in the Plan or future options that may be granted under the Plan by electronic means or to request Optionee’s consent to participate in the Plan by electronic means. Optionee hereby consents to receive such documents by electronic delivery and, if requested, to agree to

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participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

     9. Translation. If this Agreement or any other document related to the Plan is translated into a language other then English and if the translated version is different from the English version, the English version will take precedence.

     10. Effect of Agreement. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof (and has had an opportunity to consult counsel regarding the Option terms), and hereby accepts this Option and agrees to be bound by its contractual terms as set forth herein and in the Plan. Optionee hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee regarding any questions relating to this Option. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of the Notice and this Agreement, the Plan terms and provisions shall prevail.

     11. Miscellaneous.

          (a) Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

          (b) Entire Agreement; Enforcement of Rights. This Agreement, together with the Notice and the Plan, sets forth the entire agreement and understanding of the parties relating to the subject matter herein and therein and merges all prior discussions between the parties. Except as contemplated under the Plan, no modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed or, if permitted by the Company, electronically accepted, by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

          (c) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms.

          (d) Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent by telegram or fax or 48 hours after being deposited in the mail, as certified or registered mail, with postage prepaid, and addressed to the Company at its principal corporate offices and to Optionee at the address maintained for Optionee in the Company’s records.

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          (e) Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. The rights and obligations of Optionee under this Agreement may not be assigned without the prior written consent of the Company.

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EXHIBIT A

NOTICE OF EXERCISE

To:	Martha Stewart Living Omnimedia, Inc.
Attn:	Administrator of the Omnibus Stock and Option Compensation Plan
Subject:	Notice of Intention to Exercise Stock Option

     This Notice of Exercise constitutes official notice that the undersigned intends to exercise Optionee’s option to purchase                     shares of Martha Stewart Living Omnimedia, Inc. Common Stock, under and pursuant to the Company’s Omnibus Stock and Option Compensation Plan (the “Plan”) and the Notice of Stock Option Grant and Stock Option Agreement (the “Agreement”) dated                     , as follows:

Number of Shares:

Exercise Price per Share:

Total Exercise Price:

Method of Payment of Exercise Price:

     The shares should be registered in the name (s) of:

                                                                               and

                                                                                    .¹

     By signing below, I hereby agree to be bound by all of the terms and conditions set forth in the Plan and the Agreement. If applicable, proof of my right to purchase the shares pursuant to the Plan and the Agreement is enclosed.²

Dated:                                                            

(Signature)	(Signature)3
(Please Print Name)	(Please Print Name)
(Full Address)	(Full Address)

1	If more than one name is listed, please specify whether the owners will hold the shares as community property or as joint tenants with the right of survivorship.
2	Applicable if someone other than the Optionee (e.g., a death beneficiary) is exercising the stock option.
3	Each person in whose name shares are to be registered must sign this Notice of Exercise.

EX-10.9

Exhibit 10.9

MARTHA STEWART LIVING OMNIMEDIA, INC.

OMNIBUS STOCK AND OPTION COMPENSATION PLAN

RESTRICTED STOCK GRANT AGREEMENT

     This Restricted Stock Grant Agreement (the “Agreement”) is made and entered into as of October 1, 2008 by and between Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”), and Robin Marino pursuant to the Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan (the “Plan”). To the extent any capitalized terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the Plan, which is attached to, and made a part of, this Agreement. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of this Agreement, the Plan terms and provisions shall prevail.

     In consideration of the mutual agreements herein contained and intending to be legally bound hereby, the parties agree as follows:

     1. Restricted Shares. Pursuant to the Plan, the Company hereby transfers to you, and you hereby accept from the Company, a Stock Grant consisting of 50,000 Shares (the “Restricted Shares”), on the terms and conditions set forth herein and in the Plan.

     2. Vesting of Restricted Shares. So long as your Service continues, the Restricted Shares shall vest in accordance with the following schedule: 33% of the total number of Restricted Shares shall vest on October 1, 2009; 33% of the total number of Restricted Shares shall vest on October 1, 2010; and 34% of the total number of Restricted Shares shall vest on October 1, 2011.

Notwithstanding the foregoing, upon the earlier of: (a) a Change in Control (defined below) during your Service; (b) the Company’s termination of your employment without Cause (defined below); or (c) your resignation for Good Reason (defined below), all Restricted Shares shall fully vest immediately.

For purposes of this Agreement, a Change in Control shall mean:

          (a) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) or “group” (as such term is used in Section 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the Voting Stock (as defined below) of the Company (as such term is defined below for purposes of this definition); provided that this subsection (a) shall not apply with respect to a stockholder of the Company who beneficially owns more than 50% of the Voting Stock of the Company on June 11, 2008;

          (b) all or substantially all of the assets or business of the Company are disposed of pursuant to a merger, consolidation or other transaction unless, immediately after such transaction, the stockholders of the Company immediately prior to the transaction own, directly

or indirectly, in substantially the same proportion as they owned the Voting Stock of the Company prior to such transaction more than 50% of the Voting Stock of the company surviving such transaction or succeeding to all or substantially all of the assets or business of the Company or the ultimate parent company of such surviving or successor company if such surviving or successor company is a subsidiary of another entity (there being excluded from the number of shares held by such stockholders, but not from the Voting Stock of the combined company, any shares received by affiliates of such other company in exchange for stock of such other company);

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

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

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

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

For purposes of this Agreement, Cause shall mean that the Board has made a good faith determination, after providing you with reasonably detailed written notice and a reasonable opportunity to be heard on the issues at a Board meeting, that any of the following has occurred:

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

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

          (c) you have been convicted of a felony; or

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     (d) you have engaged in fraud against the Company or misappropriated Company property (other than incidental property).

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

For purposes of this Agreement, Good Reason shall mean the occurrence, without your express prior written consent, of any one or more of the following:

     (a) a material diminution of, or material reduction or material adverse alteration in, your title (except as may occur in response to a comment from a regulatory or governmental agency), reporting status or authority to exercise Pre-Effective Date Duties, and Responsibilities (defined below), or the assignment to you of duties inconsistent with those set forth in your employment agreement dated as of September, 2008 (the “Employment Agreement”) (or as subsequently amended in accordance with such agreement) resulting in a materially adverse change to your duties and responsibilities; provided, however, that the following shall not constitute Good Reason: the assignment to, or exercise by, the Chairman of the Board, the Company’s other Co-CEO and/or any other officer(s) appointed by the Chairman of the Board or the Board, as the case may be, of (and any related diminution, reduction, alteration or elimination of your authority to exercise) any Post-Effective Date Duties and Responsibilities (defined below), regardless of whether you have exercised any such Post-Effective Date Duties and Responsibilities; and provided further that any diminution, reduction or adverse alteration in your authority to exercise any Pre-Effective Date Duties and Responsibilities (the “Reduced Pre-Effective Date Duties and Responsibilities”) shall be disregarded for the purposes of this subsection to the extent that you have authority to exercise any Post-Effective Date Duties and Responsibilities that are of approximately comparable importance to the Company as the Reduced Pre-Effective Date Duties and Responsibilities;

     (b) a material diminution, material reduction or materially adverse alteration to your Post-Effective Date Duties and Responsibilities as exercised by you in the ordinary course prior to the effective date of your Employment Agreement;

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

     (d) the Company’s requiring you to be based at a location in excess of 35 miles from the location of your principal job location or office specified in your Employment Agreement, except for required travel on the Company’s business to an extent substantially consistent with your position; or

     (e) a reduction by the Company of your base salary as in effect on the effective date of your Employment Agreement, or as the same shall be increased from time to time.

“Pre-Effective Date Duties and Responsibilities” shall mean duties and responsibilities exercised by you in your capacity as President — Media of the Company prior to the effective date of your Employment Agreement with respect to assets owned by the Company prior to such effective

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date. “Post-Effective Date Duties and Responsibilities” shall mean duties and responsibilities other than Pre-Effective Date Duties and Responsibilities, and notwithstanding anything to the contrary may include, without limitation, any duties and responsibilities related to any assets or operations that were or may be acquired by the Company on or after the effective date of your Employment Agreement at the discretion of the Board. Your right to terminate employment in a termination for Good Reason shall not be affected by your incapacity due to physical or mental illness. Subject to the requirements set forth above, your continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

     3. Termination of Service. Except as set forth in Section 2 above, in the event of the termination of your Service for any reason, all unvested Restricted Shares shall be immediately forfeited without consideration. For purposes of facilitating the enforcement of the provisions of this Section 3, you agree that the Company may issue stop-transfer instructions on the Restricted Shares to the Company’s transfer agent, may require that Restricted Shares be held by a broker designated by the Company, or may otherwise hold the Restricted Shares in escrow, until the Restricted Shares have vested and you have satisfied all applicable obligations with respect to the Restricted Shares, including any applicable tax obligations set forth in Section 5 below. Any new, substituted or additional securities or other property which is issued or distributed with respect to the unvested Restricted Shares shall be subject to the same terms and conditions as are applicable to the unvested Restricted Shares under this Agreement and the Plan.

     4. Election to Recognize Income in the Year of Grant. Under Section 83 of the Code, the Fair Market Value of the Restricted Shares on the date the Restricted Shares vest will be taxable as ordinary income at that time. You understand and acknowledge that you may elect to be taxed at the time the Restricted Shares are acquired in an amount equal to the Fair Market Value of the Restricted Shares at that time, rather than the date the Restricted Shares vest, by filing an election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days after the date of this Agreement. YOU ACKNOWLEDGE AND AGREE THAT IT IS YOUR SOLE RESPONSIBILITY, AND NOT THE COMPANY’S RESPONSIBILITY, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF YOU REQUEST THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON YOUR BEHALF.

     5. Taxes. You agree to make arrangements satisfactory to the Company for the satisfaction of any applicable tax obligations that arise in connection with the Restricted Shares which, at the sole discretion of the Committee, may include (i) having the Company withhold Shares from the Restricted Shares held in escrow, or (ii) tendering Shares to the Company, in either case, equal in value to the amount necessary to satisfy any such tax obligation. The Company shall not be required to release the Restricted Shares from the stop-transfer instructions or escrow unless and until such obligations are satisfied.

     6. Tax Advice. You represent, warrant, and acknowledge that the Company has made no warranties or representations to you with respect to the income tax consequences of the transactions contemplated by this Agreement, and you are in no manner relying on the Company or the Company’s representatives for an assessment of such tax consequences. YOU UNDERSTAND THAT THE TAX LAWS AND REGULATIONS ARE SUBJECT TO

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CHANGE. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING ANY STOCK GRANT AWARD. NOTHING STATED HEREIN IS INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING TAXPAYER PENALTIES.

     7. Non-Transferability of Restricted Shares. Restricted Shares which have not vested pursuant to Section 2 above shall not be anticipated, assigned, attached, garnished, optioned, transferred, or made subject to any creditor’s process, whether voluntarily or involuntarily or by the operation of law. Notwithstanding the foregoing, you may at any time designate a beneficiary or enter into a will or any similar arrangement which, in each case, provides for the transfer of vested Restricted Shares upon your death.

     8. Restriction on Transfer. Regardless of whether the transfer or issuance of the Restricted Shares has been registered under the Securities Act or has been registered or qualified under the securities laws of any state, the Company may impose additional restrictions upon the sale, pledge, or other transfer of the Restricted Shares (including the placement of appropriate legends on stock certificates, if any, and the issuance of stop-transfer instructions to the Company’s transfer agent) if, in the judgment of the Company and the Company’s counsel, such restrictions are necessary in order to achieve compliance with the provisions of the Securities Act, the securities laws of any state, or any other law.

     9. Stock Certificate Restrictive Legends. Stock certificates evidencing the Restricted Shares, if any, may bear such restrictive legends as the Company and the Company’s counsel deem necessary under applicable law or pursuant to this Agreement.

     10. Representations, Warranties, Covenants, and Acknowledgments. You hereby agree that in the event the Company and the Company’s counsel deem it necessary or advisable in the exercise of their discretion, the transfer or issuance of the Restricted Shares may be conditioned upon you making certain representations, warranties, and acknowledgments relating to compliance with applicable securities laws.

     11. Voting and Other Rights. Subject to the terms of this Agreement, you shall have all the rights and privileges of a stockholder of the Company while the Restricted Shares are held in escrow, including the right to vote and to receive dividends (if any).

     12. Authorization to Release Necessary Personal Information. You hereby authorize and direct your employer to collect, use and transfer in electronic or other form, any personal information (the “Data”) regarding your employment, the nature and amount of your compensation and the facts and conditions of your participation in the Plan (including, but not limited to, your name, home address, telephone number, date of birth, social security number (or any other social or national identification number), salary, nationality, job title, number of shares held and the details of all Awards or any other entitlement to shares awarded, cancelled, exercised, vested, unvested or outstanding) for the purpose of implementing, administering and managing your participation in the Plan. You understand that the Data may be transferred to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties assisting in the implementation, administration and management of the Plan, including any requisite transfer to a broker or other third party assisting with the administration of this Stock Grant under the Plan or

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with whom shares acquired pursuant to this Stock Grant or cash from the sale of such shares may be deposited. You acknowledge that recipients of the Data may be located in different countries, and those countries may have data privacy laws and protections different from those in the country of your residence. Furthermore, you acknowledge and understand that the transfer of the Data to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties is necessary for your participation in the Plan. You may at any time withdraw the consents herein by contacting your local human resources representative in writing. You further acknowledge that withdrawal of consent may affect your ability to realize benefits from this Stock Grant, and your ability to participate in the Plan.

     13. No Entitlement or Claims for Compensation.

          (a) Your rights, if any, in respect of or in connection with this Stock Grant or any other Award is derived solely from the discretionary decision of the Company to permit you to participate in the Plan and to benefit from a discretionary Award. By accepting this Stock Grant, you expressly acknowledge that there is no obligation on the part of the Company to continue the Plan and/or grant any additional Awards to you. This Stock Grant is not intended to be compensation of a continuing or recurring nature, or part of your normal or expected compensation, and in no way represents any portion of a your salary, compensation, or other remuneration for purposes of pension benefits, severance, redundancy, resignation or any other purpose.

          (b) Neither the Plan nor this Stock Grant or any other Award granted under the Plan shall be deemed to give you a right to become or remain an Employee, Consultant or director of the Company, a Parent, a Subsidiary, or an Affiliate. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate your Service at any time, with or without cause, and for any reason, subject to applicable laws, the Company’s Articles of Incorporation and Bylaws and a written employment agreement (if any), and you shall be deemed irrevocably to have waived any claim to damages or specific performance for breach of contract or dismissal, compensation for loss of office, tort or otherwise with respect to the Plan, this Stock Grant or any outstanding Award that is forfeited and/or is terminated by its terms or to any future Award.

     14. Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight (48) hours after being deposited in the mail, as certified or registered mail, with postage prepaid, and addressed to the Company at its principal corporate offices and to you at the address maintained for you in the Company’s records.

     15. Entire Agreement; Enforcement of Rights. This Agreement, together with the Plan, sets forth the entire agreement and understanding of the parties relating to the subject matter herein and therein and merges all prior discussions between the parties. Except as contemplated under the Plan, no modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

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     16. Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed, and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

     17. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded, and (iii) the balance of this Agreement shall be enforceable in accordance with its terms.

     18. Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns. Your rights and obligations under this Agreement may not be assigned without the prior written consent of the Company.

     19. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Stock Grant under the Plan and participation in the Plan or future Awards that may be granted under the Plan by electronic means or to request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

     20. Language. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.

     21. Acceptance of Agreement. You must expressly accept the terms and conditions of your Stock Grant as set forth in this Agreement by signing and returning to the Company within 90 days after the Company sends this Agreement to you. If you do not accept your Stock Grant in the manner instructed by the Company, your Stock Grant will be subject to cancellation.

     22. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

* * * *

(Signature Page Follows)

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this ___day of October 1, 2008.

MARTHA STEWART LIVING OMNIMEDIA, INC.

By:	/s/ Howard Hochhauser
	(Signature)
Name:	Howard Hochhauser
Title:	Chief Financial Officer
RECIPIENT: Robin Marino
By:	/s/ Robin Marino
	(Signature)

Address:

Telephone Number:

E-mail Address:

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EX-10.10

Exhibit 10.10

MARTHA STEWART LIVING OMNIMEDIA, INC.
OMNIBUS STOCK AND OPTION COMPENSATION PLAN

NOTICE OF STOCK OPTION GRANT

Optionee:

Robin Marino
[address]

     You have been granted an option (the “Option”) to purchase Common Stock of Martha Stewart Living Omnimedia, Inc. (the “Company”), as follows:

Date of Grant:	October 1, 2008
Exercise Price Per Share:	$8.53
Total Number of Shares:	100,000
Total Exercise Price:	$853,000
Type of Option:	Incentive Stock Option
	X      Nonstatutory Stock Option
Expiration Date:	September 30, 2015
Vesting Schedule:	So long as your Service continues, the Shares underlying this Option shall vest and become exercisable in accordance with the following schedule:

33% of the Total Number of Shares subject to this Option shall vest on October 1, 2009;

33% of the Total Number of Shares subject to this Option shall vest on October 1, 2010; and

34% of the Total Number of Shares subject to this Option shall vest on October 1, 2011.

Notwithstanding the foregoing, all Shares subject to this Option shall fully vest and become exercisable

upon the earlier of: (1) a Change in Control (as defined below); provided that you are still in Service at that time; and (2) the termination of your employment by the Company without Cause or your voluntary resignation for Good Reason (as such terms are defined below).

For purposes of this Option, a Change in Control shall mean:

(1) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) or “group” (as such term is used in Section 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the Voting Stock (as defined below) of the Company (as such term is defined below for purposes of this definition); provided that this clause (1) shall not apply with respect to a stockholder of the Company who beneficially owns more than 50% of the Voting Stock of the Company on June 11, 2008;

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

(3) the Company adopts any plan of liquidation providing for the distribution of all or substantially

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all of its assets if such plan of liquidation will result in the winding-up of the business of the Company;

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

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

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

For purposes of this Option, Cause shall mean that the Board has made a good faith determination, after providing you with reasonably detailed written notice and a reasonable opportunity to be heard on the issues at a Board meeting, that any of the following has occurred:

(1) the willful and continued failure by you to substantially perform your material duties to the Company (other than due to mental or physical

3

disability) after written notice specifying such failure and the manner in which you may rectify such failure in the future;

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

(3) you have been convicted of a felony; or

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

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

For purposes of this Option, Good Reason shall mean the occurrence, without your express prior written consent, of any one or more of the following:

(1) a material diminution of, or material reduction or material adverse alteration in, your title (except as may occur in response to a comment from a regulatory or governmental agency), reporting status or authority to exercise Pre-Effective Date Duties, and Responsibilities (defined below), or the assignment to you of duties inconsistent with those set forth in your employment agreement dated as of September 2008 (the “Employment Agreement”) (or as subsequently amended in accordance with such agreement) resulting in a materially adverse change to your duties and responsibilities; provided, however, that the following shall not constitute Good Reason: the assignment to, or exercise by, the Chairman of the Board, the Company’s other Co-CEO and/or any other officer(s) appointed by the Chairman of the Board or the Board, as the case may be, of (and any related diminution, reduction, alteration or

4

elimination of your authority to exercise) any Post-Effective Date Duties and Responsibilities (defined below), regardless of whether you have exercised any such Post-Effective Date Duties and Responsibilities; and provided further that any diminution, reduction or adverse alteration in your authority to exercise any Pre-Effective Date Duties and Responsibilities (the “Reduced Pre-Effective Date Duties and Responsibilities”) shall be disregarded for the purposes of this subsection to the extent that you have authority to exercise any Post-Effective Date Duties and Responsibilities that are of approximately comparable importance to the Company as the Reduced Pre-Effective Date Duties and Responsibilities;

(2) a material diminution, material reduction or materially adverse alteration to your Post-Effective Date Duties and Responsibilities as exercised by you in the ordinary course prior to the effective date of your Employment Agreement;

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

(4) the Company’s requiring you to be based at a location in excess of 35 miles from the location of your principal job location or office specified in your Employment Agreement, except for required travel on the Company’s business to an extent substantially consistent with your position; or

(5) a reduction by the Company of your base salary as in effect on the effective date of your Employment Agreement, or as the same shall be increased from time to time.

“Pre-Effective Date Duties and Responsibilities” shall mean duties and responsibilities exercised by you in your capacity as President — Media of the Company prior to the effective date of your Employment Agreement with respect to assets owned by the Company prior to such effective date. “Post-Effective Date Duties and Responsibilities” shall mean duties and responsibilities other than Pre-Effective Date Duties and Responsibilities, and

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notwithstanding anything to the contrary may include, without limitation, any duties and responsibilities related to any assets or operations that were or may be acquired by the Company on or after the effective date of your Employment Agreement at the discretion of the Board. Your right to terminate employment in a termination for Good Reason shall not be affected by your incapacity due to physical or mental illness. Subject to the requirements set forth above, your continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

Termination Period:

You may exercise this Option for 3 months after termination of your Service except as set forth in Section 4 of the Stock Option Agreement and in no event may you exercise this Option after the Expiration Date. Notwithstanding the foregoing, in the event of a Change in Control (defined above) during your Service, you may exercise this Option at any time until the date that is five (5) years after the consummation of the Change in Control or, if later, the expiration of the post-termination exercise period, as set forth in the first sentence above; provided that in no event may you exercise this Option after the Expiration Date. You are responsible for keeping track of these exercise periods following a termination of your Service for any reason. The Company will not provide further notice of such periods.

     Unless otherwise defined in this Notice of Stock Option Grant, the terms used herein shall have the meanings assigned to them in the Plan.

     By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan and the Stock Option Agreement, all of which are attached to, and made a part of, this document.

     In addition, you agree and acknowledge that your rights to any Shares underlying this Option will be earned only as you provide Service over time, that this Option is not being granted to you as consideration for services you rendered to the Company (or any Parent, Subsidiary, or Affiliate) prior to your Date of Grant, and that nothing in this Notice of Stock Option Grant or the attached documents confers upon you any right to continue your employment or consulting relationship with the Company (or any Parent,

6

Subsidiary, or Affiliate) for any period of time, nor does it interfere in any way with your right or the Company’s (or any Parent’s, Subsidiary’s, or Affiliate’s) right to terminate that relationship at any time, for any reason, with or without cause.

     This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

OPTIONEE:	MARTHA STEWART LIVING OMNIMEDIA, INC.
/s/ Robin Marino	By:	/s/ Howard Hochhauser
Signature
Robin Marino	Title:	Chief Financial Officer
Print Name

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MARTHA STEWART LIVING OMNIMEDIA, INC.
OMNIBUS STOCK AND OPTION COMPENSATION PLAN

STOCK OPTION AGREEMENT

     1. Grant of Option. Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”), hereby grants to the Optionee named in the Notice of Stock Option Grant attached to this Stock Option Agreement (the “Optionee”), an option (the “Option”) to purchase the total number of shares of Common Stock (the “Shares”) set forth in the Notice of Stock Option Grant (the “Notice”), at the exercise price per Share set forth in the Notice (the “Exercise Price”) subject to the terms, definitions and provisions of the Company’s Omnibus Stock and Option Compensation Plan (the “Plan”), which is incorporated in this Stock Option Agreement (the “Agreement”) by reference. Unless otherwise defined in this Agreement, the terms used in this Agreement shall have the meanings defined in the Plan.

     This Option is intended to be an Incentive Stock Option as defined in Section 422 of the Code only to the extent so designated in the Notice, and to the extent it is not so designated or to the extent this Option does not qualify as an Incentive Stock Option, it is intended to be a Nonstatutory Stock Option. Notwithstanding the foregoing, even if designated as an Incentive Stock Option, if the Shares subject to this Option (and all other incentive stock options granted to Optionee by the Company or any Parent or Subsidiary, including under other plans of the Company) that first become exercisable in any calendar year have an aggregate fair market value (determined for each Share as of the date of grant of the option covering such Share) in excess of $100,000, the Shares in excess of $100,000 shall be treated as subject to a Nonstatutory Stock Option in accordance with applicable law.

     2. Exercise of Option.

          (a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule, Termination Period and Expiration Date set forth in the Notice, Section 4 below and with the applicable provisions of the Plan. This Option may not be exercised for a fraction of a share.

          (b) Method of Exercise.

               (i) This Option shall be exercisable by execution and delivery of the Notice of Exercise attached hereto as Exhibit A or of any other form of written notice approved for such purpose by the Company which shall state Optionee’s election to exercise this Option, the number of Shares in respect of which this Option is being exercised, and such other representations and agreements as to the holder’s investment intent with respect to such Shares as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by Optionee and shall be delivered to the Company by such means as are determined by the Committee in its

discretion to constitute adequate delivery. The written notice shall be accompanied by payment of the aggregate Exercise Price for the purchased Shares.

               (ii) As a condition to the exercise of this Option and as further set forth in Section 13 of the Plan, Optionee agrees to make adequate provision for federal, state or other tax or withholding obligations, if any, which arise upon the grant, vesting or exercise of this Option, or disposition of Shares, whether by withholding, direct payment to the Company, or otherwise.

               (iii) The Company is not obligated, and will have no liability for failure, to issue or deliver any Shares upon exercise of this Option unless such issuance or delivery would comply with all applicable laws, rules and regulations, with such compliance determined by the Company in consultation with its legal counsel. This Option may not be exercised until such time as the Plan has been approved by the Company’s stockholders, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any applicable laws, rules or regulations, including any applicable U.S. federal or state securities laws or any other law or regulation, including any rule under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by applicable laws, rules or regulations. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Optionee on the date on which this Option is exercised with respect to such Shares.

               (iv) Subject to compliance with all applicable laws, rules and regulations, this Option shall be deemed to be exercised upon receipt by the Company of the appropriate written notice of exercise accompanied by the Exercise Price and the satisfaction of any applicable withholding obligations.

     3. Method of Payment. Payment of the Exercise Price shall be by any of the following, or a combination of the following, at the election of Optionee: (a) cash, (b) check, (c) Cashless Exercise, or (d) surrender of previously owned Shares.

     4. Termination of Relationship. Following the date of termination of Optionee’s Service for any reason (the “Termination Date”), Optionee may exercise this Option only as set forth in the Notice and this Section 4. If Optionee does not exercise this Option within the Termination Period set forth in the Notice or the termination periods set forth below, this Option shall terminate in its entirety. In no event may this Option be exercised after the Expiration Date set forth in the Notice. In the event of termination of Optionee’s Service other than as a result of Optionee’s Disability, death or for Cause, Optionee may, to the extent Optionee is vested in the Option Shares at the Termination Date, exercise this Option during the Termination Period set forth in the Notice. Subject to the consummation of a Change in Control, as described in the Notice, in the event of any other termination, Optionee may exercise this Option only as described below:

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          (a) Termination upon Disability of Optionee. In the event of termination of Optionee’s Service as a result of Optionee’s Disability, Optionee may, but only within 12 months from the Termination Date, exercise this Option to the extent Optionee is vested in the Option Shares.

          (b) Death of Optionee. In the event of the death of Optionee while in Service or within 3 months following the termination of Optionee’s Service, this Option may be exercised at any time within 12 months following the date of death by any beneficiary properly designated by the Optionee or, if no such beneficiary exists, by the Optionee’s estate or by a person who acquired the right to exercise this Option by bequest or inheritance, but only to the extent Optionee is vested in the Option Shares.

          (c) Termination for Cause. In the event Optionee’s Service is terminated for Cause, this Option shall terminate immediately upon such termination for Cause. In the event Optionee’s employment or consulting relationship with the Company is suspended pending investigation of whether such relationship shall be terminated for Cause, all Optionee’s rights under this Option, including the right to exercise this Option, shall be suspended during the investigation period.

     5. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution. The designation of a beneficiary does not constitute a transfer. This Option may be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee.

     6. Authorization to Release Necessary Personal Information.

          (a) Optionee hereby authorizes and directs Optionee’s employer to collect, use and transfer in electronic or other form, any personal information (the “Data”) regarding Optionee’s employment, the nature and amount of Optionee’s compensation and the facts and conditions of Optionee’s participation in the Plan (including, but not limited to, Optionee’s name, home address, telephone number, date of birth, social security number (or any other social or national identification number), salary, nationality, job title, number of shares held and the details of all Awards or any other entitlement to Shares awarded, cancelled, exercised, vested, unvested or outstanding) for the purpose of implementing, administering and managing Optionee’s participation in the Plan. Optionee understands that the Data may be transferred to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties assisting in the implementation, administration and management of the Plan, including any requisite transfer to a broker or other third party assisting with the administration of this Option under the Plan or with whom shares acquired pursuant to this Option or cash from the sale of shares underlying this Option may be deposited. Optionee acknowledges that recipients of the Data may be located in different countries, and those countries may have data privacy laws and protections different from those in the country of Optionee’s residence. Furthermore, Optionee acknowledges and understand that the transfer of the

3

Data to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties is necessary for Optionee’s participation in the Plan.

          (b) Optionee may at any time withdraw the consents herein by contacting Optionee’s local human resources representative in writing. Optionee further acknowledges that withdrawal of consent may affect Optionee’s ability to exercise or realize benefits from this Option, and Optionee’s ability to participate in the Plan.

     7. No Entitlement or Claims for Compensation.

          (a) Optionee’s rights, if any, in respect of or in connection with this Option or any other Award is derived solely from the discretionary decision of the Company to permit Optionee to participate in the Plan and to benefit from a discretionary Award. By accepting this Option, Optionee expressly acknowledges that there is no obligation on the part of the Company to continue the Plan and/or grant any additional Awards to Optionee. This Option is not intended to be compensation of a continuing or recurring nature, or part of Optionee’s normal or expected compensation, and in no way represents any portion of a Optionee’s salary, compensation, or other remuneration for purposes of pension benefits, severance, redundancy, resignation or any other purpose.

          (b) Neither the Plan nor this Option or any other Award granted under the Plan shall be deemed to give Optionee a right to become or remain an Employee, Consultant or director of the Company, a Parent, a Subsidiary, or an Affiliate. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate Optionee’s Service at any time, with or without cause, and for any reason, subject to applicable laws, the Company’s Articles of Incorporation and Bylaws and a written employment agreement (if any), and Optionee shall be deemed irrevocably to have waived any claim to damages or specific performance for breach of contract or dismissal, compensation for loss of office, tort or otherwise with respect to the Plan, this Option or any outstanding Award that is forfeited and/or is terminated by its terms or to any future Award.

          (c) Optionee acknowledges that he or she is voluntarily participating in the Plan.

          (d) The future value of the underlying Shares is unknown and cannot be predicted with certainty. If the underlying Shares do not increase in value, the Option will have no value. If Optionee exercises the Option and obtains Shares, the value of the Shares acquired upon exercise may increase or decrease in value, even below the Exercise Price.

     8. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to the Option granted under and participation in the Plan or future options that may be granted under the Plan by electronic means or to request Optionee’s consent to participate in the Plan by electronic means. Optionee hereby consents to receive such documents by electronic delivery and, if requested, to agree to

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participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

     9. Translation. If this Agreement or any other document related to the Plan is translated into a language other then English and if the translated version is different from the English version, the English version will take precedence.

     10. Effect of Agreement. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof (and has had an opportunity to consult counsel regarding the Option terms), and hereby accepts this Option and agrees to be bound by its contractual terms as set forth herein and in the Plan. Optionee hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee regarding any questions relating to this Option. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of the Notice and this Agreement, the Plan terms and provisions shall prevail.

     11. Miscellaneous.

          (a) Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

          (b) Entire Agreement; Enforcement of Rights. This Agreement, together with the Notice and the Plan, sets forth the entire agreement and understanding of the parties relating to the subject matter herein and therein and merges all prior discussions between the parties. Except as contemplated under the Plan, no modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed or, if permitted by the Company, electronically accepted, by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

          (c) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms.

          (d) Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent by telegram or fax or 48 hours after being deposited in the mail, as certified or registered mail, with postage prepaid, and addressed to the Company at its principal corporate offices and to Optionee at the address maintained for Optionee in the Company’s records.

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          (e) Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. The rights and obligations of Optionee under this Agreement may not be assigned without the prior written consent of the Company.

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EXHIBIT A

NOTICE OF EXERCISE

To:	Martha Stewart Living Omnimedia, Inc.
Attn:	Administrator of the Omnibus Stock and Option Compensation Plan
Subject:	Notice of Intention to Exercise Stock Option

     This Notice of Exercise constitutes official notice that the undersigned intends to exercise Optionee’s option to purchase                     shares of Martha Stewart Living Omnimedia, Inc. Common Stock, under and pursuant to the Company’s Omnibus Stock and Option Compensation Plan (the “Plan”) and the Notice of Stock Option Grant and Stock Option Agreement (the “Agreement”) dated                     , as follows:

Number of Shares:

Exercise Price per Share:

Total Exercise Price:

Method of Payment of Exercise Price:

     The shares should be registered in the name (s) of:

                                                                               and

                                                                                    .¹

     By signing below, I hereby agree to be bound by all of the terms and conditions set forth in the Plan and the Agreement. If applicable, proof of my right to purchase the shares pursuant to the Plan and the Agreement is enclosed.²

Dated:                                                            

(Signature)	(Signature)3
(Please Print Name)	(Please Print Name)
(Full Address)	(Full Address)

1	If more than one name is listed, please specify whether the owners will hold the shares as community property or as joint tenants with the right of survivorship.
2	Applicable if someone other than the Optionee (e.g., a death beneficiary) is exercising the stock option.
3	Each person in whose name shares are to be registered must sign this Notice of Exercise.

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: November 10, 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: November 10, 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 September 30, 2008, 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: November 10 , 2008	/s/ Charles Koppelman
	Charles Koppelman
	Principal Executive Officer
Dated: November 10, 2008	/s/ Howard Hochhauser
	Howard Hochhauser
	Chief Financial Officer

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