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 March 31, 2009

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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 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 Act). Yes o No þ

Class	Outstanding as of May 07, 2009
Class A, $0.01 par value		28,038,722
Class B, $0.01 par value		26,690,125
Total		54,728,847

Martha Stewart Living Omnimedia, Inc.

Index to Form 10-Q

	Page
Part I. Financial Information
Item 1. Financial Statements.	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	22
Item 4. Controls and Procedures.	23
Part II. Other Information
Item 1. Legal Proceedings.	24
Item 1A. Risk Factors.	24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	31
Item 3. Defaults Upon Senior Securities.	31
Item 4. Submission of Matters to a Vote of Security Holders.	31
Item 5. Other Information.	31
Item 6. Exhibits.	32
Signatures	33
EX-10.1
EX-10.2
EX-10.3
EX-31.1
EX-31.2
EX-32

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

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

	March 31,			December 31,
	2009			2008
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	49,744		$	50,204
Short-term investments		9,855			9,915
Accounts receivable, net		37,205			52,500
Inventory		6,483			6,053
Deferred television production costs		4,597			4,076
Income taxes receivable		41			40
Other current assets		6,608			3,712
Total current assets		114,533			126,500
PROPERTY, PLANT AND EQUIPMENT, net		13,088			14,422
GOODWILL AND OTHER INTANGIBLE ASSETS, net		93,309			93,312
OTHER NONCURRENT ASSETS, net		17,621			27,051
Total assets	$	238,551		$	261,285
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	19,920		$	27,877
Accrued payroll and related costs		6,181			7,525
Income taxes payable		97			142
Current portion of deferred subscription revenue		22,686			22,597
Current portion of other deferred revenue		19,554			7,582
Total current liabilities		68,438			65,723
DEFERRED SUBSCRIPTION REVENUE		6,374			6,874
OTHER DEFERRED REVENUE		4,752			13,334
LOAN PAYABLE		18,000			19,500
DEFERRED INCOME TAX LIABILITY		2,197			1,854
OTHER NONCURRENT LIABILITIES		3,179			3,005
Total liabilities		102,940			110,290
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Class A Common Stock, $0.01 par value, 350,000 shares authorized; 28,151 and 28,204 shares outstanding in 2009 and 2008, respectively		282			282
Class B Common Stock, $0.01 par value, 150,000 shares authorized; 26,690 shares outstanding in 2009 and 2008		267			267
Capital in excess of par value		284,641			283,248
Accumulated deficit		(148,871	)		(132,027	)
Accumulated other comprehensive income		67			—
		136,386			151,770
Less: Class A Treasury Stock - 59 shares at cost		(775	)		(775	)
Total shareholders’ equity		135,611			150,995
Total liabilities and shareholders’ equity	$	238,551		$	261,285

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

3

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

	Three Months Ended
	March 31,
	2009			2008
REVENUES
Publishing	$	28,361		$	40,792
Broadcasting		10,514			10,562
Internet		2,622			3,414
Merchandising		8,933			13,066
Total revenues		50,430			67,834
OPERATING COSTS AND EXPENSES
Production, distribution and editorial		28,170			36,037
Selling and promotion		14,781			18,714
General and administrative		14,113			16,262
Depreciation and amortization		1,751			1,356
Impairment charge		7,100			—
Total operating costs and expenses		65,915			72,369
OPERATING LOSS		(15,485	)		(4,535	)
OTHER (EXPENSE) / INCOME
Interest (expense) / income, net		(8	)		483
Loss on equity securities		(757	)		—
Loss in equity interest		(236	)		—
Total other (expense) / income		(1,001	)		483
LOSS BEFORE INCOME TAXES		(16,486	)		(4,052	)
Income tax provision		(358	)		(182	)
NET LOSS	$	(16,844	)	$	(4,234	)
LOSS PER SHARE — BASIC AND DILUTED
Net Loss	$	(0.31	)	$	(0.08	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted		53,766			52,722

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

4

MARTHA STEWART LIVING OMNIMEDIA, INC.
Consolidated Statement of Shareholders’ Equity
For the Three Months Ended March 31, 2009
(unaudited, in thousands)

																Accumulated
	Class A					Class B										other		Class A
	Common Stock					Common Stock				Capital in excess			Accumulated			comprehensive		Treasury Stock
	Shares			Amount		Shares		Amount		of par value			deficit			income		Shares			Amount			Total
Balance at January 1, 2009		28,204		$	282		26,690	$	267	$	283,248		$	(132,027	)	$	—		(59	)	$	(775	)	$	150,995
Comprehensive loss:
Net loss		—			—		—		—		—			(16,844	)		—		—			—			(16,844	)
Other comprehensive income:
Unrealized gain on investment		—			—		—		—		—			—			67		—			—			67
Total comprehensive loss		—			—		—		—		—			—			—		—			—			(16,777	)
Issuance of shares of stock and restricted stock, net of cancellations and tax withholdings		(53	)		—		—		—		(149	)		—			—		—			—			(149	)
Non-cash equity compensation		—			—		—		—		1,542			—			—		—			—			1,542
Balance at March 31, 2009		28,151		$	282		26,690	$	267		284,641		$	(148,871	)	$	67		(59	)	$	(775	)	$	135,611

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

5

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

	Three Months Ended
	March 31,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(16,844	)	$	(4,234	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Non-cash revenue		(926	)		(23	)
Depreciation and amortization		1,751			1,356
Amortization of deferred television production costs		5,078			4,563
Impairment on cost-based investment		7,100			—
Non-cash equity compensation		1,632			1,935
Deferred income tax expense		343			—
Loss in equity interest		236			—
Loss on equity securities		757			—
Other non-cash charges, net		239			185
Changes in operating assets and liabilities		3,280			35,708
Net cash provided by operating activities		2,646			39,490
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in other noncurrent assets		—			(5,000	)
Capital expenditures		(1,516	)		(263	)
Purchases of short-term investments		(10,233	)		(50	)
Sales of short-term investments		10,292			26,305
Net cash (used in) / provided by investing activities		(1,457	)		20,992
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt		(1,500	)		—
Issuance of stock and restricted stock, net of cancellations and tax liabilities		(149	)		(1,411	)
Net cash used in financing activities		(1,649	)		(1,411	)
Net (decrease) / increase in cash		(460	)		59,071
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		50,204			30,536
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	49,744		$	89,607

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

6

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

1. General

     Martha Stewart Living Omnimedia, Inc., together with its subsidiaries, is herein referred to as “we,” “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, 2008 (the “2008 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.

     The Company’s “Significant Accounting Policies” are discussed in more detail in the 2008 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 delayed 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 deferred 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, and January 1, 2009 for nonfinancial assets and nonfinancial liabilities. The adoption of SFAS 157 for financial assets and liabilities and for nonfinancial assets and nonfinancial liabilities did not have a material impact on the consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (Revised) (“SFAS 141(R)”). SFAS 141(R) significantly changed the accounting for and reporting of business combinations in consolidated financial statements previously required under SFAS 141. 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) also results 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) requires 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. The Company has simultaneously adopted SFAS 141(R) and SFAS 160 as of January 1, 2009, as required. These standards will have no impact on the previous acquisitions recorded by the Company in the financial statements.

7

3. 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 with fiscal 2009 financial statement presentation.

4. Inventories

     Inventory is comprised of paper stock. The inventory balances at March 31, 2009 and December 31, 2008 were $6.5 million and $6.1 million, respectively.

5. Investment in Other Non-Current Assets

     During the second quarter of 2008, the Company entered into a three-year agreement with TurboChef Technologies, Inc. (“TurboChef”) to provide intellectual property and promotional services in exchange for $10.0 million. TurboChef provided compensation in the form of shares of TurboChef stock and a warrant to purchase shares of TurboChef stock for an aggregate value of $5.0 million in the first agreement year, and was to provide another $2.5 million in each of year two and three of the agreement in the form of stock or cash, at its option, for a total contract value of $10.0 million. In lieu of cash consideration, TurboChef provided initial compensation in 2008 in the form of 381,049 shares of TurboChef stock and a warrant to purchase 454,000 shares of TurboChef stock for an aggregate fair value of approximately $5 million.

     On January 5, 2009, the Middleby Corporation (“Middleby”) completed its acquisition of TurboChef in a cash and stock transaction. Under the terms of the merger agreement, holders of TurboChef’s common shares received a combination of $3.67 in cash and 0.0486 shares of Middleby common stock per TurboChef share. In addition, the Company now has a warrant to purchase 22,064 shares of Middleby. The consideration upon the merger equated to $2.0 million, which represented $1.4 million in cash and 18,518 shares of Middleby common stock worth $0.5 million on January 5, 2009, as well as $0.1 million related to the warrant. In the first quarter of 2009, Middleby paid to the Company $2.5 million in cash consideration, fulfilling the second year obligation under the agreement. In the third year of the agreement, the Company expects to receive another $2.5 million of Middleby stock or cash consideration. Total consideration of $10.0 million for this agreement is being recognized on a straightline basis over the three-year term.

     Any changes to the market value of the Middleby common stock require an adjustment to both the shares held as well as the warrant. In accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” the Middleby shares are considered available-for-sale-securities and are recorded at fair value each quarter, with temporary adjustments recorded in other comprehensive income. The warrant meets the definition of a derivative in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and is marked to market each quarter with the adjustment recorded in other income or other expense.

     Non-cash amounts related to these agreements have been appropriately adjusted in the cash flows from operating activities in the statement of cash flows.

     In the first quarter of 2009, the Company recorded an impairment charge of $7.1 million to reduce the carrying value of a certain cost-method investment that experienced an other-than-temporary loss in value. The Company also recorded $0.8 million of losses to reflect market fluctuations in an equity derivative instrument.

8

     While the Company has recognized all declines in investments that are believed to be other-than-temporary as of March 31, 2009, it is reasonably possible that individual investments in the Company’s portfolio may experience an other-than-temporary decline in value in the future if the underlying issuer experiences poor operating results or the U.S. or certain foreign equity markets experience further declines in value.

6. 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 $7.7 million to its valuation allowance in the first three months of 2009, resulting in a cumulative balance of $75.7 million as of March 31, 2009. In addition, the Company has recorded $0.3 million of tax expense which is attributable to differences between the financial statement carrying amounts of current and prior year acquisitions of certain indefinite-lived intangible assets and their respective tax bases which resulted in a net deferred tax liability of $2.2 million. The Company intends to maintain a valuation allowance until evidence would support the conclusion that it is more likely than not that the deferred tax asset could be realized.

     In accordance with the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), the Company had a FIN 48 liability balance of $0.2 million as of March 31, 2009, of which $0.1 million represented unrecognized tax benefits, which if recognized at some point in the future would favorably impact the effective tax rate, and $0.1 million was 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 $0.05 million.

7. 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 April 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.

     On March 2, 2009, the Company made equity awards to certain employees pursuant to the New Stock Plan. The awards consisted, in the aggregate, of 2,719,750 options priced at $1.96 per share (the closing price on the date of issuance), which options vest over a four-year period, and 311,625 performance-based restricted stock units, each of which represents the right to a share of the Company’s Class A Common Stock if the Company achieves certain earnings targets over a performance period.

8. 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 674,854 shares of the Company’s Class A Common Stock which equaled a value of $5.0 million.. The shares issued in connection

9

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 of the Company’s Class A Common Stock.

     The Company acquired the assets related to chef Emeril Lagasse to further the Company’s diversification strategy and help grow the Company’s 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 an approximate six-year period, which is expensed based upon future estimated revenues to be received.

     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 in the Merchandising, Broadcasting and Publishing segments in accordance with the nature of the underlying contract. The following unaudited pro forma financial information presents a summary of the results of operations assuming the acquisition occurred at the beginning of the first quarter of 2008:

	Three Months Ended
(unaudited, in thousands, except per share amounts)	March 31, 2008
Net revenues	$	71,052
Net loss		(3,336	)
Net loss per share — basic and diluted	$	(0.06	)

     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 amount is based on the pro forma number of shares outstanding as of the end of the first quarter of 2008 which includes 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 the first quarter of 2008, nor is it necessarily indicative of the future results of the combined company.

9. Industry Segments

     The Company is an integrated media and merchandising company providing consumers with inspiring lifestyle content and programming, and well-designed, high-quality products. The Company’s business segments are Publishing, Broadcasting, Internet and Merchandising. The Publishing segment primarily consists of the Company’s magazine operations, and also those related to its book operations. 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 Internet segment primarily consists of the content-driven website marthastewart.com supported by advertising and, until the middle of the first quarter of 2008, the operations relating to the direct-to-consumer floral business. 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 flowers program with 1-800-Flowers.com which began in the second quarter of 2008. The accounting policies for the Company’s business

10

segments are discussed in more detail in Note 1 above and in the 2008 10-K, especially under the heading “Note 2. Summary of Significant Accounting Policies.”

     Segment information for the quarter ended March 31, 2009 and 2008 is as follows:

(in thousands)	Publishing			Broadcasting		Internet			Merchandising			Corporate			Consolidated
2009
Revenues	$	28,361		$	10,514	$	2,622		$	8,933		$	—		$	50,430
Non-cash equity compensation		435			128		41			157			871			1,632
Depreciation and amortization		74			69		452			18			1,138			1,751
Operating income/(loss)		(1,872	)		834		(2,032	)		(1,776	)		(10,639	)		(15,485	)
Total assets		73,250			27,689		11,585			68,704			57,323			238,551
2008
Revenues	$	40,792		$	10,562	$	3,414		$	13,066		$	—		$	67,834
Non-cash equity compensation		651			238		59			362			625			1,935
Depreciation and amortization		99			109		378			24			746			1,356
Operating income/(loss)		1,656			175		(2,247	)		6,596			(10,715	)		(4,535	)
Total assets		90,582			23,397		11,233			22,504			96,887			244,603

10. Related Party Transactions

     See Note 11, “Subsequent Events”, for discussion of a new employment agreement executed in April 2009 between the Company and Martha Stewart.

11. Subsequent Events

     In April 2009, the Company entered into an amended and restated employment agreement with Martha Stewart which replaced the existing agreement between the Company and Ms. Stewart that was scheduled to expire in September 2009. The new agreement extends until March 31, 2012. During the term of the agreement, Ms. Stewart continues to serve as the Founder, and is entitled to talent compensation of $2.0 million per year. In addition, she is entitled to an annual bonus in an amount determined by the Compensation Committee, with a target bonus equal to $1.0 million and a maximum annual bonus of 150% of the target amount. Ms. Stewart received a $3.0 million make whole/retention payment in connection with the execution of the agreement, which amount is subject to pro-rata forfeiture in the event Ms. Stewart terminates the agreement without good reason or the Company terminates the agreement with cause.

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 or realizing the benefits of acquisitions;

11

o failure to replace Kmart revenues 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 or postage 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 programming, and well-designed, high-quality products. Our Company is organized into four business segments with Publishing, Broadcasting and Internet representing our media platforms that are complemented by our Merchandising segment. In the first quarter of 2009, total revenues decreased approximately 26% due primarily to the declines in print advertising revenue, as well as the decrease in minimum royalty guarantees and sales from Kmart as compared with the prior year quarter. These declines were partially offset by revenues from our Emeril Lagasse assets which contributed to both our Broadcasting and Merchandising segments and from the addition of new Merchandising initiatives.

     Our operating costs and expenses were lower in the first quarter of 2009 primarily from savings in our Publishing segment which had lower production, distribution and editorial costs and lower selling and promotion expenses. In addition, we also reduced expenses in our Merchandising segment across all expense categories including general and administrative costs. These cost savings were largely due to lower compensation expenses across all segments due to the reduction of our compensation accrual and lower headcount. Partially offsetting the Publishing, Merchandising and other Company-wide cost savings was a non-cash impairment charge in the quarter of $7.1 million related to our cost-based Merchandising equity investment.

     We ended the quarter with approximately $60 million in cash, cash equivalents and short-term investments and $18 million of debt. Our overall liquidity remained essentially flat from December 31, 2008 as cash provided by operations was offset by capital expenditures and prepayment on our long-term debt.

Media Update. In the first quarter, revenues from our media platforms declined due primarily to decreased advertising revenues in our Publishing segment as the result of fewer pages sold and in our Broadcasting segment as the result of lower ratings. In addition, prior year revenues in our Internet segment included our flowers program which transitioned to our Merchandising segment in the second quarter of 2008. These declines 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 our Publishing segment advertising revenues for the second quarter, although we have limited visibility beyond the second quarter.

Publishing

     Advertising revenues declined due to a decrease in pages partially offset by higher rates per page driven in part by higher circulation rate bases for each title. Circulation revenues also declined as subscription revenues decreased due to lower rates and higher agent commission expense, partially offset by higher volume of copies served. Additionally, circulation revenues decreased from lower volume of newsstand sales and the timing of special issues. The decline in revenues was partially offset by decreases in all expense categories including production, editorial, circulation marketing, and advertising costs. These cost savings included lower compensation costs from staff reductions and a lower compensation accrual, as well as cost savings from lower page volume and from reduced discretionary spending. As we enter the second quarter, print advertising revenue is currently trending lower, similar to the declines that we experience in the first quarter of 2009 as compared to the prior year period.

12

Broadcasting

     Broadcasting segment revenues were essentially flat in the first quarter of 2009 as compared to the prior year period. Decreased advertising revenue from lower ratings was largely offset by programming revenue from Emeril Lagasse’s original series on Planet Green. The Martha Stewart Show continues to maintain a core audience.

Internet

     In the first quarter of 2009, while revenues were down due to the inclusion of Martha Stewart Flowers revenue in the prior year first quarter, we continued to experience growth in our online audience. Our page views increased, on average, almost 50% from the prior year period and advertising revenue increased 13%. For the second quarter, we expect continued year-over-year growth in online advertising revenue, although we have limited visibility beyond the second quarter.

Merchandising Update. In the first quarter, Merchandising segment revenues decreased due to the decline in our minimum royalty guarantees and sales from Kmart as compared with the prior year quarter. Partially offsetting the decrease in revenues was the continued benefit from Emeril Lagasse’s licensing business. In addition, Merchandising segment revenues benefited from our program with 1-800-Flowers.com, which was a new agreement as compared with the prior year period. For the remainder of the year, we expect to experience lower retail sales from Kmart as compared with the prior year period, as the result of the continued impact of the wind down of our relationship. We also expect royalty revenues, excluding Kmart, to be down meaningfully in the second quarter as compared with the prior year period primarily due to the absence of certain one-time benefits in the prior year.

     Our 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. 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 ended January 31, 2009, our earned royalty based on actual retail sales at Kmart was $17.9 million. Furthermore, $10.0 million of royalties previously paid have been deferred and were subject to recoupment in the period ending January 31, 2009. No royalties were recouped in 2008 for the contract year ended January 31, 2009. The $10.0 million of deferred royalties remain subject to recoupment for the period ending January 31, 2010. However, given the current trends in Kmart retail sales, we expect to reverse the entire reserve into non-cash revenue in the fourth quarter of 2009.

13

Comparison of Three Months Ended March 31, 2009 to Three Months Ended March 31, 2008

PUBLISHING SEGMENT

	2009			2008		Better/
(in thousands)	(unaudited)			(unaudited)		(Worse)
Publishing Segment Revenues
Advertising	$	15,549		$	22,096	$	(6,547	)
Circulation		12,609			16,550		(3,941	)
Books		48			1,767		(1,719	)
Other		155			379		(224	)
Total Publishing Segment Revenues		28,361			40,792		(12,431	)
Publishing Segment Operating Costs and Expenses
Production, distribution and editorial		16,448			22,233		5,785
Selling and promotion		11,890			15,175		3,285
General and administrative		1,821			1,629		(192	)
Depreciation and amortization		74			99		25
Total Publishing Segment Operating Costs and Expenses		30,233			39,136		8,903
Operating (Loss) / Income	$	(1,872	)	$	1,656	$	(3,528	)

     Publishing revenues decreased 30% for the three months ended March 31, 2009 from the prior year period. Advertising revenue decreased $6.5 million due to the decrease in pages in Martha Stewart Living, Everyday Food and Body + Soul. The decrease in advertising pages was partially offset by slightly higher advertising rates across all titles driven in part by a higher circulation rate base. Circulation revenue decreased $3.9 million due to higher agency commissions and lower subscription rate per copy in the first quarter of 2009 for Martha Stewart Living, Everyday Food and Body + Soul as compared with the prior year period. Circulation revenue also decreased from lower newsstand unit volume across all of our titles, as well as the prior year contribution of two special interest publications as compared to no special interest publications in the first quarter of 2009. 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 $1.7 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

	Three months ended March 31,	Three Months ended March 31,
	2009	2008
Martha Stewart Living	Three Issues	Three Issues
Everyday Food	Three Issues	Three Issues
Body + Soul	Two Issues	Two Issues
Special Interest Publications	Zero	Two Issues

     Production, distribution and editorial expenses decreased $5.8 million, primarily due to savings related to lower volume of pages, partially offset by higher rates related to physical costs to distribute the magazines. There was also a decrease in art and editorial story and staff costs including a lower compensation accrual. Selling and promotion expenses decreased $3.3 million due to lower circulation marketing costs, lower fulfillment rates associated with Martha Stewart Living and lower marketing program and advertising staff costs including a lower compensation accrual. General and administrative expenses increased $0.2 million primarily due to higher allocation of facilities costs partially offset by a lower compensation accrual.

14

BROADCASTING SEGMENT

	Three Months Ended March 31,
	2009		2008		Better/
(in thousands)	(unaudited)		(unaudited)		(Worse)
Broadcasting Segment Revenues
Advertising	$	6,024	$	7,094	$	(1,070	)
Radio		1,875		1,875		—
Licensing and other		2,615		1,593		1,022
Total Broadcasting Segment Revenues		10,514		10,562		(48	)
Broadcasting Segment Operating Costs and Expenses
Production, distribution and editorial		7,630		7,647		17
Selling and promotion		622		903		281
General and administrative		1,359		1,728		369
Depreciation and amortization		69		109		40
Total Broadcasting Segment Operating Costs and Expenses		9,680		10,387		707
Operating Income	$	834	$	175	$	659

     Broadcasting revenues remained essentially flat for the three months ended March 31, 2009 from the prior year period. Advertising revenue decreased $1.1 million primarily due to the decline in household ratings. Other revenue increased $1.0 million primarily due to Emeril Lagasse’s talent fee from his original series on Planet Green, as well as a marketing agreement with TurboChef that began in the second quarter of 2008.

     Selling and promotion expenses decreased $0.3 million primarily due to lower headcount and compensation costs as well as reduced spending for the February 2009 sweeps as compared to the prior year period. General and administrative expenses decreased $0.4 million due to a lower compensation accrual and decreased compensation expenses.

15

INTERNET SEGMENT

	Three Months Ended March 31,
	2009			2008			Better /
(in thousands)	(unaudited)			(unaudited)			(Worse)
Internet Segment Revenues
Advertising	$	2,620		$	2,310		$	310
Product		2			1,104			(1,102	)
Total Internet Segment Revenues		2,622			3,414			(792	)
Internet Segment Operating Costs and Expenses
Production, distribution and editorial		1,858			3,049			1,191
Selling and promotion		1,752			1,199			(553	)
General and administrative		592			1,035			443
Depreciation and amortization		452			378			(74	)
Total Internet Segment Operating Costs and Expenses		4,654			5,661			1,007
Operating Loss	$	(2,032	)	$	(2,247	)	$	215

     Internet revenues decreased 23% for the three months ended March 31, 2009 from the prior year period. Product revenue decreased $1.1 million due to the inclusion of revenue from Martha Stewart Flowers in the first quarter of the prior year. Beginning in the second quarter of 2008, we transitioned to a co-branded agreement with 1-800-Flowers.com which is reported in our Merchandising segment. Advertising revenue increased $0.3 million due to an increase in page views and sold advertising volume, despite lower rates.

     Production, distribution and editorial costs decreased $1.2 million due primarily to the prior year transition of our flowers business to 1-800-Flowers.com, which eliminated inventory and shipping expenses, as well as due to a lower compensation accrual in the first quarter of 2009 as compared to the prior year period. Costs related to our higher-margin 1-800-Flowers.com program are reported in the Merchandising segment. Selling and promotion expenses increased $0.6 million due to higher compensation expenses due to increased headcount and higher commissions. General and administrative expenses decreased $0.4 million due to lower compensation expenses and a lower compensation accrual in the first quarter of 2009 as compared to the prior year period.

16

MERCHANDISING SEGMENT

	Three Months Ended
	March 31,
	2009			2008		Better /
(in thousands)	(unaudited)			(unaudited)		(Worse)
Merchandising Segment Revenues
Kmart earned royalty	$	2,436		$	4,558	$	(2,122	)
Kmart minimum true-up		939			3,806		(2,867	)
Other		5,558			4,702		856
Total Merchandising Segment Revenues		8,933			13,066		(4,133	)
Merchandising Segment Operating Costs and Expenses
Production, distribution and editorial		2,255			3,107		852
Selling and promotion		517			1,437		920
General and administrative		819			1,902		1,083
Depreciation and amortization		18			24		6
Impairment on equity investment		7,100			—		(7,100	)
Total Merchandising Segment Operating Costs and Expenses		10,709			6,470		(4,239	)
Operating (Loss) / Income	$	(1,776	)	$	6,596	$	(8,372	)

     Merchandising revenues decreased 32% for the three months ended March 31, 2009 from the prior year period. The decrease in segment revenues was due to the reduction of our contractual minimum guarantee and lower sales from Kmart. Actual retail sales of our products at Kmart declined 45% on comparable store and total store basis. The pro-rata portion of revenues related to the contractual minimum amounts covering the specified periods is listed separately above as Kmart minimum true-up. Other revenues increased primarily due to contributions from Emeril Lagasse’s brand and our partnership with 1-800-Flowers.com for our flowers program which both began contributing to our revenues in the second quarter of 2008.

     Production, distribution and editorial expenses decreased $0.9 million due primarily lower compensation costs and a lower compensation accrual in the first quarter of 2009 as compared to the prior year period. Selling and promotion expenses decreased $0.9 million primarily as a result of a decrease of $0.6 million from services that we provide to our partners for reimbursable creative services projects. General and administrative costs decreased $1.1 million due to lower allocated facilities and compensation expenses. In the first quarter of 2009, we recorded a $7.1 million non-cash impairment charge related to a cost-based equity investment.

17

CORPORATE

	Three Months Ended March 31,
	2009			2008			Better /
(in thousands)	(unaudited)			(unaudited)			(Worse)
Corporate Operating Costs and Expenses
General and administrative	$	9,501		$	9,969		$	468
Depreciation and amortization		1,138			746			(392	)
Total Corporate Operating Costs and Expenses		10,639			10,715			76
Operating Loss	$	(10,639	)	$	(10,715	)	$	76

     Corporate operating costs and expenses decreased 1% for the three months ended March 31, 2009 from the prior year period. General and administrative expenses decreased $0.5 million due to a lower compensation accrual and lower compensation costs partially offset by increased severance, as well as higher facility-related charges. Depreciation and amortization expenses increased $0.4 million due to accelerated depreciation charges related to vacating and subleasing a portion of our office space.

OTHER ITEMS

Interest (expense) / income, net. Interest expense, net, was $(0.01) million for the three months ended March 31, 2009 compared to interest income, net, of $0.5 million for the prior year period. The decrease was attributable primarily to first quarter 2009 interest expense from our $30 million term loan related to the acquisition of certain assets of Emeril Lagasse. Interest income decreased due to lower interest rates.

Loss on equity securities. Loss was $(0.8) million for the three months ended March 31, 2009. The first quarter 2009 expense was 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 $(0.2) million for the three months ended March 31, 2009. We record our proportionate share of the results of our equity investments one quarter in arrears. Therefore, this loss represents our portion of the quarter ended December 31, 2008 results of our equity investments.

Income tax expense. Income tax expense for the three months ended March 31, 2009 was $0.4 million, compared to a $0.2 million expense in the prior year period.

Net Loss. Net loss was $(16.8) million for the three months ended March 31, 2009 compared to a net loss of $(4.2) million for the three months ended March 31, 2008, as a result of the factors described above.

18

Liquidity and Capital Resources

Overview

     During the first quarter of 2009, our overall cash, cash equivalents and short-term investments decreased $0.5 million from December 31, 2008. The decrease was due to the satisfaction of our 2008 year-end receivable due from Kmart and other advertising receivables partially offset by capital expenditures related to our office relocation efforts as well as a principal pre-payment of our loan with Bank of America. Cash, cash equivalents and short-term investments were $59.6 million and $60.1 million at March 31, 2009 and December 31, 2008, respectively. Total debt was $18.0 million as of March 31, 2009.

Cash Flows from Operating Activities

     Cash flows provided by operating activities were $2.6 million and $39.5 million for the three months ended March 31, 2009 and 2008, respectively. In the first quarter of 2009, cash flow from operations reflected the satisfaction of the 2008 year-end receivable due from Kmart and other advertising receivables partially offset by television distribution expenses.

Cash Flows from Investing Activities

     Cash flows (used in) / provided by investing activities were $(1.5) million and $21.0 million for the three months ended March 31, 2009 and 2008, respectively. In the first quarter of 2009, cash flow used in investing activities reflected $1.5 million paid for capital improvements in conjunction with our relocation and consolidation of certain offices.

Cash Flows from Financing Activities

     Cash flows used in financing activities were $1.6 million and $1.4 million for the three months ended March 31, 2009 and 2008, respectively. In the first quarter of 2009, cash used in financing activities primarily relates to a $1.5 million principal pre-payment made pursuant to our $30.0 million term loan agreement with Bank of America.

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 March 31, 2009. We had no outstanding borrowings under this facility as of March 31, 2009 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 is secured by substantially all of the assets of the Emeril businesses we acquired and the Company and most of its domestic subsidiaries are guarantors of the loan. 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 first quarter of 2009, we prepaid $1.5 million in principal representing the amount due on March 31, 2010. In the next 12 months, there are no principal payments that are due. 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 March 31, 2009, we were compliant with all the financial covenants. A summary of the most significant financial covenants is as follows:

Financial Covenant	Required at March 31, 2009
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 2.75
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.

19

     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. 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. In our Internet segment, advertising revenue on marthastewart.com is tied to traffic among other key factors and is typically highest in the fourth quarter of the year. Revenues from our Merchandising segment can vary significantly from quarter to quarter due to new product launches and the seasonality and performance of certain product lines. In addition, we recognize the revenue resulting from the difference, if any, between the minimum royalty amount under the Kmart contract and royalties paid on actual sales in the fourth quarter of each year, when the amount can be determined.

Off-Balance Sheet Arrangements

     Our bylaws may require us to indemnify our directors and officers against liabilities that may arise by reason of their status as such and to advance their expenses incurred as a result of any legal proceedings against them as to which they could be indemnified.

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 United States generally accepted accounting principles (“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.

20

     We believe that, of our significant accounting policies disclosed in our 2008 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 starting in the third quarter of 2003. In an arrangement with multiple deliverables, EITF 00-21 provides guidance to determine a) how the arrangement consideration should be measured, b) whether the arrangement should be divided into separate units of accounting, and c) how the arrangement consideration should be allocated among the separate units of accounting. We have applied the guidance included in EITF 00-21 in establishing revenue recognition policies for our arrangements with multiple deliverables. For agreements with multiple deliverables, if we are unable to put forth vendor specific objective evidence required under EITF 00-21 to determine the fair value of each deliverable, then we will account for the deliverables as a combined unit of accounting rather than separate units of accounting. In this case, revenue will be recognized as the earnings process is completed.

     Advertising revenues in the Publishing segment are generally recorded upon release of magazines for sale to consumers and are stated net of agency commissions and cash and sales discounts. Subscription revenues are recognized on a straight-line basis over the life of the subscription as issues are delivered. Newsstand revenues are recognized based on estimates 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. Revenues earned from book publishing are recorded as manuscripts are delivered to and accepted by our publisher. Additional revenue is recorded as sales on a unit basis exceed the advanced royalty for the individual title or in certain cases, advances on cross-collateralized titles.

     Television advertising revenues are generally recorded when the related commercials are aired and are recorded net of agency commission and estimated reserves for television audience underdelivery. Television integration revenues are 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.

     Internet advertising revenues are generally based on the sale of impression-based advertisements, which are recorded in the period in which the advertisements are served.

     Licensing-based revenues, most of which are in our Merchandising segment, are accrued on a monthly basis based on the specific terms of each contract. Generally, revenues are recognized based on actual sales while any minimum guarantees are earned evenly over the fiscal year. Revenues related to our agreement with Kmart are recorded on a monthly basis based on actual retail sales, until the last period of the year, when we recognize a substantial majority of the true-up between the minimum royalty amount and royalties paid on actual sales, when such amounts are determinable. Payments are generally made by our partners on a quarterly basis.

     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. We base our 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.

21

Goodwill and Indefinite-Lived Intangible Assets

     We are required to analyze our goodwill and indefinite-lived 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 and Definite-Lived Intangible 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 Income Tax Asset Valuation Allowance

     We record a valuation allowance to reduce our deferred income tax assets to the amount that is more likely than not to be realized. In evaluating our ability to recover our deferred income tax assets, we consider all available positive and negative evidence, including our operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction by jurisdiction basis. Our cumulative pre-tax loss in recent years represents sufficient negative evidence for us to determine that the establishment of a full valuation allowance against the deferred tax asset is appropriate. This valuation allowance offsets deferred tax assets associated with future tax deductions as well as carryforward items. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes. See Note 6 of the Notes to 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 Rates

     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

22

of $18.0 million on the term loan at March 31, 2009 at an average rate of 3.3% for the quarter. A one percentage point increase in the interest rate would have increased interest expense by $0.05 million for the three months ended March 31, 2009.

     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 March 31, 2009, 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 March 31, 2009. We attempt to 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 percentage point decrease in average interest rates would have decreased interest income by $0.1 million for the three months ended March 31, 2009.

Stock Prices

     We have common stock investments in several publicly-traded companies that are subject to market price volatility. These investments had an aggregate fair value of approximately $2.4 million as of March 31, 2009. A hypothetical decrease in the market price of these investments of 10% would result in a fair value of approximately $2.2 million. The hypothetical decrease in fair value of $0.2 million would be recorded in shareholders’ equity as an other comprehensive loss, as any change in fair value of our publicly-held equity securities are not recognized on our statement of operations, unless the loss is deemed other-than-temporary.

     We are also exposed to market risk due to changes in fair value of the publicly-traded common stock of Middleby that underlie our warrant to purchase 22,064 Middleby shares. This investment had a fair value of approximately $0.1 million as of March 31, 2009. For the three months ended March 31, 2009, we recognized an expense of $0.8 million related to the conversion of the warrant as the result of Middleby’s acquisition of TurboChef, partially offset by the increase in fair value of the Middleby stock.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

     Under the supervision and with the participation of our management, including our Principal Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) required by Exchange Act Rules 13a-15(b) or 15d-15(b), as of the end of the period covered by this report. Based upon that evaluation, our Principal Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of that date to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission (“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 Chief 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 first quarter of fiscal 2009, 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.

23

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     There have been no material changes from legal proceedings as previously disclosed in the 2008 10-K, other than the Company’s settlement and dismissal from the case captioned Datatern, Inc. v. Bank of America Corp. et al. (No. 5-08CV-70), previously reported in “Item 3. Legal Proceedings” of our 2008 10-K.

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 impacted by general equity market conditions, the relative attractiveness of our market sector, 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 Martha Stewart, our founder, and Emeril Lagasse. Any adverse reactions to publicity relating to Ms. Stewart or Mr. Lagasse, or the loss of either of their services, could adversely affect our revenues, results of operations and our ability to maintain or generate a consumer base.

     While we believe there has been significant consumer acceptance for our products as stand-alone brands, the image, reputation, popularity and talent of Martha Stewart and Emeril Lagasse remain important factors.

     Ms. Stewart’s efforts, personality and leadership have been, and continue to be, critical to our success. While we have managed our business without her daily participation at times in the past, the repeated diminution or loss of her services due to disability, death or some other cause, or any repeated or sustained shifts in public or industry perceptions of her, could have a material adverse effect on our business.

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

     The crisis in the financial markets and sustained weakening of the economy could significantly impact our business, financial condition, results of operations and cash flows, and could adversely affect the value of our intellectual property assets, hamper our ability to refinance our existing debt or raise additional funds.

     The economy has experienced extreme disruption in 2008 and 2009, including extreme volatility and declines in securities prices, severely diminished liquidity and a drastic reduction in credit availability. These events have lead to increased unemployment, declines in consumer confidence, declines in discretionary income and spending, and extraordinary and unprecedented uncertainty and instability for many companies, across all industries. This economic downturn has adversely affected consumer spending and could severely impact many of the companies with which we do business. We cannot predict the health and viability of the companies with which we do business and upon which we depend for royalty revenues, advertising dollars and credit.

     These economic conditions and market instability also make it increasingly difficult for us to forecast consumer and product demand trends and companies’ willingness to spend money to advertise in our media properties, We have experienced a decline in advertising revenues. An extended period of reduced cash flows could increase our need for credit, at a time when such credit may not be available due to the conditions in the financial markets. A reduction in cash flows also could also cause us to be in violation of certain debt covenants. We are not able to predict the likely duration and severity of the current disruption in the financial markets and the economic recession. If these economic conditions worsen or persist for an extended period of time, it is likely that our results of operations and cash flows will be negatively impacted leading to deterioration in our financial condition.

24

     In addition, we have significant goodwill, intangible and other assets recorded on our balance sheet. We have already incurred impairment charges with respect to goodwill and certain intangible assets, and are now realizing a charge with respect to a tangible investment. We will continue to evaluate the recoverability of the carrying amount of our goodwill, intangible and other assets on an ongoing basis, and we may in the future incur additional, and possibly substantial, impairment charges, which would adversely affect our financial results. Impairment assessment inherently involves the exercise of judgment in determining assumptions about expected future cash flows and the impact of market conditions on those assumptions. Although we believe the assumptions we have used in testing for impairment are reasonable, significant changes in any one or our assumptions could produce a significantly different result. Future events and changing market conditions may prove assumptions to be wrong with respect to prices, costs, holding periods or other factors. Differing results may amplify impairment charges in the future.

     These effects of the current financial crisis are difficult to forecast and mitigate. As a consequence, our operating results will be difficult to predict and prior results will not likely be indicative of results to be expected in future periods. Any of the foregoing effects could have a material adverse effect on our business, results of operations, and financial condition and could adversely affect our stock price.

     Our Merchandising business and licensing programs may continue to suffer from downturns in the health and stability of the general economy and housing market, and their adverse impact on our consumers and business relationships.

     Reduction in the availability of credit, a downturn in the housing market, and other negative economic developments, including increased unemployment and negative year over year performance in the stock market, have occurred and may continue or 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. Further, downturns in consumer spending adversely impact consumer sales overall, resulting in weaker revenues from our licensed products. These trends also may affect the viability and financial health of companies with which we conduct business. Continued slowdown in consumer spending, or going-concern problems for companies with which we do business could materially adversely impact our business, financial condition and prospects.

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

     We depend on advertising revenue in our Publishing, Broadcasting, and Internet businesses. We cannot control how much or where companies choose to advertise. We have seen a significant downturn in advertising dollars generally in the marketplace, and more competition for the reduced dollars, which has hurt our publications and advertising revenues. As a result, fewer advertisers represent a greater proportion of our advertising revenue. We cannot assure how or whether this trend might correct. If advertisers continue to spend less money, or if they advertise elsewhere in lieu of our publications, broadcasts or website, our business and revenues will be materially adversely affected.

     We face significant competition for advertising and consumer demand.

     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 some forms of media have relatively low barriers to entry, we anticipate that additional competitors, some of which have greater resources than we do, may enter these markets and intensify competition.

25

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

     Last year, we acquired certain assets of Chef Emeril Lagasse. Failure to manage or 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 if 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.

     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 has relied heavily on revenue from a single source, the reduction of revenue from which has hurt and continues to hurt our profitability.

     For the twelve months ended January 31, 2009, the minimum guaranteed royalty payment from Kmart was $20.0 million, significantly less that the $65.0 million we received for the twelve months ended January 31, 2008. This drop in guarantees from Kmart is permanent, and our agreement with Kmart continues only through January 2010. In this final year, our expected guaranteed payment is $15.0 million. We have not yet earned royalties from other sources in sufficient scope to recoup the loss in guaranteed payments from Kmart. While we continue to diversify our merchandise offerings in an effort to build up alternative royalty streams, we may not be able to earn, from sources other than Kmart, revenue in excess of the reduction of guarantees from our Kmart contract. This shortfall has adversely affected our operating results and business.

     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. If these companies experience financial hardship, they may be unwilling or unable to pay us royalties or continue selling our product, regardless of their contractual obligations.

     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. Disputes also could prevent or delay our ability to collect the licensing revenue that we expect in connection with these 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.

26

     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 derive 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 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 show being broadcast on fewer stations. A ratings decline further than we anticipate could also make it economically inefficient to continue production of the show in the daily one-hour format or otherwise. If production of the show were to cease, we would lose a significant marketing platform for us and our products, as well as cause us to write down 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.

     We do not produce the television shows featuring Emeril Lagasse. 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 and more competition for the reduced dollars across more media platforms. While we currently benefit from our ability to sell advertising on our television programs, if adverse changes occur, we cannot be certain 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.

27

       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 continued development and growth 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. When initial results from the relaunch of the marthastewart.com site in the second quarter of 2007 were below expectations, we made changes to the site. We cannot be certain that those changes will enable us to sustain growth for our website 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 be certain 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 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 $15.7 million in connection with Blueprint, which we ceased publishing. 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

28

vendors include paper suppliers, printers, subscription fulfillment houses and national newsstand wholesalers, distributors and retailers. Each of these industries in recent years has experienced consolidation among its principal participants. Further consolidation may result in all or any of the following, which could adversely affect our results of operations:

•   decreased competition, which may lead to increased prices;

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

•   greater dependence on certain vendors.

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

     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.

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

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

     Distribution of magazines to newsstands and bookstores is conducted primarily through companies, known as wholesalers. Wholesalers have in the past advised us that they intended to increase the price of their services. We have not experienced any material increase to date, however some wholesalers have experienced credit and on-going concern risks. It is possible that other wholesalers likewise may seek to increase the price of their services or discontinue operations. An increase in the price of our wholesalers’ services could have a material adverse effect on our results of operations. The need to change wholesalers could cause a disruption or delay in deliveries, which could adversely impact our results of operations.

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

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

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

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

     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 over 90% 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

29

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 depend. 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, Broadcasting, Internet, and Merchandising, each of which subjects us to competitive pressures and other uncertainties.

     We face intense competitive pressures and uncertainties in each of our four businesses: Publishing, Broadcasting, Internet, and Merchandising. Please refer to our Annual Report on Form 10-K for the year ended December 31, 2008 as filed with the SEC for a description of our competitive risks in our applicable business lines as described under the following headings: see “Business — Publishing—Competition,” “Business — Broadcasting—Competition,” “Business — Internet—Competition” and “Business — Merchandising—Competition.”

30

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 March 31, 2009:

	(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 (1)		per Share (or Unit)		Plans or Programs	Plans or Programs
January 2009		26,521	$	2.85	Not applicable	Not applicable
February 2009		13,963	$	2.37	Not applicable	Not applicable
March 2009		22,236	$	2.12	Not applicable	Not applicable
Total for quarter ended March 31, 2009		62,720	$	2.48	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 of our Class A Common Stock 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.

31

ITEM 6. EXHIBITS.

     (a) Exhibits

Exhibit
Number	Exhibit Title
10.1	Employment Agreement dated as of March 24, 2009 between Martha Stewart Living Omnimedia, Inc. and Kelli Turner. *
10.2	Second Amendment, dated as of April 9, 2009, to the Employment Agreement dated as of September 17, 2004, between Martha Stewart Living Omnimedia, Inc. and Martha Stewart. *
10.3	Separation Agreement dated as of April 20, 2009 between Martha Stewart Living Omnimedia, Inc. and Wenda Harris Millard. *
10.4	Form of Performance-Based Restricted Stock Unit Agreement pursuant to the Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan (incorporated by reference to Exhibit 10.1 to Form 8-K filed February 12, 2009.)
31.1	Certification of Principal Executive Officer *
31.2	Certification of Chief Financial Officer *
32	Certification of Principal Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) *

* filed herewith

32

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:	May 11, 2009
		/s/ Kelli Turner
	Name:	Kelli Turner
	Title:	Chief Financial Officer
		(Principal Financial Officer and duly authorized officer)

33

EXHIBIT INDEX

Exhibit
Number	Exhibit Title
10.1	Employment Agreement dated as of March 24, 2009 between Martha Stewart Living Omnimedia, Inc. and Kelli Turner. *
10.2	Second Amendment, dated as of April 9, 2009, to the Employment Agreement dated as of September 17, 2004, between Martha Stewart Living Omnimedia, Inc. and Martha Stewart. *
10.3	Separation Agreement dated as of April 20, 2009 between Martha Stewart Living Omnimedia, Inc. and Wenda Harris Millard. *
10.4	Form of Performance-Based Restricted Stock Unit Agreement pursuant to the Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan (incorporated by reference to Exhibit 10.1 to Form 8-K filed February 12, 2009.)
31.1	Certification of Principal Executive Officer *
31.2	Certification of Chief Financial Officer *
32	Certification of Principal Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) *

* filed herewith

34

EX-10.1

Exhibit 10.1

March 24, 2009                 

PERSONAL & CONFIDENTIAL

Ms. Kelli Turner
[Address omitted]

Dear Kelli:

     This letter agreement (the “Agreement”) sets forth the terms and conditions of your employment with Martha Stewart Living Omnimedia, Inc. (the “Company”).

1. Duties and Responsibilities

(a) You will serve as EVP, Chief Financial Officer of the Company. In this capacity, you will perform such duties consistent with your position and such other executive duties customary to your office and as are reasonably necessary to the operations of the Company or as may be reasonably assigned to you by the Company’s principal executive officer or the Board of Directors (the “Board”). You will: (i) devote all of your business time and attention, your best efforts, and all of your skill and ability to promote the interests of the Company; (ii) carry out your duties in a diligent, competent, faithful and professional manner; (iii) work with other employees of the Company in a competent and professional manner; (iv) generally promote the interests of the Company and (v) comply with all the Company’s policies as in effect from time to time. You will report to the Company’s principal executive officer.

(b) During the term of your employment, you agree to obtain the prior written approval of the person to whom you report prior to accepting any appointments of any kind (including but not limited to appointments to boards of directors) with any third parties other than the Company; provided, however, you will be permitted to remain on the board of directors of any charitable organization for which you now serve. It is understood that if approved, any such appointment, and your activities thereunder, must not constitute a violation of any provision of this Agreement.

2.	Term
	Your employment with the Company will be for a term of two (2) years, commencing on March 31, 2009 and ending on the close of business on March 31, 2011, unless terminated earlier pursuant to the provisions of paragraph 5 below (the “Term”). In the

MARTHA STEWART LIVING OMNIMEDIA
11 West 42nd Street, 25th Floor, New York, NY 10036 phone 212 827 8000 web marthastewart.com

event either party wishes to commence negotiations for a new employment arrangement that would become effective following the Term, that party will inform the other party at least six months prior to the end of the Term. This Agreement will not be deemed to be extended or renewed beyond April 6, 2011 unless the parties enter into a written agreement specifically extending this Agreement. In the absence of such an agreement, if your employment continues beyond the Term, such employment will be terminable at will.

3. Compensation

(a)	The Company shall pay you a base salary at the annual rate of not less than $375,000 per annum, payable in accordance with the Company’s normal payroll practices.
(b)	In addition to your base salary, you will be eligible to receive an annual bonus with a target of 100% of your annual base salary based upon, among other criteria, the Company’s assessment of your performance and the overall financial performance of the Company. Such bonus, if any, will be paid concurrently with bonuses paid to other executives of the Company. Any such bonus deemed payable for 2009 will not be pro-rated and will be based primarily on the Company’s assessment of your individual performance. In order to be eligible to receive any bonus, you must be employed on, and not have given or received notice of termination prior to, the day of the bonus payment.
(c)	You will receive an option to acquire 180,000 shares, and 40,000 PRSUs, which equity will be issued and priced on the first business day of the calendar month following your start date in accordance with the Company’s policy on equity issuances. The grant and exercise of these stock options and PRSUs will be made subject to the provisions of the Company’s Omnibus Stock and Option Compensation Plan.

4.	Benefits
	You will be eligible to participate in all health, dental, disability, life insurance plans and programs, retirement plans and other fringe benefits made available by the Company for the benefit of the Company’s employees generally, subject, however, to the terms and conditions of such benefit plans as in effect from time to time.

5. Termination

(a) The Company will be entitled to discharge you immediately for cause as defined in subparagraph (c) below, and in such event, your rights to any unearned, non-vested or non-accrued compensation hereunder will then terminate.

(b)

The Company will also be entitled to terminate you immediately without cause. In such event, you will be eligible to continue to receive your then-current base salary (in accordance with normal payroll practices) as severance payments for the remainder of the Term (the “Severance Period”); provided, however, that in the event you obtain alternate employment after the first three (3) months of the Severance Period, any income earned by you in respect to such employment will reduce your severance payments under this paragraph 5(b) on a “dollar for dollar” basis. As used herein, “alternate employment” will include full or part-time employment, consulting services, freelance services and self-employment. In order for the Company to determine each payment it is obligated to make to you after the first three (3) months of the Severance Period, you will at the end of each month after the first three (3) months of the Severance Period provide the Company in writing the compensation from sources other than the Company that you earned during the preceding month, together with copies of any invoices issued by you for your services, any checks you received from such employment and any other evidence in your possession reflecting compensation you earned. In addition, upon request from the Company, you agree to provide the Company with other written verification (earnings stubs, tax returns, new employer verification) of the compensation you receive or are entitled to receive after the first three (3) months of the Severance Period. In addition, in the event you are terminated by the Company without cause, you 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 such bonus payment will be paid in a lump sum at the time the Company pays other bonuses, subject to Section 15 hereof (if applicable). The making of any payments under this paragraph 5(b) is conditioned upon you signing and not revoking the Company’s standard form of separation agreement and general release. Such severance is deemed to be in lieu of any other entitlements to severance, salary bridging or other similar benefits upon termination that may be made available to employees in accordance with the Company’s policies.

(c)

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:

(i) 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;

(ii)	you have engaged in willful, intentional misconduct that has resulted in material damage to the Company’s business or reputation;
(iii)	you have been convicted of a felony; or
(iv)	you have engaged in fraud against the Company or misappropriated Company property (other than incidental property).

For purposes of this Agreement, 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 Section 5(c) shall be construed to prevent you from contesting the Board’s determination that cause exists.

(d) In the event you are unable to perform your duties hereunder by virtue of illness or physical or mental incapacity or disability (from any cause or causes whatsoever) in substantially the manner and to the extent required hereunder prior to the commencement of such disability (all such causes being herein referred to as “disability”) and you fail to perform such duties for periods aggregating 120 days, whether or not continuous, in any continuous period of 365 days, the Company will have the right to terminate your employment hereunder as at the end of any calendar month upon 30 days’ prior written notice to you. In case of your death, your employment hereunder will terminate as of the date of death.

6. Non-Competition, Non-Solicitation; Non-Disparagement and Confidentiality Obligations

(a) You agree that your services hereunder are of a special, unique, extraordinary and intellectual character, and your position with the Company places you in a position of confidence and trust with the Company. You further acknowledge that the rendering of services to the Company necessarily requires the disclosure of confidential information and trade secrets of the Company. You consequently agree that it is reasonable and necessary for the protection of the goodwill and business of the Company that you make the covenants contained herein; and accordingly, you agree that during your employment with the Company and during any Tail Period (as defined below), you 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 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 Term. You shall be deemed to be “engaged in or associated with a Competitive Activity” if you are or become an owner, employee, officer, director, independent contractor, agent, partner, advisor, or render personal services in any other capacity, with or for any individual, partnership, corporation or other organization (collectively, an “Enterprise”) that is engaged in a Competitive Activity, provided, however, that you 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 your services relate to (x) an aspect or endeavor of such Enterprise that is distinct from, and unrelated to, and you have 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 that your employment with the Company terminates, regardless of the reason for such termination, and ending on the twelve-month anniversary of such date. You agree to provide notice of the restrictions on your Competitive Activity to any Enterprise with which you have or contemplate having a business or employment relationship.

(b)

You agree that during your employment and for a twenty-four month period thereafter you will not: (i) solicit for employment opportunities or employ any employees of Martha Stewart or the Company; (ii) solicit or induce any employee of Martha Stewart or the Company to terminate, alter or lessen that person’s affiliation with Martha Stewart or the Company; or (iii) 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; provided, however, it will not be deemed a breach of this provision to solicit your then-current assistant. You also agree that during and after your employment, you will not solicit or induce any person or entity that is a party to an agreement with Martha Stewart or the Company to violate any such agreement. You acknowledge and agree that this paragraph is reasonable and necessary to protect the Company’s legitimate business interests.

(c)

In the course of your employment with the Company, you will acquire and have access to confidential or proprietary information about the Company, including but not limited to, trade secrets, methods, service models, marketing campaigns, advertising, financial information and records, customer contacts, creative policies and ideas, subscription lists, editorial policies, and information about or

received from advertisers, customers and other companies with which the Company does business. The foregoing shall be collectively referred to as “Confidential Information.” You are aware that the Confidential Information is not readily available to the public and accordingly, you agree that you will not at any time (whether during the Term or after termination of this Agreement), disclose to anyone (other than your counsel in the course of a dispute arising from the alleged disclosure of Confidential Information or as required by law) any Confidential Information, or utilize such Confidential Information for your own benefit, or for the benefit of third parties. You agree that the foregoing restrictions shall apply whether or not any such information is marked “confidential” and regardless of the form of the information. The term “Confidential Information” does not include information which (i) is or becomes generally available to the public other than by breach of this provision or (ii) you learn from a third party who is not under an obligation of confidence to the Company. In the event that you become legally required to disclose any Confidential Information, you will provide the Company with prompt notice thereof so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this paragraph 6(c) to permit a particular disclosure. In the event that such protective order or other remedy is not obtained, or that the Company waives compliance with the provisions of this paragraph 6(c) to permit a particular disclosure, you will furnish only that portion of the Confidential Information which you are legally required to disclose and, at the Company’s expense, will cooperate with the efforts of the Company to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information. You further agree that all memoranda, disks, files, notes, records or other documents, whether in electronic form or hard copy (collectively, the “Material”) compiled by you or made available to you during your employment with the Company (whether or not the Material constitutes or contains Confidential Information), and in connection with the performance of your duties hereunder, shall be the property of the Company and shall be delivered to the Company on the termination of your employment with the Company or at any other time upon request. Except in connection with your employment with the Company, you agree that you will not make or retain copies or excerpts of the Material.

(d) During your employment with the Company, and thereafter you 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 You 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)

If you commit a breach or the Company has reasonable grounds to believe that you are about to commit a breach, of any of the provisions of clauses (a), (b), (c) or (d) above, the Company shall have the right to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction without being required to post bond or other security and without having to prove the inadequacy of the available remedies at law, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. In addition, the Company may also take all such other actions and remedies available to it under law or in equity and shall be entitled to such damages as it can show it has sustained by reason of such breach.

(f)

The parties acknowledge that the type and periods of restriction imposed in the provisions of clauses (a), (b), (c) and (d) above are fair and reasonable and are reasonably required for the protection of the Company and the goodwill associated with the business of the Company. If any of the covenants in clauses (a), (b), (c) or (d) above, or any part thereof, is hereafter construed to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid portions. If any of the covenants contained in clauses (a), (b), (c) or (d), or any part thereof, is held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or areas of such provision and, in its reduced form, said provision shall then be enforceable. The parties hereto intend to and hereby confer jurisdiction to enforce the covenants contained in clauses (a), (b), (c) and (d) above upon the courts of any state within the geographical scope of such covenants. In the event that the courts of any one or more of such states shall hold such covenants wholly unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the Company’s right to the relief provided above in the courts of any other states within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, the above covenants as they relate to each state being, for this purpose, severable into diverse and independent covenants.

7.

Work For Hire

As an Company employee, you will be part of a team of highly talented individuals, whose creative contributions are an integral part of the Company’s success as a company. Accordingly, you acknowledge and agree that the Company has specially ordered and commissioned any and all results and proceeds of your services hereunder (the “Works”) as works-made-for-hire under the United States Copyright Act and all similar laws throughout the world (the “Act”), and that the Company shall be deemed as the sole author and owner of all right, title and interest in the Works in any and all languages,

formats and media, whether now known or hereafter created, throughout the world in perpetuity (the “Rights”). If the Works, or any part of the Works are not deemed works-made-for-hire under the Act, you hereby irrevocably grant and assign the Rights exclusively to the Company. You hereby waive any so-called moral rights of authors and other similar rights in connection with the Works. You acknowledge and agree that the Company is not under any obligation to use the Works, and may exploit, reproduce, distribute, make derivative works of, alter or edit the Works or combine the Works with other materials, in any media whether now known or hereafter created throughout the world, in the Company’s sole discretion, free of any obligation to you whatsoever, financial or otherwise. You hereby waive the right to seek or obtain any injunctive or other equitable relief in connection with the Company’s exploitation of the Works and any Rights therein. You agree that upon any termination of your employment, you will immediately turn over any and all of the Works in your possession to the Company. You irrevocably grant to the Company the perpetual right to use and authorize others to use your name, biographical information, photograph and likeness in connection with any use of the Works and/or in connection with your employment with the Company. You represent and warrant that you have the right to perform your services for the Company and to grant the Rights in the Works to the Company; the Works will be original with you; and neither the Works, nor the Company’s exercise of any of the Rights, shall violate or otherwise conflict with the rights of any person or entity.

8.	Assignment
	This Agreement may not be transferred, assigned, pledged or hypothecated by any party hereto, other than by operation of law; provided, however, that Company shall be permitted to assign this Agreement to an affiliate in connection with a reorganization of the Company’s business or assets for tax or financial planning purposes. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and assigns.
9.	Modification
	This Agreement may not be orally canceled, changed, modified or amended, and no cancellation, change, modification or amendment shall be effective or binding, unless in writing and signed by the parties to this Agreement.
10.	Severability; Survival
	In the event any provision or portion of this Agreement is determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall nevertheless be binding upon the parties with the same effect as though the invalid or unenforceable part had been severed and deleted. The respective rights and obligations of the parties hereunder shall survive the termination of your employment to the extent necessary to the intended preservation of such rights and obligations.

11.	No Conflict
	You represent and warrant that you are not subject to any agreement, instrument, obligations, order, judgment or decree of any kind, or any other restrictive agreement or obligation of any character, which would prevent you from entering into this Agreement or which would be breached by you upon the performance of your duties pursuant to this Agreement.
12.	Governing Law
	This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within New York.
13.	Entire Agreement
	Except as provided herein, this Agreement constitutes the complete agreement between you and the Company and supersedes all prior agreements relating to the subject matter hereof.
14.	Withholding
	The Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.
15.	Section 409A
	Notwithstanding anything herein to the contrary:

(a)

As determined by the Company, to the extent any provision herein constitutes a “nonqualified deferred compensation plan” under Section 409A(d)(l) of the Internal Revenue Code of 1986, as amended (the “Code”), which provides benefits to you upon your “separation from service” under Section 409A(a)(2)(A)(i) of the Code, and you are a “specified employee” under Section 409A(a)(2)(B)(i) of the Code, then any such payment to you shall not commence prior to the date that is six (6) months after the date of your separation from service and any amounts withheld during such six-month period shall be paid once benefits commence. The right to a series of installment payments hereunder is treated as a right to a series of separate payments.

(b)

The provisions herein, and plans and arrangements referenced hereunder, are intended to comply with the applicable requirements of Section 409A of the Code

and shall be limited, construed and interpreted in accordance with such intent. To the extent that any payment or benefit described hereunder is subject to Section 409A of the Code, it is intended that it shall be paid in a manner that will comply with Section 409A of the Code, including any guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto. Notwithstanding anything herein to the contrary, any provision hereunder that is inconsistent with Section 409A of the Code shall be deemed to be amended to comply with Section 409A of the Code and to the extent such provision cannot be amended to comply therewith, such provision shall be null and void.

(c)

You are entitled to certain taxable reimbursements and/or in-kind benefits for the specified period set forth hereunder (except if no specified period is set forth or otherwise evidenced or intended hereunder the specified period shall be the term of employment). The amount of expenses eligible for reimbursement, and/or in-kind benefits provided, during your taxable year shall not affect the expenses eligible for reimbursement, and/or in-kind benefits to be provided, in any other taxable year.

(d)

No acceleration of any payment, including payments made during the Severance Period, shall be permitted if such acceleration would result in you being taxed under Section 409A of the Code.

16.	Counterparts
	This Agreement may be executed in counterparts, all of which taken together shall constitute one instrument.

         If you agree with these terms, please sign the copy attached and return it to me, constituting it our agreement.

Best regards, Martha Stewart Living Omnimedia, Inc.
By:	/s/ Charles A. Koppelman
	Name:
	Title:

Accepted and Agreed:

/s/ Kelli Turner

EX-10.2

Exhibit 10.2

AMENDED AND RESTATED EMPLOYMENT AGREEMENT BETWEEN
MARTHA STEWART LIVING OMNIMEDIA, INC.
AND MARTHA STEWART DATED AS OF APRIL 1, 2009

     AGREEMENT, dated as of April 1, 2009 (the “Effective Date”), by and between Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”), and Martha Stewart (the “Founder”).

     WHEREAS, the Founder is a party to an employment agreement, dated September 17, 2004, as amended (the “Prior Employment Agreement); and

     WHEREAS, the Company recognizes that the Founder’s talents and abilities are unique and have been integral to the success of the Company;

     WHEREAS, the Company wishes to secure the ongoing services of the Founder pursuant to the terms and conditions set forth herein, and therefore the Founder and the Company intend hereby to enter into a new amended and restated employment agreement as set forth herein;

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

     1. Employment. From and after the Effective Date, the Company hereby agrees to employ the Founder as Chief Editorial and Media Director of the Company, and the Founder hereby accepts such employment, on the terms and conditions set forth below.

     2. Term. The Founder’s employment by the Company hereunder shall begin on the Effective Date and shall end on March 31, 2012, but subject to earlier termination as provided herein (the “Employment Period”). The Employment Period may be extended by mutual agreement of the Company and the Founder.

     3. Position and Duties. During the Employment Period, the Founder shall serve as Founder, Chief Editorial and Media Director of the Company with the following duties, authority and responsibilities:

          (i) serving as Founding Editorial Director for all publications of the Company;

          (ii) serving as an executive producer for television and radio productions of the Company; and

          (iii) subject to the oversight of the Board, serving as the primary spokesperson for the Company (it being understood, however, that the Principal Executive Officer, Chief Executive Officer(s) and the Chief Financial Officer of the Company, rather than the Founder, shall serve as primary spokespersons for the Company to the financial and investment community and with respect to business and financial affairs).

     The Founder shall report directly to the Board. Unless otherwise authorized by the Board, the

1

Founder shall devote substantially all of her working time, attention and energies during normal business hours (other than absences due to illness or vacation) to the performance of her duties for the Company. Notwithstanding the above, the Founder shall be permitted, to the extent such activities do not violate, or substantially interfere with her performance of her duties and responsibilities under this Agreement, or any other agreement to which she and the Company are parties, in all cases except for (iii), as determined by the Principal Executive Officer and a committee of the Board, to (i) engage in motion picture, television, public speaking and publishing activities, (ii) appear from time to time in commercials and/or advertisements that do not present a conflict with the Company’s interests with respect to its products or significant business relationships, in all cases subject to the approval of the Board, (iii) manage her personal, financial and legal affairs (including writing her autobiography), (iv) serve on civic or charitable boards or committees (it being expressly understood and agreed that the Founder’s continuing to serve on any such board and/or committees on which she is serving, or with which she is otherwise associated, as of the Effective Date, shall be deemed not to interfere with her performance of her duties and responsibilities under this Agreement), (v) serve on boards of other companies and (vi) make personal appearances and lectures, and the Founder shall be entitled to receive and retain all remuneration received by her from the items listed in clauses (i) through (vi) of this paragraph (including, without limitation, appearance and speaking fees, book advances, royalties, residuals and other fees and compensation (including guild and union payments) payable therewith) outside the performance of her duties hereunder.

     4. Place of Performance. During the Employment Period, the locations of employment of the Founder shall be in New York City, New York and Bedford, New York and the Founder shall not be required to relocate her employment to any other location. During the Employment Period, the Company shall provide the Founder with the same offices and staff that she was provided with immediately prior to the Effective Date.

     5. Compensation and Related Matters.

          (a) Talent Compensation. In consideration of her continued work as a performer and for making public appearances on behalf of the Company or for third-parties as required in support of products covered by Company contracts with third parties consistent with past practices, and as an author or provider of content consistent with past practices for the Company’s media properties, publications and contractual arrangements during the Employment Period, the Company shall pay the Founder talent compensation at the rate of not less than Two Million Dollars ($2,000,000) per year (the “Talent Compensation”). The Talent Compensation shall be paid in approximately equal installments in accordance with the Company’s customary payroll practices and subject to all applicable income and employment tax withholdings. The Talent Compensation shall be subject to annual review by the Board and may be increased in the Board’s discretion. If the Talent Compensation is increased by the Board, such increased Talent Compensation shall then constitute the Talent Compensation for all purposes under this
Agreement.

          (b) Annual Bonus. For each full fiscal year of the Company that begins and ends during the Employment Period, and for the 2009 fiscal year, the Founder shall be eligible to earn an annual cash bonus (the “Annual Bonus”) in such amount as shall be determined by the

2

Compensation Committee of the Board (the “Compensation Committee”) based on the achievement of Company and individual performance goals as established by the Compensation Committee for each such fiscal year , with a target Annual Bonus equal to One Million Dollars ($1,000,000) (the “Target Amount”) and a maximum Annual Bonus equal to 150% of the Target Amount. The Compensation Committee shall establish objective criteria to be used to determine the extent to which performance goals have been satisfied. Such Annual Bonus shall be paid in a lump sum no earlier than January 1st and no later than March 15th of the calendar year following the calendar year to which such bonus relates. The Founder shall be entitled to receive a pro rata portion of any payable Annual Bonus for the 2012 fiscal year, upon expiration of the Employment Period if this Agreement is not renewed, which pro rata portion shall be determined by multiplying the amount of the Annual Bonus paid to the Founder in respect of the full fiscal year immediately prior to the expiration of the Employment Period by a fraction the numerator of which is the number of days the Founder was employed by the Company in the 2012 Fiscal Year and the denominator or which is 365 and, subject to Section 20(b) below, such pro rata Annual Bonus shall be paid by the Company to the Founder within thirty (30) days following the expiration of the Employment Period.

          (c) Make-whole/retention payment. In recognition of her extraordinary efforts on behalf of the Company and to maintain her continued level of involvement during the Employment Period consistent with past practices, the Company shall as soon as practicable following the full execution of this Agreement (but not later than the date which is five (5) days following the full execution hereof) pay the Founder a payment of Three Million Dollars ($3,000,000); provided, however, that if the Founder terminates this Agreement without Good Reason (defined below) or the Company terminates this Agreement for Cause (defined below) during the Employment Period, a pro-rata portion of such payment (determined based on a fraction, the numerator of which is the number of calendar days from the Date of Termination (defined below) through the last day of the Employment Period, and the denominator of which is the total number of calendar days of the Employment Period) shall be subject to forfeiture and repayment by the Founder upon such terms and conditions as determined by the Compensation Committee in its discretion at the time of such forfeiture.

          (d) Automobiles. During the Employment Period, the Company shall provide the Founder with automobiles and drivers seven days per week on a basis no less favorable than in effect immediately prior to the Effective Date to be used in the Founder’s sole discretion.

          (e) Business, Travel and Entertainment Expenses. The Company shall promptly reimburse the Founder for all business, travel and entertainment expenses on a basis no less favorable than in effect immediately prior to the Effective Date and subject to the
Company’s current expense reimbursement policies, 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 Founder shall pay the SIFL rate for any personal use of such private plane.

          (f) Vacation. During the Employment Period, the Founder shall be entitled to six weeks of vacation per year. Vacation not taken during the applicable fiscal year (but not in excess of three weeks) shall be carried over to the next following fiscal year.

3

          (g) Welfare, Pension and Incentive Benefit Plans. During the Employment Period, the Founder (and her eligible spouse and dependents) shall be entitled to participate in all welfare benefit plans and programs maintained by the Company from time to time for the benefit of its senior executives, including, without limitation, all medical, hospitalization, dental, disability, accidental death and dismemberment, travel accident and life insurance plans, programs and arrangements, on a basis no less favorable than in effect with respect to the Founder immediately prior to the Effective Date. In addition, during the Employment Period, the Founder shall be eligible to participate in all pension, retirement, savings and other employee benefit plans and programs maintained from time to time by the Company for the benefit of its senior executives, other than any equity-based incentive plans, severance plans, retention plans and any annual cash incentive plan, on a basis no less favorable than in effect immediately prior to the Effective Date.

          (h) Security Expenses. During the Employment Period, the Company shall pay or promptly reimburse the Founder for (1) all installation and maintenance costs and monitoring fees relating to security at the Founder’s residences and (2) all expenses relating to personal security services for the Founder.

          (i) Telephone and Internet Access. During the Employment Period, the Company shall pay or promptly reimburse the Founder for customary telephone, computer usage and internet access at her homes for business use.

          (j) New Programming. For any original network, cable or syndicated show of the Company (other than “The Martha Stewart Show”) produced after the Effective Date and in which the Founder is the on-air talent (“New Programming”), the Founder shall be entitled to receive an amount equal to the fair market value of her talent services, as mutually agreed to by the Founder and the Board, or, if the Founder and the Board are unable to agree upon such fair market value, by an independent expert selected by mutual agreement between the Founder and the Board (it being understood that any determination of fair market value shall take into account the Founder’s rights to residual payments pursuant to the next sentence). Any payments in respect of New Programming shall be paid in the calendar year following the calendar year of production. In addition, with respect to any re-run or re-packaging of any New Programming (each, a “Re-run”), the Founder shall receive an amount equal to ten percent (10%) of the Adjusted Gross Revenues, which shall be paid no later than the end of the calendar year in which the Adjusted Gross Revenues are determined.

“Adjusted Gross Revenues” means gross revenues of the Company from any Re-run minus the sum of (i) production costs, (ii) marketing costs and (iii) distribution costs; provided that if such Re-run includes programming other than New Programming, the portion of Adjusted Gross Revenues which is attributable to New Programming shall be determined on a fair and equitable basis approved by the Founder.

          (k) Equity Awards. The Board shall in its sole discretion make an annual grant of stock options to Founder.

     6. Termination. The Founder’s employment hereunder may be terminated during

4

the Employment Period under the following circumstances:

          (a) Death. The Founder’s employment hereunder shall terminate upon her death.

          (b) Disability. The Company shall have the right to terminate the Founder’s employment as a result of the Founder’s Disability (as defined below) as determined by a physician selected by the Founder, and reasonably acceptable to the Company. “Disability” shall mean (i) the Founder’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; (ii) the Founder is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering the Founder; or (iii) the Founder is determined to be totally disabled by the Social Security Administration.

          (c) Cause. The Company shall have the right to terminate the Founder’s employment for “Cause.” For purposes of this Agreement, the Company shall have “Cause” to terminate the Founder’s employment only upon the Founder’s:

          (i) willful gross misconduct or conviction of a felony after the Effective Date that, in either case, results in material and demonstrable damage to the business or reputation of the Company; or

          (ii) willful and continued failure to perform her duties hereunder (other than such failure resulting from legal necessity or after the issuance of a Notice of Termination by the Founder for Good Reason) within ten business days after the Company delivers to her a written demand for performance that specifically identifies the actions to be performed.

For purposes of this Section 6(c), no act or failure to act by the Founder shall be considered “willful” if such act is done by the Founder in the good faith belief that such act is or was to be beneficial to the Company or one or more of its businesses, or such failure to act is due to the Founder’s good faith belief that such action would be materially harmful to the Company or one of its businesses. Cause shall not exist unless and until the Company has delivered to the Founder a copy of a resolution duly adopted by a majority of the Board (excluding the Founder for purposes of determining such majority) at a meeting of the Board called and held for such purpose after reasonable (but in no event less than thirty days’) notice to the Founder and an opportunity for the Founder, together with her counsel, to be heard before the Board, finding that in the good faith opinion of the Board that “Cause” exists, and specifying the particulars thereof in detail. This Section 6(c) shall not prevent the Founder from challenging in any court of competent jurisdiction the Board’s determination that Cause exists or that the Founder has failed to cure any act (or failure to act) that purportedly formed the basis for the Board’s determination.

          (d) Good Reason. The Founder may terminate her employment for “Good Reason” after giving the Company detailed written notice thereof, if the Company shall have failed to cure the event or circumstance constituting “Good Reason” within ten business days

5

after receiving such notice. Good Reason shall mean the occurrence of any of the following without the written consent of the Founder:

          (i) the assignment to the Founder of duties materially inconsistent with this Agreement or a material change in her titles or authority;

          (ii) any failure by the Company to comply with Section 5 hereof in any material way;

          (iii) the requirement of the Founder to relocate to locations other than those provided in Section 4 hereof;

          (iv) the failure of the Company to comply with and satisfy Section 12(a) of this Agreement; or

          (v) any material breach of this Agreement by the Company.

The Founder’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

          (e) Without Cause. The Company shall have the right to terminate the Founder’s employment hereunder without Cause by providing the Founder with a Notice of Termination.

          (f) Without Good Reason. The Founder shall have the right to terminate her employment hereunder without Good Reason by providing the Company with a Notice of Termination.

     7. Termination Procedure.

          (a) Notice of Termination. Any termination of the Founder’s employment by the Company or by the Founder during the Employment Period (other than pursuant to Section 6(a)) 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 Founder’s employment under that provision.

          (b) Date of Termination. “Date of Termination” shall mean (i) if the Founder’s employment is terminated by her death, the date of her death, (ii) if the Founder’s employment is terminated pursuant to Section 6(b), thirty (30) days after the date of receipt of the Notice of Termination (provided that the Founder does not return to the substantial performance of her duties on a full-time basis during such thirty (30) day period), and (iii) if the Founder’s employment is terminated for any other reason, the date on which a Notice of Termination is given or any later date (within thirty (30) days after the giving of such notice) set forth in such Notice of Termination.

6

     8. Compensation upon Termination or During Disability. In the event the Founder is disabled or her employment terminates during the Employment Period, the Company shall provide the Founder with the payments and benefits set forth below. The Founder acknowledges and agrees that the payments set forth in this Section 8 constitute liquidated damages for termination of her employment during the Employment Period.

          (a) Termination by Company without Cause or by Founder for Good Reason. If the Founder’s employment is terminated by the Company without Cause (other than Disability) or by the Founder for Good Reason, subject in all respects to the application of Section 20(b) below:

          (i) the Company shall pay to the Founder, on or before the Date of Termination, a lump sum payment equal to the sum of (A) Talent Compensation and accrued vacation pay through the Date of Termination, (B) three million dollars ($3,000,000), and (C) the higher of (1) $5,000,000 or (2) three times the highest Annual Bonus paid with respect to any fiscal year beginning during the Employment Period;

          (ii) the Company shall continue to provide the Founder and her eligible spouse and dependents for a period equal to the greater of (A) the remaining term of the Employment Period, or (B) three years following the Date of Termination, the medical, hospitalization, dental and life insurance programs provided for in Section 5(g), as if she had remained employed; provided, that if the Founder, her spouse or her eligible dependents cannot continue to participate in the Company programs providing such benefits, the Company shall arrange to provide the Founder and her spouse and dependents with the economic equivalent of the benefits they otherwise would have been entitled to receive under such plans and programs; and provided, further, that such benefits shall terminate on the date or dates the Founder becomes eligible to receive equivalent coverage and benefits under the plans and programs of a subsequent employer at an equivalent cost to the Founder (such coverage and benefits to be determined on a coverage-by-coverage, or benefit-by-benefit, basis);

          (iii) the Company shall, consistent with past practice, reimburse the Founder pursuant to Section 5(e) for business expenses incurred but not paid prior to such termination of employment;

          (iv) until the third anniversary of the Date of Termination, the Company shall continue to provide the Founder with (A) the benefits set forth in Section 5(d) hereof and (B) an office and an assistant in each of New York, New York and Westport, Connecticut; and

          (v) the Founder shall be entitled to any other rights, compensation and/or benefits as may be due to the Founder in accordance with the terms and provisions of any agreements, plans or programs of the Company (other than any severance-based plan or program).

The payments and benefits provided for as subclause (A) of clause (i) above and in clause (iii) above are hereinafter referred to as the “Accrued Obligations.” To the extent any of the benefits provided for in clauses (ii) — (v) above are taxable to the Founder, and except as permitted by Section 409A (as defined in Section 20(a) below), any right to reimbursement or in-kind benefits

7

will not be subject to liquidation or exchange for another benefit, the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year it will not affect the expenses eligible for reimbursement in a later taxable year, and any payments for reimbursements will be paid on or before the last day of the taxable year following the taxable year in which the expense was incurred.

          (b) Cause or by Founder without Good Reason. If the Founder’s employment is terminated by the Company for Cause or by the Founder other than for Good Reason, then the Company shall provide the Founder with her Accrued Obligations and shall have no further obligation to the Founder hereunder.

          (c) Disability. During any period that the Founder fails to perform her duties hereunder as a result of Disability, the Founder shall continue to receive her full Talent Compensation set forth in Section 5(a) until her employment is terminated pursuant to Section 6(b). In the event the Founder’s employment is terminated for Disability pursuant to Section 6(b), the Company shall provide the Founder with the excess, if any, of her full Talent Compensation over the amount of any long-term disability benefits that she receives under the Company’s welfare benefit plans and programs providing ‘disability pay’ within the meaning of Treasury Regulation Section 31.3121(v)(2)-1(b)(4)(iv)(C), payable in accordance with the normal payroll practices of the Company, for the remainder of the Employment Period and shall have no further obligations to the Founder hereunder.

          (d) Death. If the Founder’s employment is terminated by her death, the Company shall provide to the Founder’s beneficiary, legal representatives or estate, as the case may be, the Founder’s full Talent Compensation (less any long-term disability benefits paid to the Founder under the Company’s welfare benefit plans and programs providing ‘disability pay’ within the meaning of Treasury Regulation Section 31.3121(v)(2)-1(b)(4)(iv)(C)), payable in accordance with the normal payroll practices of the Company, for a period equal to the remaining term of the Employment Period and shall have no further obligations hereunder.

          (e) Mitigation. The Founder 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 Founder under this Agreement on account of subsequent employment except as specifically provided in this Section 8. Additionally, amounts owed to the Founder under this Agreement shall not be offset by any claims the Company may have against the Founder, 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 Founder or others.

9. 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 Founder shall not, without

8

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 Founder shall cooperate with the Company in obtaining a protective order at the Company’s expense against disclosure by a court of competent jurisdiction), communicate, to anyone other than the Company and those designated by the Company or on behalf of the Company in the furtherance of its business or to perform her duties hereunder, any trade secrets, confidential information, knowledge or data relating to the Company, its affiliates or any businesses or investments of the Company or its affiliates, obtained by the Founder during the Founder’s employment by the Company and MSLO LLC that is not generally available public knowledge (other than by acts by the Founder in violation of this Agreement.)

          (b) Noncompetition. During the Employment Period and until the 12-month anniversary of the Founder’s Date of Termination if the Founder’s employment is terminated by the Company for Cause or the Founder terminates employment without Good Reason, the Founder shall not engage in or become associated with any Competitive Activity. For purposes of this Section 9(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 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 Founder’s name, likeness, image, or voice to promote or market any such product or service, (iii) the creation, publication or distribution of regular or special issues of magazines, and (iv) any other business in which the Company is engaged during the term of this Agreement (the activities described in clauses (i) through (iv), in each case determined as of the date of the action alleged to be Competitive Activity, (the “Businesses”); provided, that, a Competitive Activity shall not include (i) any speaking engagement to the extent such speaking engagement does not promote or endorse a product or service which is competitive with any product or service of the Company, (ii) the writing of any book or article relating to subjects other than the Businesses (e.g., nonfiction relating to the Founder’s career or general business advice) or (iii) the television, video or music business so long as such activity does not relate to the Businesses. The Founder shall be considered to have become “associated with a Competitive Activity” if she becomes involved as an owner, employee, officer, director, independent contractor, agent, partner, advisor, or in any other capacity calling for the rendition of the Founder’s personal services, with any individual, partnership, corporation or other organization that is engaged in a Competitive Activity and her involvement relates to a significant extent to the Competitive Activity of such entity; provided, however, that the Founder shall not be prohibited from (a) owning less than one percent (1%) 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. If, at any time, the provisions of this Section 9(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 9(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 Founder agrees that this Section 9(b) as so amended shall be valid and binding as though any invalid or unenforceable

9

provision had not been included herein.

          (c) Nonsolicitation. During the Employment Period, and for 12 months after the Founder’s Date of Termination if the Founder’s employment is terminated by the Company for Cause or the Founder terminates employment without Good Reason, the Founder will 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 Founder) 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 Founder (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 for two (2) years thereafter, (i) neither the Founder, nor anyone acting on behalf of the Founder, shall make or publish any disparaging or derogatory statement (whether written or oral) regarding the Company or any of its affiliated companies or businesses, or the current directors or current executive vice presidents and above of any of them, in any public communication, or in any non-public communication with any member of the media or with any other person which may be reasonably expected to be publicly disseminated to the press or the media, and (ii) neither the Company nor any of its affiliated companies or businesses or their affiliates, current directors or current executive vice presidents and above, nor anyone authorized by the Company to speak on behalf of the Company, shall make or publish any disparaging or derogatory statement (whether written or oral) regarding the Founder in any public communication, or in any non-public communication with any member of the media or with any other person which may be reasonably expected to be publicly disseminated to the press or the media.

          (e) Injunctive Relief. In the event of a breach or threatened breach of this Section 9, the Founder agrees that the Company shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Founder acknowledging that damages would be inadequate and insufficient.

     10. Indemnification.

          (a) General. The Company agrees that if the Founder 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 Founder is or was a trustee, director, officer or employee of the Company, MSLO LLC, or any predecessor to MSLO LLC (including any sole proprietorship owned by the Founder) or any of their affiliates or is or was serving at the request of the Company, MSLO LLC, any predecessor to MSLO LLC (including any proprietorship owned by the Founder), or any of their 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 Founder shall be

10

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 Founder in connection therewith. Such indemnification and this Section 10(a) shall continue as to the Founder even if the Founder has ceased to be an officer, director, trustee or agent, or is no longer employed by the Company and shall inure to the benefit of her heirs, executors and administrators or upon any termination of this Agreement. In addition, the Company shall indemnify and hold harmless the Founder in connection with any claim for indemnification under clause (bb) of paragraph 11(a) of the Production Agreement (as defined in the Prior Employment Agreement).

          (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 10 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 Founder 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 Founder 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 Founder 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 Founder for the portion of such Expenses to which the Founder is entitled.

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

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

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

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

11

          (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 Founder, 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 Founder also shall have the right to employ her own counsel in such action, suit or proceeding if she reasonably concludes that failure to do so would involve a conflict of interest between the Company and the Founder, and under such circumstances the fees and expenses of such counsel shall be at the expense of the Company.

          (iii) The Company shall not be liable to indemnify the Founder 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 Founder without the Founder’s written consent. Neither the Company nor the Founder 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 10 shall not be exclusive of any other right which the Founder 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) Timing of Reimbursements or Expenses. To the extent required under Section 409A (as defined in Section 20(a) below), any reimbursements or expenses provided under this Section 10 shall be subject to the limitations on payment and reimbursement of taxable expenses set forth in Section 8(a).

     11. Legal Fees and Expenses. If any contest or dispute shall arise between the Company and the Founder regarding any provision of this Agreement, the Company shall reimburse the Founder for all legal fees and expenses reasonably incurred by the Founder in connection with such contest or dispute, but only if the Founder prevails to a substantial extent with respect to the Founder’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 to the foregoing, the Company shall reimburse the Founder for all reasonable legal fees and expenses incurred in connection with the negotiation and execution of this Agreement. To the extent required under Section 409A (as defined in Section 20(a) below), any reimbursements or expenses provided under this Section 11 shall be subject to the limitations on payment and reimbursement of taxable expenses set forth in Section 8(a).

     12. 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

12

(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 12 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

          (b) Founder’s Successors. No rights or obligations of the Founder under this Agreement may be assigned or transferred by the Founder 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 Founder’s death, this Agreement and all rights of the Founder hereunder shall inure to the benefit of and be enforceable by the Founder’s beneficiary or beneficiaries, personal or legal representatives, or estate, to the extent any such person succeeds to the Founder’s interests under this Agreement. If the Founder 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 Founder, or otherwise to her legal representatives or estate.

     13. 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 Founder:

At her residence address most recently filed with the Company.

If to the Company:

Martha Stewart Living Omnimedia, Inc.
11 West 42nd Street
New York, NY 10036
Attention: General Counsel
Tel: (212) 827-8000
Fax: (212) 827-8188

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

     14. Miscellaneous. No provisions of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing signed by the Founder 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

13

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. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The respective rights and obligations of the parties hereunder of this Agreement shall survive the Founder’s termination of employment and the termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations. Except as otherwise provided in Section 10 hereof with respect to indemnification under Delaware law, 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.

     15. 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.

     16. 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.

     17. Entire Agreement. This Agreement, the Intellectual Property License Agreement and Preservation Agreement, dated as of October 22, 1999, and the Intangible Asset License Agreement, dated June 13, 2008, as amended, 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 or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of such subject matter including, without limitation, the Prior Employment Agreement. The parties agree that the Prior Employment Agreement has been terminated effective as of 11.59 PM on the day immediately preceding the Effective Date.

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

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

     20. Section 409A.

          (a) The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the guidance issued thereunder (“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. Founder is hereby advised to seek independent advice from her 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

14

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 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 Founder’s separation from service, or (ii) the date of the Founder’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 20 (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 Regulation Section 1.409A-2(b)(2)(iii).

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this 9^th day of April, 2009.

MARTHA STEWART LIVING OMNIMEDIA, INC.
By:	/s/ Charles A. Koppelman
	Name: Charles A. Koppelman
	Title: Principal Executive Officer
	/s/ Martha Stewart
	Martha Stewart

15

EX-10.3

Exhibit 10.3

SEPARATION AGREEMENT

     This Separation Agreement (the “Agreement”), dated as of April 20, 2009 (the “Effective Date”), is entered into between Martha Stewart Living Omnimedia, Inc. (the “Company”) and Wenda Harris Millard (“Ms. Millard”).

     WHEREAS, the parties are party to an Employment Agreement dated as of September 17, 2008 (the “Employment Agreement”), pursuant to which Ms. Millard serves as the Company’s Co-Chief Executive Officer and President — Media;

     WHEREAS, Ms. Millard has informed the Board of Directors of her intention to voluntarily resign from her positions with the Company other than for Good Reason (as defined in the Employment Agreement) pursuant to the terms of this Agreement effective as of the Effective Date; and

     WHEREAS, the parties desire that, subject to the terms and conditions set forth herein, Ms. Millard shall cooperate with the Company to assist in the transition of her responsibilities;

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

1. (a) Ms. Millard shall:

     (i) resign as of the Effective Date (which date shall constitute the “Date of Termination” for purposes of the Employment Agreement) as the Co-Chief Executive Officer and President — Media;

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

     (iii) execute and deliver the Waiver and Release of Claims within twenty-five (25) days after the Effective Date in the form attached hereto as Exhibit A (the “Waiver and Release of Claims”).

(b) The Company shall:

     (i) pay Ms. Millard in accordance with payroll practices the amount of her Base Salary (as defined in the Employment Agreement) and unused vacation time, each prorated on a daily basis, that was accrued and unpaid as of the Effective Date; and

     (ii) have amended that certain Notice of Stock Option Grant and Stock Option Agreement awarding Ms. Millard an option in respect of 330,000 shares of the Company’s Class A common stock granted on March 2, 2009 (all of which is currently unvested) (the “Option Agreement”). The Option Agreement shall have been amended to provide that the option shall terminate as to 230,000 shares on the Effective Date and remain outstanding in respect to 100,000 shares and

1

become exercisable with respect to such 100,000 shares on the 18-month anniversary of the Effective Date (the “Amended Option Agreement”), provided that as of such anniversary date Ms. Millard is not in breach of her obligations under the Employment Agreement, including without limitation Section 10 thereof. In the event that the option in respect to 100,000 shares becomes exercisable pursuant to the Amended Option Agreement, the option shall remain exercisable for a period of 12 months from the date of vesting. In the event Ms. Millard breaches such obligations, such option will immediately terminate. Any equity-based awards granted to Ms. Millard that have become vested prior to the Effective Date shall remain outstanding in accordance with their terms.

     (c) Notwithstanding anything in the Employment Agreement to the contrary, except as explicitly provided herein Ms. Millard shall not be entitled to any further payments or benefits under the Employment Agreement except as provided herein.

     2. Subject to Section 1 of this Agreement, nothing in this Agreement shall be construed to amend or modify the terms of the Employment Agreement, including without limitation Section 10 thereof. Ms. Millard acknowledges and agrees that the voluntary termination of her employment is not a termination by the Company “without Cause” or a termination by her for “Good Reason” (each as defined in the Employment Agreement). Accordingly, Ms. Millard shall not, and is not entitled to, receive any severance payments or other benefits pursuant to the Employment Agreement or the Company’s 2008 Executive Severance Pay Plan and, except as otherwise provided in the Amended Option Agreement, no equity-based awards granted to her pursuant to the Equity Agreements (as defined under the Employment Agreement), the Option Agreement or any other equity-based award granted pursuant to the Omnibus Plan (or any predecessor plan or agreement) shall accelerate and all unvested equity awards shall be forfeited and cancelled and of no further force or effect.

     3. Ms. Millard acknowledges and agrees that her execution on the date hereof and the enforceability of the Waiver and Release of Claims is an integral part of, and a material inducement to the Company to enter into, this Agreement and agrees that in the event that either (i) Ms. Millard fails to execute and deliver to the Company the Waiver and Release of Claims within twenty-five (25) days after the Effective Date, or (ii) Ms. Millard revokes the Waiver and Release of Claims as provided in Section 9 of the Waiver and Release of Claims, the Company may in its sole and absolute discretion revoke this Agreement by giving written notice to Ms. Millard, in which event this Agreement shall be deemed null and void ab initio, as will the Amended Option Agreement.

     4. Ms. Millard’s contribution to the Company’s 401 (k) plan (the “401 (k) Plan”) will cease upon her termination pursuant to the terms of the 401(k) Plan. Ms. Millard shall be entitled to distribution and/or rollover of any vested amounts under the 401(k) Plan in accordance with the terms of the 401 (k) Plan. To the extent that Ms. Millard does not vest in any portion of the Company contribution for 2009 under the 401(k) Plan as a result of her not being employed on the last day of the plan year, Ms. Millard shall receive a separate cash payment from the Company promptly following the date the Waiver and Release of Claims becomes effective, not to exceed the amount of maximum match contribution set forth in the 401(k) Plan. Ms. Millard’s active participation in any of the Company’s employee benefit plans and arrangements shall end

2

as of the Effective Date and she shall retain all rights to vested benefits payable in accordance with the terms of such employee benefit plans. In addition, until such time as Ms. Millard is entitled to medical benefits from another employer, but in no event for a period of longer than one (1) year from the Effective Date, the Company shall reimburse Ms. Millard for the portion of COBRA benefits Ms. Millard pays in an amount equal to the contributions that the Company would have made on her behalf had she remained an employee of the Company (i.e., Ms. Millard will not be reimbursed for that portion of the COBRA premium equal to the amount that was deducted from her payroll for such benefits when she was an employee).

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

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

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

3

     8. Except for issues or matters as to which federal law is applicable, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without giving effect to the conflicts of law principles thereof. The federal and state courts located in New York County, New York, shall have sole and exclusive jurisdiction over any dispute arising out of or relating to this Agreement, and each party hereby expressly consents to the jurisdiction of such courts and waives any objection (whether on grounds of venue, residence, domicile, inconvenience of forum or otherwise), to such a proceeding brought before such a court.

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

MARTHA STEWART LIVING OMNIMEDIA, INC,
By: /s/ Charles A. Koppelman	4/21/09
Name: Charles A. Koppelman	Date
Title: Executive Chairman
/s/ Wenda Harris Millard	20 April 2009
Wenda Harris Millard	Date

4

Exhibit A

WAIVER AND RELEASE OF CLAIMS

1. General Release. In consideration of the Amended Option Agreement to be made pursuant to that Separation Agreement dated as of April ____, 2009 (the “Agreement”), Wenda Harris Millard (the “Employee”), with the intention of binding the Employee and the Employee’s heirs, executors, administrators and assigns, does hereby waive, release, remise, acquit and forever discharge Martha Stewart Living Omnimedia, Inc. (the “Company”) and each of its subsidiaries and affiliates (collectively, the “Company Affiliated Group”), the respective present and former directors, officers, employees, representatives, agents, attorneys, employee benefits plans (and the fiduciaries thereof) and attorneys of each of the foregoing, and the successors, predecessors and assigns of each of the foregoing (together with each member of the Company Affiliated Group, each a “Company Released Party” and collectively, the “Company Released Parties”), of and from any and all claims, actions, causes of action, complaints, charges, demands, rights, obligations, damages, debts, sums of money, accounts, financial obligations, suits, expenses, attorneys’ fees, liens and liabilities of whatever kind or nature in law, equity or otherwise, whether accrued, absolute, contingent, unliquidated or otherwise and whether now known or unknown, suspected or unsuspected (an “Action”) which the Employee, individually or as a member of a class, now has, owns or holds (or may have, own or hold), or has at any time heretofore had, owned or held against any Company Released Party in any capacity arising out of facts or matters in existence on or prior to the time Employee executes this Waiver and Release of Claims, including, without limitation, any and all Actions (i) arising out of or in any way connected with the Employee’s service to any member of the Company Affiliated Group (or the predecessors thereof) in any capacity, or the termination of such service in any such capacity, (ii) for severance or vacation benefits, unpaid wages, salary or incentive payments, (iii) for breach of contract, wrongful discharge, impairment of economic opportunity, defamation, intentional infliction of emotional harm or other tort and (iv) for any violation of applicable state and local labor and employment laws (including, without limitation, all laws concerning harassment, discrimination, retaliation and other unlawful or unfair labor and employment practices), any and all Actions based on the Employee Retirement Income Security Act of 1974 (“ERISA”), and any and all Actions arising under the civil rights laws of any federal, state or local jurisdiction, including, without limitation, Title VII of the Civil Rights Act of 1964 (“Title VII”), the Americans with Disabilities Act (“ADA”), Sections 503 and 504 of the Rehabilitation Act, the Family and Medical Leave Act, the Age Discrimination in Employment Act (“ADEA”), the New York State Constitution, the New York Human Rights Law, the New York Labor Law, the New York Civil Rights Law, the New York City Human Rights Law, the New York Retaliatory Action by Employers Law, the New York Non-Discrimination for Legal Actions Law and the New York Wage and Hour Law or any other statute, laws, ordinances, or regulations of any jurisdiction, as each has been amended, excepting only:

     (a) rights of the Employee under this Waiver and Release of Claims, rights under the Agreement, and rights under the Employment Agreement that survive its termination;

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

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

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

A-1

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

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

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

2. Release by Company. The Company does hereby release, remise, acquit and forever discharge the Employee from any and all known Actions arising out of or in any way connected with the Employee’s service to any member of the Company Affiliated Group, except for Actions in respect of Employee’s compliance with the terms of the Employment Agreement that survive termination or Actions to which Employee has liability and would not be entitled to indemnification pursuant to Section 12 of the Employment Agreement.

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

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

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

6. Additional Covenants.

     (a) Return of Company Material. The Employee shall, promptly after the date hereof, return to the Company all Company Material (as defined below). For purposes of this Section 6, “Company Material” means any documents, files and other property and information of any kind belonging or relating to (i) any member of the Company Affiliated Group, (ii) the current and former suppliers, creditors, directors, officers, employees, agents and customers of any of them or (iii) the businesses, products, services and operations (including, without limitation, business, financial and accounting practices) of any of them, in each case whether tangible or intangible (including, without limitation, credit

A-2

cards, building and office access cards, keys, computer equipment, cellular telephones, pagers, electronic devices, hardware, manuals, books, files, documents, records, software, customer data, research, financial data and information, memoranda, surveys, correspondence, statistics and payroll and other employee data, and any copies, compilations, extracts, excerpts, summaries and other notes thereof or relating thereto), excluding only information (x) that is generally available public knowledge or (y) that relates exclusively to the Employee’s compensation or employee benefits.

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

     (c) Injunctive Relief. In the event of a breach or threatened breach by the Employee of this Section 6, the Employee agrees that the Company shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Employee acknowledging that damages would be inadequate or insufficient, and that in connection with seeking such injunctive relief the Company shall not be required to show any actual damage or the inadequacy of any remedy at law or to post a bond or other security.

7. Voluntariness. The Employee acknowledges and agrees that she is relying solely upon her own judgment; that the Employee is over eighteen years of age and is legally competent to sign this Waiver and Release of Claims; that the Employee is signing this Waiver and Release of Claims of her own free will; that the Employee has read and understood the Waiver and Release of Claims before signing it; and that the Employee is signing this Waiver and Release of Claims in exchange for consideration that she believes is satisfactory and adequate. The Employee also acknowledges and agrees that she has been informed of the right to consult with legal counsel, has been encouraged to do so and has had sufficient opportunity to do so. The Employee agrees that she is not relying on any representations, whether written or oral, not set forth in this Waiver and Release of Claims, in determining to execute this Waiver and Release of Claims.

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

A-3

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

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

10. Effect of Unenforceability of Release. In the event that the Employee or any of her heirs, successors or assigns initiates an Action in respect of any portion of this Waiver and Release of Claims that is held to be null and void or otherwise determined not to be enforceable by the Company for any reason (whether as part of such Action or otherwise) then, in addition to any other remedy available to the Company hereunder, the Amended Option Agreement shall be deemed null and void.

11. Governing Law Jurisdiction. Except for issues or matters as to which federal law is applicable, this Waiver and Release of Claims shall be governed by and construed and enforced in accordance with the laws of the State of New York without giving effect to the conflicts of law principles thereof. The federal and state courts located in New York County, New York, shall have sole and exclusive jurisdiction over any dispute arising out of or relating to this Waiver and Release of Claims, and each party hereby expressly consents to the jurisdiction of such courts and waives any objection (whether on grounds of venue, residence, domicile, inconvenience of forum or otherwise), to such a proceeding brought before such a court.

Wenda Harris Millard

A-4

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Charles Koppelman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Martha Stewart Living Omnimedia, Inc. (the “registrant”);

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: May 11, 2009

/s/ Charles Koppelman  

Charles Koppelman 

Principal Executive Officer 

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Kelli Turner, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Martha Stewart Living Omnimedia, Inc. (the “registrant”;

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: May 11, 2009

/s/ Kelli Turner  

Kelli Turner 

Chief Financial Officer 

EX-32

EXHIBIT 32

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

In connection with the Quarterly Report of Martha Stewart Living Omnimedia, Inc. (the “registrant”) on Form 10-Q for the quarter ended March 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “report”), we, Charles Koppelman and Kelli Turner, 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: May 11, 2009	/s/ Charles Koppelman Charles Koppelman
	Principal Executive Officer
Dated: May 11, 2009	/s/ Kelli Turner Kelli Turner
	Chief Financial Officer