Exhibit 10.2
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of September 17,
2008 (the “Effective Date”), by and between Martha Stewart Living Omnimedia,
Inc., a Delaware corporation (the “Company”), and Charles A. Koppelman (the
“Executive”).
     WHEREAS, the Executive has been serving since June 2005 as Chairman of the
Board of Directors of the Company (the “Chairman” of the “Board”); and
     WHEREAS, the Company entered into a Separation Agreement dated as of
June 10, 2008 with its former Chief Executive Officer (“CEO”) and on June 11,
2008, appointed two co-CEOs and determined that the co-CEOs should report to the
Chairman; and
     WHEREAS, on July 25, 2008 (the “Starting Date”), the Board appointed the
Executive as Executive Chairman of the Company; and
     WHEREAS, the Company desires that the Executive serve as its Executive
Chairman following the Effective Date, and the Executive is willing to be so
employed, in each case on the terms and conditions set forth herein;
     NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the sufficiency of which is hereby acknowledged, and intending to be legally
bound hereby, the parties hereto agree as follows:
     1. Employment Term. Subject to the provisions of Section 7 of this
Agreement, the Company hereby agrees to employ the Executive hereunder, and the
Executive hereby agrees to be employed by the Company hereunder, in each case
subject to the terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on December 31, 2012 (such period, as it may be
extended in accordance with the terms of the following sentence, the “Employment
Term”). Unless the Company or the Executive has theretofore provided notice in
writing to the other party of its intention not to extend the Employment Term,
on June 30, 2012 and on each succeeding June 30, this Agreement shall
automatically be extended for an additional 12 months from the then scheduled
expiration date.
     2. Duties.
          (a) During the Employment Term, the Executive shall serve as the
Executive Chairman of the Company. The Executive shall be the senior-most
executive officer of the Company and shall have the duties and responsibilities
customarily exercised by an individual serving in that position in a corporation
of the size and nature of the Company. In his capacity as Executive Chairman,
the Executive shall use his best energies and abilities in the performance of
his duties, services and responsibilities for the Company. In performing such
duties, services and responsibilities, the Executive will report directly to the
Board.

 

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     (b) During the Employment Term, the Executive shall devote substantially
all of his business time and attention to the businesses of the Company and its
subsidiaries and affiliates and shall not engage in any activity inconsistent
with the foregoing, whether or not such activity shall be engaged in for
pecuniary profit, unless approved by the Board; provided, however, that, to the
extent such activities do not violate, or substantially interfere with his
performance of his duties, services and responsibilities under, this Agreement,
the Executive shall be permitted to manage his personal, financial and legal
affairs and serve on civic or charitable boards and committees of such boards.
The parties understand and agree that the Executive may continue to serve on
corporate, civic and charitable boards on which he sits as of the date of this
Agreement (including the Executive’s service as the Chairman of FAO Schwartz
Inc.; a director of the Board of Governors of New York Hospital; a member of the
Dean’s Council of Hofstra Law School; a director of the Arts Board of Tufts
University; a stockholder and director of SFNY, Inc, and a trustee of the United
States Gypsum Asbestos Personal Injury Settlement Trust) (such activities,
together, and as may be amended pursuant to this paragraph, the “Non-Company
Activities”). Executive shall not permit the Non-Company Activities to interfere
with the Executive’s performance on behalf of the Company under this Agreement,
and Executive agrees that, subject to the first sentence of this paragraph, he
shall only accept new or additional responsibilities related to businesses other
than the Company’s (such new or additional responsibilities constituting
Non-Company Activities) to the extent Executive gives up a Non-Company Activity
requiring a commensurate amount of time and effort. During the Employment Term,
the Executive’s principal location of employment shall be at the Company’s
executive offices in New York City, New York, except for customary business
travel on behalf of the Company and its subsidiaries and affiliates.
          (c) Upon any termination of the Executive’s employment with the
Company, the Executive shall be deemed to have resigned from all other positions
he then holds as an employee or director or other independent contractor of the
Company or any of its subsidiaries or affiliates, unless otherwise agreed by the
Company and the Executive. Any such termination shall constitute a “separation
of service” with the Company for purposes of Section 409A of the Internal
Revenue Code of 1986, as amended (“Section 409A”).
     3. Base Salary; Bonus.
          (a) During the Employment Term, in consideration of the performance by
the Executive of the Executive’s obligations during the Employment Term
(including any service in any position with any subsidiary or affiliate of the
Company), the Company shall pay the Executive a base salary (the “Base Salary”)
at an annual rate of $900,000, subject to increase but not decrease in the
discretion of the Board, based on the Board’s annual review of Executive’s
compensation, payable in accordance with the normal payroll practices of the
Company in effect from time to time. The Base Salary at the rate of $75,000 per
month will be payable to Employee retroactively to the Starting Date, provided
that such amount will be reduced by any payments made to CAK Entertainment, Inc.
under the terms of the Consulting Agreement (as defined below) for the period
from the Starting Date through October 21, 2008 (at the rate of $60,000 per
month), such that on the date hereof, Employee shall be entitled to receive
$45,000 pursuant to this Agreement from the Starting Date through October 21,
2008, and CAK

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Entertainment shall be entitled to receive $60,000 pursuant to the terms of the
Consulting Agreement.
          (b) During the Employment Term, in addition to the payments of the
Base Salary set forth above, the Executive shall be eligible to receive, in
respect of each calendar year during which the Employment Term is in effect (pro
rata for 2008 and any other partial calendar year), a performance-based cash
bonus of 100% of Base Salary at target and 150% of Base Salary at maximum based
on achievement of goals established with respect to each calendar year by the
Compensation Committee of the Board after reasonable consultation with the
Executive. Such bonus, if any, shall be paid concurrently with other bonuses
paid to senior executives of the Company, provided you are continuously and
actively employed through such date of payment. Such bonus shall be paid in a
lump sum no earlier than January 1st and no later than March 15th of the
calendar year following the calendar year to which such bonus relates.
          (c) The consulting agreement entered into by the Company and CAK
Entertainment, Inc., dated October 21, 2005, and as modified July 19, 2007
(together, the “Consulting Agreement”), is hereby terminated, as well as the
Executive’s consulting services provided therewith. In order to avoid any
conflicts of interest relating to Employee’s services as an employee pursuant to
this Agreement, the Company shall pay CAK Entertainment, Inc. the balance of
cash fees outstanding and payable in 2008 under the Consulting Agreement in the
amount of $375,000, and shall accelerate the vesting of outstanding equity
awards made pursuant to the Consulting Agreement, consisting of (i) 30,482
shares of restricted stock, and (ii) the vesting of the option with respect to
81,283 shares (such cash payment, together with the accelerated equity awards,
the “Consulting Fee”). The Company hereby agrees to accelerate the payment of
the balance of cash fees in the amount of $600,414 due to CAK Entertainment,
Inc. pursuant to Section 6 of Exhibit A to the Consulting Agreement, and to
provide that the payment will be paid in a lump sum to CAK Entertainment, Inc.
on January 9, 2009 (the “Tail Fee”) so that the payment complies with
Section 409A. The cash payment due for CAK Entertainment, Inc. in 2008 shall be
paid promptly following the date hereof. The Consulting Fee and the Tail Fee
shall be the total and exclusive payment for any and all payments or commissions
that may be due or may become due under the Consulting Agreement. These payments
satisfy all obligations of the Company in connection with the Consulting
Agreement, which is rendered terminated conditioned upon the payments described
in this subparagraph.
          (d) Executive shall be eligible to receive $300,000 in the event that
the Company achieves adjusted EBITDA for 2008 that is 10% greater than adjusted
EBITDA in 2007, which shall be paid in 2009, if at all, on March 10, 2009.
     4. Benefits.
          (a) During the Employment Term, the Executive shall be entitled to
participate in the employee benefit plans, policies, programs, perquisites and
arrangements, as may be amended from time to time, that are provided generally
to similarly situated employees of the Company (excluding for this purpose
Martha Stewart) to the extent the Executive meets the eligibility requirements
for any such plan, policy, program, perquisite or arrangement.

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          (b) The Company shall reimburse the Executive for all reasonable
business expenses incurred by the Executive in carrying out the Executive’s
duties, services and responsibilities under this Agreement during the Employment
Term, including, without limitation, first class transportation or travel on a
private plane of the Company to the extent that such private plane is available.
The Executive shall comply with generally applicable policies, practices and
procedures of the Company with respect to reimbursement for, and submission of
expense reports, receipts or similar documentation of, such expenses
          (c) The Company shall reimburse Executive for a driver at an hourly
rate to be agreed to, provided that such expense related to a driver for
Executive shall not exceed $60,000 in any year.
          (d) The Company shall, to the extent feasible and available, make an
office available to one or more individuals working with the Executive on
Non-Company Activities, provided that Employee shall reimburse the Company for
the use of such space at the applicable rental rate.
          (e) For purposes of complying with Section 409A, any reimbursement of
benefits provided under this Section 4 shall be subject to the following:
(i) provision of such reimbursement or benefits provided during one calendar
year shall not affect the amount of reimbursements or benefits provided during a
subsequent calendar year; (ii) such reimbursements or benefit may not be
exchanged or substituted for other forms of compensation to the Executive; and
(iii) payments must be made no later than the last day of the calendar year
immediately following the calendar year in which the expense is incurred.
     5. Vacations. During each calendar year of the Employment Term (pro rata
for partial calendar years), the Executive shall be entitled to four weeks of
paid vacation to be taken in accordance with the applicable policy of the
Company.
     6. Equity Compensation.
          (a) Promptly after the execution and delivery of this Agreement by the
parties, the Company shall grant the Executive 425,000 shares of restricted
Class A common stock, par value $0.01 per share (“Stock”), of the Company,
pursuant to the Restricted Stock Agreement attached hereto as Exhibit A (the
“Restricted Stock Agreement”) and the Company’s policy on equity issuances,. The
Restricted Stock Agreement shall provide that (i) 25,000 shares of the Stock
shall vest on the first anniversary of the date of grant; (ii) 200,000 shares of
the Stock shall vest in approximately equal tranches on the first, second and
third anniversaries of the date of grant; (iii) 100,000 shares of the Stock
shall vest if and only if the Fair Market Value of the Common Stock (as such
terms are defined in the Company’s Omnibus Stock and Option Compensation Plan)
has been at least $15 on each of the immediately preceding 60 consecutive
trading days during the initial Employment Term; and (iv) 100,000 shares of the
Stock shall vest if and only if the Fair Market Value of the Common Stock has
been at least $25 on each of the immediately preceding 60 consecutive trading
days during the initial Employment Term (items (iii) and (iv) hereof, together,
the “Performance Shares”).

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          (b) Promptly after the execution and delivery of this Agreement by the
parties, the Company shall grant the Executive a non-qualified option to
purchase 600,000 shares of Stock of the Company pursuant to the Company’s policy
on equity issuances. The option shall vest in three approximately equal tranches
with a seven (7) year term, pursuant to the Stock Option Agreement attached
hereto as Exhibit B (the “Stock Option Agreement” and, together with the
Restricted Stock Agreement, the “Equity Agreements”). It is expected that, in
the discretion of the Board (or the Compensation Committee of the Board), the
Executive may from time to time be granted additional equity awards during the
Employment Term.
          (c) Upon a Change in Control of the Company, all unvested equity
awards held by the Executive shall become fully vested and (in the case of stock
options) exercisable.
     7. Termination of the Employment Term.
          (a) The Executive’s employment with the Company and the Employment
Term shall terminate upon the earliest to occur of:
               (i) the death of the Executive;
               (ii) the termination of the Executive’s employment by the Company
by reason of the Executive’s Disability;
               (iii) the termination of the Executive’s employment by the
Company for Cause or without Cause;
               (iv) the termination of the Executive’s employment by the
Executive for Good Reason or without Good Reason; and
               (v) the expiration of the Employment Term.
          (b) For purposes of this Agreement, the following terms shall have the
following meanings:
               (i) “Cause” shall mean that the Board has made a good faith
determination, after providing the Executive with reasonably detailed written
notice and a reasonable opportunity to be heard on the issues at a Board
meeting, that any of the following has occurred:
                    (1) the willful and continued failure by the Executive to
substantially perform his material duties to the Company (other than due to
mental or physical disability) after written notice specifying such failure and
the manner in which the Executive may rectify such failure in the future;
                    (2) the Executive has engaged in willful, intentional
misconduct that has resulted in material damage to the Company’s business or
reputation;
                    (3) the Executive has been convicted of a felony; or

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                    (4) the Executive has engaged in fraud against the Company
or misappropriated Company property (other than incidental property).
     For purposes of this Agreement, no act or failure by the Executive shall be
considered “willful” if such act is done by the Executive in the good faith
belief that such act is or was in the best interests of the Company or one or
more of its businesses. Nothing in this Section 7(b)(i) shall be construed to
prevent the Executive from contesting the Board’s determination that Cause
exists.
               (ii) “Change in Control” of the Company shall mean:
                    (1) any “person” (as such term is used in Sections 3(a)(9)
and 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) or “group” (as such term is used in Section 14(d)(2) of the Exchange Act)
is or becomes a “beneficial owner” (as such term is used in Rule 13d-3
promulgated under the Exchange Act) of 50% or more of the Voting Stock of the
Company; provided that this clause (1) shall not apply with respect to a
stockholder of the Company who beneficially owns more than 50% of the Voting
Stock of the Company on the Effective Date;
                    (2) all or substantially all of the assets or business of
the Company are disposed of pursuant to a merger, consolidation or other
transaction unless, immediately after such transaction, the stockholders of the
Company immediately prior to the transaction own, directly or indirectly, in
substantially the same proportion as they owned the Voting Stock of the Company
prior to such transaction more than 50% of the Voting Stock of the company
surviving such transaction or succeeding to all or substantially all of the
assets or business of the Company or the ultimate parent company of such
surviving or successor company if such surviving or successor company is a
subsidiary of another entity (there being excluded from the number of shares
held by such stockholders, but not from the Voting Stock of the combined
company, any shares received by affiliates of such other company in exchange for
stock of such other company);
                    (3) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its assets if such plan of
liquidation will result in the winding-up of the business of the Company;
                    (4) the consummation of any merger, consolidation or other
similar corporate transaction unless, immediately after such transaction, the
stockholders of the Company immediately prior to the transaction own, directly
or indirectly, in substantially the same proportion as they owned the Voting
Stock of the Company prior to such transaction more than 50% of the Voting Stock
of the company surviving such transaction or its ultimate parent company if such
surviving company is a subsidiary of another entity (there being excluded from
the number of shares held by such stockholders, but not from the Voting Stock of
the combined company, any shares received by affiliates of such other company in
exchange for stock of such other company); or

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                    (5) the failure of the Company to have any securities
required to be registered under Section 12 of the Exchange Act.
For purposes of this definition, “the Company” shall include any entity that
succeeds to all or substantially all of the business of the Company; “Voting
Stock” shall mean securities of any class or classes having general voting power
under ordinary circumstances, in the absence of contingencies, to elect the
directors of a corporation; and references to ownership of “more than 50% of the
Voting Stock” shall mean the ownership of shares of Voting Stock that represent
the right to exercise more than 50% of the votes entitled to be cast in the
election of directors of a corporation.
               (iii) “Disability” of the Executive shall have occurred if, as a
result of the Executive’s incapacity due to physical or mental illness as
determined by a physician selected by the Executive, and reasonably acceptable
to the Company, the Executive shall have been substantially unable to perform
his duties hereunder for six consecutive months, or for an aggregate of 180 days
during any period of twelve consecutive months.
               (iv) “Good Reason” shall mean the occurrence, without the
Executive’s express prior written consent, of any one or more of the following:
                    (1) a material diminution of, or material reduction or
material adverse alteration in, the Executive’s positions, titles, duties, or
responsibilities from, or the assignment to the Executive of duties inconsistent
with, those set forth in Section 2(a) (or as subsequently amended in accordance
with Section 18 with the consent of the Executive);
                    (2) a material breach of the Agreement by the Company that
continues after the reasonable notice and opportunity to cure;
                    (3) the Company’s requiring the Executive to be based at a
location in excess of 35 miles from the location of the Executive’s principal
job location or office specified in Section 2(b), except for required travel on
the Company’s business to an extent substantially consistent with the
Executive’s position; or
                    (4) a reduction by the Company of the Executive’s base
salary or target annual bonus percentage as in effect on the Effective Date, or
as the same shall be increased from time to time.
The Executive’s right to terminate employment in a termination for Good Reason
shall not be affected by the Executive’s incapacity due to physical or mental
illness. Subject to the requirements set forth above, the Executive’s continued
employment shall not constitute a consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.

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     8. Termination Procedures.
          (a) Notice of Termination. Any termination of the Executive’s
employment by the Company or by the Executive during the Employment Term (other
than pursuant to Sections 7(a)(i) and 7(a)(v)) shall be communicated by written
Notice of Termination to the other party. For purposes of this Agreement, a
“Notice of Termination” shall mean a notice indicating the specific termination
provision in this Agreement relied upon and setting forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under that provision.
          (b) Date of Termination. For purposes of this Agreement, “Date of
Termination” shall mean (i) if the Executive’s employment is terminated by his
death, the date of his death, (ii) if the Executive’s employment is terminated
pursuant to Section 7(a)(ii), 30 days after the date of receipt of the Notice of
Termination (provided that the Executive does not return to the substantial
performance of his duties on a full-time basis during such 30-day period),
(iii) if the Executive’s employment is terminated pursuant to Section 7(a)(v),
the date of expiration of the Employment Term, and (iv) if the Executive’s
employment is terminated for any other reason, the date on which a Notice of
Termination is given or any later date (within 30 days after the giving of such
notice) set forth in such Notice of Termination.
     9. Termination Payments.
          (a) Upon any termination of the Executive’s employment, he shall be
entitled to payment of any earned but unpaid portion of the Base Salary, bonus,
benefits and unreimbursed business expenses, in each case with respect to the
period ending on the Date of Termination. In addition, upon termination of
Executive’s employment without Cause or a termination by Executive with Good
Reason, Executive will be entitled to a pro-rated bonus for the year of
termination (calculated at the end of the fiscal year and then pro rated through
the date of termination) provided that applicable performance targets have been
met and bonuses are paid generally to similarly situated executives at the
Company. Such payments shall be made in accordance with the provisions of
Section 3 and Section 4 of this Agreement.
          (b) In addition to the payments and benefits provided in Section 9(a),
if the Executive’s employment is terminated (x) by the Company without Cause or
(y) by the Executive for Good Reason, (i) outstanding equity awards (excluding,
however, the Performance Shares if such Performance Shares have not vested by
their own terms) held by the Executive shall vest and/or become exercisable,
(ii) the Company shall pay the Executive the Severance Payment and (iii) the
Company shall provide the Executive with continued medical coverage at
active-employee rates for two years or, if earlier, until the Executive receives
subsequent employer-provided coverage. For purposes of this Section 9(b), the
“Severance Payment” shall be a lump-sum cash payment equal to eighteen
(18) months’ of the Executive’s Base Salary. The Severance Payment shall be paid
no later than 60 days following the Date of Termination; provided the Executive
has executed the release referred to below and any waiting period with respect
to such release has elapsed. In addition, (i) provision of continued medical
coverage to the Executive pursuant to this Section 9(b) during any one calendar
year shall not affect the amount of such coverage provided during a subsequent
calendar year; and (ii) provision of such

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continued medical coverage may not be exchanged or substituted for other forms
of compensation to the Executive.
Payment of the Severance Pay shall be conditioned upon the Executive’s execution
of a general release in form satisfactory to the Company and the Executive;
provided, however, that such release shall not contain post-termination
restrictions that are more onerous for the Executive than those contained in
this Agreement.
     10. Confidential Information; Noncompetition; Nonsolicitation;
Nondisparagement.
          (a) Confidential Information. Except as may be required or appropriate
in connection with his carrying out his duties under this Agreement, the
Executive shall not, without the prior written consent of the Company or as may
otherwise be required by law or any legal process, or as is necessary in
connection with any adversarial proceeding against the Company (in which case
the Executive shall cooperate with the Company in obtaining a protective order
at the Company’s expense against disclosure by a court of competent
jurisdiction), communicate, to anyone other than the Company and those
designated by the Company or on behalf of the Company in the furtherance of its
business or to perform his duties hereunder, any trade secrets, confidential
information, knowledge or data relating to the Company, its affiliates or any
businesses or investments of the Company or its affiliates, obtained by the
Executive during the Executive’s services to the Company that is not generally
available public knowledge (other than by acts by the Executive in violation of
this Agreement).
          (b) Noncompetition. During the Employment Term and (unless this
Agreement terminates pursuant to clause (v) of Section 7(a) or is terminated by
the Executive for “Good Reason” as defined in Section 7(b)(iv)) until the
eighteen (18) month anniversary of the Executive’s Date of Termination, the
Executive shall not engage in or become associated with any Competitive
Activity. For purposes of this Section 10(b), a “Competitive Activity” shall
mean any business or other endeavor that engages in any country in which the
Company has significant business operations to a significant degree in a
business that directly competes with all or any substantial part of any of the
Company’s businesses of (i) producing radio, television and other video
programs, (ii) designing, developing, licensing, promoting and selling
merchandise through catalogs, direct marketing, Internet commerce and retail
stores of the product categories in which the Company so participates using the
name, likeness, image, or voice of any Company employee (without limitation,
Company employees for the purposes of this Section 10(b) shall be deemed to
include Martha Stewart and Emeril Lagasse) to promote or market any such product
or service, (iii) the creation, publication or distribution of regular or
special issues of magazines and operation of websites, and (iv) any other
business in which the Company is engaged during the term of this Agreement (it
being understood that a media business shall not be deemed to engage in
Competitive Activity if the content produced by such media business does not
compete with the content of the such programs (in the case of clause (i)) or
magazines or websites (in the case of clause (iii)). The Executive shall be
considered to have become “associated with a Competitive Activity” if he becomes
involved as an owner, employee, officer, director, independent contractor,
agent, partner, advisor, or in any other capacity calling for the rendition of
the Executive’s personal services, with any individual, partnership, corporation
or other organization that is engaged in a Competitive Activity and his

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involvement relates to a significant extent to the Competitive Activity of such
entity; provided, however, that the Executive shall not be prohibited from
(a) owning less than two percent of any publicly traded corporation, whether or
not such corporation is in competition with the Company or (b) serving as a
director of a corporation or other entity the primary business of which is not a
Competitive Activity; and provided, further, however, that the Executive shall
not be deemed to have become associated with a Competitive Activity if the
Executive becomes chief executive officer of an organization that engages in one
or more Competitive Activities so long as (i) less than 10% of the annual
revenue of such organization is derived from Competitive Activities and (ii) the
Executive does not actively participate in the management or operation of the
part of such organization that engages in any Competitive Activity. If, at any
time, the provisions of this Section 10(b) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 10(b) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and the Executive agrees that
this Section 10(b) as so amended shall be valid and binding as though any
invalid or unenforceable provision had not been included herein.
          (c) Nonsolicitation. During the Employment Term, and for twenty-four
(24) months after the Executive’s Date of Termination, the Executive shall not,
directly or indirectly, (1) solicit for employment by other than the Company any
person (other than any personal secretary or assistant hired to work directly
for the Executive) employed by the Company or its affiliated companies as of the
Date of Termination, (2) solicit for employment by other than the Company any
person known by the Executive (after reasonable inquiry) to be employed at the
time by the Company or its affiliated companies as of the date of the
solicitation or (3) solicit any customer or other person with a business
relationship with the Company or any of its affiliated companies to terminate,
curtail or otherwise limit such business relationship.
          (d) Non-disparagement. During the Employment Term and thereafter,
(i) the Executive shall not, directly or indirectly, make or publish any
disparaging statements (whether written or oral) regarding the Company or any of
its affiliated companies or businesses, or the affiliates, directors, officers,
agents, principal stockholders or customers of any of them and (ii) neither the
Company nor any of its affiliated companies or businesses or their affiliates,
directors, or officers shall directly or indirectly, make or publish any
disparaging statements (whether written or oral) regarding the Executive.
Executive shall not author, co-author, or assist in the production or authorship
of any story, book, show, script or other work about the Company or Martha
Stewart without the Company’s prior review of such work and the Company’s
written consent as to the production and content thereof.
          (e) Injunctive Relief. In the event of a breach or threatened breach
of this Section 10, each party agrees that the non-breaching party shall be
entitled to injunctive relief in a court of appropriate jurisdiction to remedy
any such breach or threatened breach, the parties acknowledging that damages
would be inadequate and insufficient.
     11. Reimbursement of Legal Fees. If any contest or dispute shall arise
between the Company and the Executive regarding any provision of this Agreement,
the Company shall

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reimburse the Executive for all legal fees and expenses reasonably incurred by
the Executive in connection with such contest or dispute, but only if the
Executive prevails to a substantial extent with respect to the Executive’s
claims brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the resolution of
such contest or dispute (whether or not appealed) to the extent the Company
receives written evidence of such fees and expenses. In addition, the Company
shall reimburse the Executive for all reasonable legal fees and expenses
incurred in connection with the negotiation and execution of this Agreement.
     12. Indemnification.
          (a) General. The Company agrees that if the Executive is made a party
or is threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a “Proceeding”), by reason of
the fact that the Executive is or was a trustee, director or officer of the
Company or any of its affiliates or is or was serving at the request of the
Company or any of its affiliates as a trustee, director, officer, member,
employee or agent of another corporation or a partnership, joint venture,
limited liability company, trust or other enterprise, including, without
limitation, service with respect to employee benefit plans, whether or not the
basis of such Proceeding is alleged action in an official capacity as a trustee,
director, officer, member, employee or agent while serving as a trustee,
director, officer, member, employee or agent, the Executive shall be indemnified
and held harmless by the Company to the fullest extent authorized by Delaware
law, as the same exists or may hereafter be amended, against all Expenses
incurred or suffered by the Executive in connection therewith, and such
indemnification shall continue as to the Executive even if the Executive has
ceased to be a trustee, director, officer, member, employee or agent, or is no
longer employed by the Company and shall inure to the benefit of his heirs,
executors and administrators.

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          (b) Expenses. As used in this Agreement, the term “Expenses” shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements, and costs, attorneys’ fees, accountants’
fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
          (c) Enforcement. If a claim or request under this Section 12 is not
paid by the Company or on its behalf, within thirty (30) days after a written
claim or request has been received by the Company, the Executive may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim or request and if successful in whole or in part, the Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Delaware law.
          (d) Partial Indemnification. If the Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify the Executive for the portion of such
Expenses to which the Executive is entitled.
          (e) Advance of Expenses. Expenses incurred by the Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of the Executive that the Company pay such Expenses, but only in the
event that the Executive shall have delivered in writing to the Company (i) an
undertaking to reimburse the Company for Expenses with respect to which the
Executive is not entitled to indemnification and (ii) a statement of his good
faith belief that the standard of conduct necessary for indemnification by the
Company has been met.
          (f) Notice of Claim. The Executive shall give to the Company notice of
any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, the Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
the Executive’s power and at such times and places as are convenient for the
Executive.
          (g) Defense of Claim. With respect to any Proceeding as to which the
Executive notifies the Company of the commencement thereof:
                    (i) The Company will be entitled to participate therein at
its own expense;
                    (ii) Except as otherwise provided below, to the extent that
it may wish, the Company will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to the Executive, which in the Company’s sole
discretion may be regular counsel to the Company and may be counsel to other
officers and directors of the Company or any subsidiary. The Executive also
shall have the right to employ his own counsel in such action, suit or
proceeding if he reasonably concludes that failure to do so would involve a
conflict of interest between the Company and the Executive, and under such
circumstances the fees and expenses of such counsel shall be at the expense of
the Company.

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                    (iii) The Company shall not be liable to indemnify the
Executive under this Agreement for any amounts paid in settlement of any action
or claim effected without its written consent. The Company shall not settle any
action or claim in any manner which would impose any penalty that would not be
paid directly or indirectly by the Company or limitation on the Executive
without the Executive’s written consent. Neither the Company nor the Executive
will unreasonably withhold or delay their consent to any proposed settlement.
          (h) Non-Exclusivity. The right to indemnification and the payment of
expenses incurred in defending a Proceeding in advance of its final disposition
conferred in this Section 12 shall not be exclusive of any other right which the
Executive may have or hereafter may acquire under any statute or certificate of
incorporation or by-laws of the Company or any subsidiary, agreement, vote of
shareholders or disinterested directors or trustees or otherwise.
          (i) Insurance. The Executive shall be covered by the directors’ and
officers’ insurance policies maintained by the Company on the same basis as
other directors and officers of the Company.
     13. Dispute Resolution. Except as set forth in Section 10(e), any
controversy or claim arising out of or relating to this Agreement or the making,
interpretation or breach thereof shall be settled by arbitration in New York
City, New York by three arbitrators in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof, and any party to the arbitration may institute proceedings
in any court having jurisdiction for the specific performance of any such award.
The powers of the arbitrator shall include, but not be limited to, the awarding
of injunctive relief.
     14. Representations.
          (a) The Executive represents and warrants that (i) he is not subject
to any contract, arrangement, policy or understanding, or to any statute,
governmental rule or regulation, that in any way limits his ability to enter
into and fully perform his obligations under this Agreement and (ii) he is not
otherwise unable to enter into and fully perform his obligations under this
Agreement.
          (b) The Company represents and warrants to the Executive that (i) this
Agreement has been duly authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company and (ii) subject to
the accuracy of the Executive’s representation in Section 14(a), the employment
of the Executive on the terms and conditions contained in this Agreement will
not conflict with or result in a breach or violation of the terms of any
contract or other obligation or instrument to which the Company is a party or by
which it is bound or any statute, law, rule, regulation, judgment, order or
decree applicable to the Company.

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     15. Successors; Binding Agreement.
          (a) Company’s Successors. No rights or obligations of the Company
under this Agreement may be assigned or transferred, except that the Company
shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
“Company” shall include any successor to its business and/or assets (by merger,
purchase or otherwise) which executes and delivers the agreement provided for in
this Section 15 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
          (b) Executive’s Successors. No rights or obligations of the Executive
under this Agreement may be assigned or transferred by the Executive other than
his rights to payments or benefits hereunder, which may be transferred only by
will or the laws of descent and distribution. Upon the Executive’s death, this
Agreement and all rights of the Executive hereunder shall inure to the benefit
of and be enforceable by the Executive’s beneficiary or beneficiaries, personal
or legal representatives, or estate, to the extent any such person succeeds to
the Executive’s interests under this Agreement. If the Executive should die
following his Date of Termination while any amounts would still be payable to
him hereunder if he had continued to live, all such amounts unless otherwise
provided herein shall be paid in accordance with the terms of this Agreement to
such person or persons so appointed in writing by the Executive, or otherwise to
his legal representatives or estate.
     16. Notice. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered either personally or by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive, at his residence address most recently filed with the
Company; and
a copy to:
Howard Jacobs, Esq.
Katten Muchin Rosenman, LLP
575 Madison Avenue
New York, NY 10022
Tel: (212) 940-8505
Fax: (212) 894-5505
If to the Company:
Martha Stewart Living Omnimedia, Inc.
11 West 42nd Street
New York, NY 10036

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Attention: General Counsel
Tel: (212) 827-8362
Fax: (212) 827-8188;
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
     17. Mitigation. The Executive shall not be required to mitigate damages
with respect to the termination of his employment under this Agreement by
seeking other employment or otherwise, and there shall be no offset against
amounts due the Executive under this Agreement on account of subsequent
employment except as specifically provided in Section 9(b). Additionally,
amounts owed to the Executive under this Agreement shall not be offset by any
claims the Company may have against the Executive, and the Company’s obligation
to make the payments provided for in this Agreement, and otherwise to perform
its obligations hereunder, shall not be affected by any other circumstances,
including, without limitation, any counterclaim, recoupment, defense or other
right which the Company may have against the Executive or others.
     18. Modification; Waiver. No provision of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing and signed by the Executive and by a duly authorized officer of the
Company, and such waiver is set forth in writing and signed by the party to be
charged. No waiver by either party hereto at any time of any breach by the other
party hereto of any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
     19. Section 409A.
     (a) The intent of the parties is that payments and benefits under this
Agreement comply with Section 409A and, accordingly, to the maximum extent
permitted, all provisions of this Agreement shall be construed in a manner
consistent with the requirements for avoiding taxes or penalties under
Section 409A. Executive is hereby advised to seek independent advice from your
tax advisor(s) with respect to any payments or benefits under this Agreement.
Notwithstanding the foregoing, the Company does not guarantee the tax treatment
of any payments or benefits provided under this Agreement, whether pursuant to
the Code, federal, state, local or foreign tax laws and regulations.
     (b) If the Executive is deemed on the date of termination of his
“separation from service” with the Company to be a “specified employee”, each
within the meaning of Section 409A(a)(2)(B) of the Code, then with regard to any
payment or the providing of any benefit under this Agreement, and any other
payment or the provision of any other benefit that is required to be delayed in
compliance with Section 409A(a)(2)(B) of the Code, such payment or benefit shall
not be made or provided prior to the earlier of (i) the expiration of the
six-month period measured from the date of the Executive’s separation from
service or, (ii) the date of the Executive’s death if and to the extent such
six-month delay is required to comply with Section

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409A(a)(2)(B) of the Code. In such event, on or promptly after the first
business day following the six-month delay period, all payments delayed pursuant
to this Section19 (whether they would have otherwise been payable in a single
sum or in installments in the absence of such delay) shall be paid or reimbursed
to the Executive in a lump sum, and any remaining payments and benefits due
under this Agreement shall be paid or provided in accordance with the normal
payment dates specified for them herein.
     (c) If under this Agreement, an amount is to be paid in installments, each
installment shall be treated as a separate payment for purposes of Treasury
Regulations Section 1.409A-2(b)(2)(iii).
     20. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
     21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
     22. Entire Agreement. This Agreement and the Equity Agreements set forth
the entire agreement of the parties hereto in respect of the subject matter
contained herein and supersede all prior agreements, promises, covenants,
arrangements, communications, representations and warranties, whether oral or
written, by any officer, employee or representative of any party hereto in
respect of such subject matter.
     23. Withholding. All payments hereunder shall be subject to any required
withholding of federal, state and local taxes pursuant to any applicable law or
regulation.
     24. Section Headings. The section headings in this Agreement are for
convenience of reference only, and they form no part of this Agreement and shall
not affect its interpretation.
     25. Governing Law; Survival The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
York without regard to its conflicts of law principles. Each of the parties
agrees that if any dispute is not resolved by the parties pursuant to
Section 13, such dispute shall be resolved only in the courts of the State of
New York sitting in the County of New York or the United States District Court
for the Southern District of New York and the appellate courts having
jurisdiction of appeals in such courts. In that context, and without limiting
the generality of the foregoing, each of the parties irrevocably and
unconditionally (a) submits for itself in any Proceeding relating to this
Agreement, or for recognition and enforcement of any judgment in respect
thereof, to the exclusive jurisdiction of the courts of the State of New York
sitting in the County of New York, the court of the United States of America for
the Southern District of New York, and appellate courts having jurisdiction of
appeals from any of the foregoing, and agrees that all claims in respect of any
such Proceeding shall be heard and determined in such New York State court or,
to the extent permitted by law, in such federal court; (b) consents that any
such Proceeding may and shall be brought in such courts and waives any objection
that it may now or thereafter have to the venue or jurisdiction of any such
Proceeding in any such court or that such Proceeding

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was brought in an inconvenient court and agrees not to plead or claim the same;
(c) waives all right to trial by jury in any Proceeding (whether based on
contract, tort or otherwise) arising out of or relating to this Agreement, or
its performance under or the enforcement of this Agreement; (d) agrees that
service of process in any such Proceeding may be effected by mailing a copy of
such process by registered or certified mail (or any substantially similar form
of mail), postage prepaid, to such party at its address as provided in
Section 16; and (e) agrees that nothing in this Agreement shall affect the right
to effect service of process in any other manner permitted by the laws of the
State of New York. The provisions of Section 10 that are intended to survive the
Employment Term shall remain in full force and effect for their respective
periods of duration; it being understood that the provisions of Section 10(d)
shall be perpetual.
          26. Contemporaneous Execution of Letter Terminating of Consulting
Term. Contemporaneously with the execution hereof, the parties each shall
execute, and the Executive shall cause CAK Entertainment Inc. to execute, the
letter agreement attached hereto as Exhibit C.
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

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

                  /s/ Charles Koppelman       Charles A. Koppelman         

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Exhibit C
MARTHA STEWART LIVING OMNIMEDIA, INC.
11 West 42nd Street
New York, New York 10036
CAK Entertainment Inc.
37 East 64th Street, Suite 1607
New York, New York 10021
Attn: Charles A. Koppelman

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

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

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

ACCEPTED AND AGREED:
CAK ENTERTAINMENT INC.

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

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