Exhibit 10.8
SEPARATION AGREEMENT
     This Separation Agreement (the “Agreement”), dated as of June 10, 2008 (the
“Effective Date”), is entered into between Martha Stewart Living Omnimedia, Inc.
(the “Company”) and Susan Lyne (“Ms. Lyne”).
     WHEREAS, the parties are party to an Employment Agreement dated as of
November 11, 2004 (the “Employment Agreement”), pursuant to which Ms. Lyne
serves as the Company’s President and Chief Executive Officer and a member of
the Company’s Board of Directors;
     WHEREAS, Ms. Lyne has informed the Board of Directors of her intention to
resign from her positions with the Company pursuant to the terms hereof; and
     WHEREAS, the parties desire that, subject to the terms and conditions set
forth herein, (i) Ms. Lyne shall cooperate with the Company to assist in the
transition to one or more new Chief Executive Officer(s) (the “Successor”) as an
advisor to the Company until July 11, 2008 (such date, the “Resignation Date”);
(ii) Ms. Lyne shall resign as the Company’s President and Chief Executive
Officer as of the date hereof; and (iii) Ms. Lyne shall resign as a member of
the Company’s Board of Directors on the Resignation Date;
     NOW, THEREFORE, in consideration of these premises and the mutual covenants
hereinafter set forth, the parties agree as follows:
     1. (a) Ms. Lyne shall:
     (i) cooperate with the Company and the Successor in efforts to effect an
orderly transition;
     (ii) until the Resignation Date, continue to serve as a member of the
Company’s Board of Directors;
     (iii) resign as of the date hereof as the Company’s President and Chief
Executive Officer pursuant to the terms of the Employment Agreement (as amended
hereby); and
     (iv) execute and deliver the Waiver and Release of Claims in the form
attached hereto as Exhibit A (the “Waiver and Release of Claims”) on the Date of
Termination as defined in the Employment Agreement.
     (b) Subject to Section 1(c) below, the Company shall:
     (i) on the Resignation Date, pay Ms. Lyne the sum of the following amounts:
(A) the amount of her Base Salary and unused vacation time, each prorated on a
daily basis, that was accrued and unpaid as of the Resignation Date; (B) the
product obtained by multiplying her Base Salary by a fraction, (x) the numerator
of which is the number of calendar days between the Resignation Date, exclusive,
and December 31, 2008, inclusive, and (y) the denominator of which is 365; (C) a
portion of her expected 2008 bonus in the amount of $540,000; and
(D) reimbursement of reasonable attorneys fees in connection with the
negotiation and

 

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execution of this Agreement in an amount not to exceed $15,000. The parties will
cooperate to the extent required by Ms. Lyne with respect to timing of payments
hereunder for purposes of complying with Section 409A of the Internal Revenue
Code.
     (ii) on the date that the Company pays annual incentive bonuses to its
senior executives in respect of 2008 (the “2008 Incentive Bonus” for each such
senior executive), but not later than March 15, 2009, pay Ms. Lyne the amount,
if any, by which (A) the product of (x) $900,000 and (y) the percentage
multiplier applied to senior executives in the bonus pool, exceeds (B) $540,000;
and
     (iii) for purposes of clarification of Section 5 of the Nonqualified Stock
Option Agreement dated as of November 11, 2004 between the parties (the “2004
Option Agreement”), deem Ms. Lyne’s Termination of Employment (as defined in the
2004 Option Agreement) to provide that all options which have previously vested
under the 2004 Option Agreement remain exercisable until the fifth anniversary
of the Resignation Date, subject to Section 1(c) below;
     (c) Notwithstanding anything herein to the contrary, (i) Ms. Lyne shall not
be entitled to payment pursuant to Section l(b)(i)(B), and Sections l(b)(ii) and
(iii) of this Agreement if she has committed a material breach (following notice
by the Company and a reasonable opportunity to cure) of her obligations under
this Agreement or under Section 10 of the Employment Agreement (as amended
pursuant to Section 2 below, and which amended Employment Agreement shall apply
to her service to the Company as an advisor) or under the Waiver and Release of
Claims (as defined below), or if Ms. Lyne’s employment with the Company is
terminated prior to the Resignation Date by Ms. Lyne without Good Reason or by
the Company for Cause.
     2. The parties agree that the Employment Agreement shall hereby be deemed
amended as of the Effective Date as follows:
     (a) Section 9 of the Employment Agreement (Termination Payments) is deleted
in its entirety;
     (b) Section 10(b) of the Employment Agreement (Noncompetition) is deleted
in its entirety;
     (c) Section 10(c) of the Employment Agreement (Nonsolicitation) is amended
as follows: the reference therein to “12 months” is amended to read “24 months;”
and
     (d) Section 10(d) of the Employment Agreement (Nondisparagement) is amended
as follows: the reference therein to “12 months” is amended to read “all
periods.”
Without limiting the foregoing and for avoidance of doubt, Ms. Lyne shall not be
entitled to receive any payments pursuant to Section 9 of the Employment
Agreement under any circumstances, including but not limited to in the event her
employment as an advisor with the Company is terminated prior to the Resignation
Date by her for Good Reason or without Good Reason or by the Company without
Cause or for Cause. Without limiting anything in this

 

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Agreement and notwithstanding anything in the Employment Agreement to the
contrary, the Employment Term thereunder shall not be deemed to extend beyond
July 11, 2008. Except as expressly amended by Section 2 of this Agreement, all
other terms and provisions of the Employment Agreement shall remain unmodified
and in full force and effect, including without limitation Section 12 thereof
(Indemnification); provided however, that such Employment Agreement shall apply
to Ms. Lyne in her new capacity as an advisor to the Company. For avoidance of
doubt, Ms. Lyne’s employment with the Company as an advisor may be terminated
prior to the Resignation Date by her for Good Reason or without Good Reason or
by the Company without Cause or for Cause pursuant to Section 7 of the
Employment Agreement; provided that if Ms. Lyne resigns for Good Reason or is
terminated without Cause prior to the Resignation Date, Ms. Lyne shall be
entitled to the benefits set forth in Section 1(b) above.
     3. Nothing in this Agreement shall be construed to amend or modify the
terms of any agreement executed by the parties, including without limitation
(i) the 2004 Option Agreement, (ii) the Restricted Stock Award Agreement dated
as of November 11, 2004 between the parties and (iii) the Nonqualified Stock
Option Agreement dated as of March 3, 2008 between the parties (the agreements
referenced in clauses (i)-(iii) hereof, collectively, the “Equity Agreements”).
     4. Ms. Lyne acknowledges and agrees that her execution on the Date of
Termination and the enforceability of the Waiver and Release of Claims is an
integral part of, and a material inducement to the Company to enter into, this
Agreement and agrees that in the event that either (i) Ms. Lyne fails to execute
and deliver to the Company the Waiver and Release of Claims or (ii) Ms. Lyne
revokes the Waiver and Release of Claims as provided in Section 9 of the Waiver
and Release of Claims, the Company may in its sole and absolute discretion
revoke this Agreement by giving written notice to Ms. Lyne, in which event this
Agreement shall be deemed null and void ab initio and Ms. Lyne shall promptly
after receipt of such notice return to the Company any amounts paid to Ms. Lyne
pursuant to this Agreement that are in excess of the amounts to which she is
entitled to receive under the Employment Agreement. For avoidance of doubt, if
the Company revokes this Agreement pursuant to the preceding sentence the
Employment Agreement shall not have been deemed amended hereby.
     5. Ms. Lyne’s contribution to the Company’s 401(k) plan will cease on the
last day of the Employment Term. When directed by Ms. Lyne, the Company shall
pay Ms. Lyne any amounts she contributed or which are vested in such plan in
accordance with the terms of such plan. To the extent that Ms. Lyne does not
receive any portion of the Company contribution for 2008 under the 401(k) or
forfeits any prior Company contributions under the 401(k) plan as of the
Resignation Date, Ms. Lyne shall receive a separate cash payment from the
Company promptly following the Resignation Date to maker her whole for any such
lost payments. Ms. Lyne’s active participation in the Company’s benefits plans
shall end on the last day of the Employment Term and she shall retain all rights
to vested benefits payable in accordance with the terms of such plans. In
addition, until such time as Ms. Lyne is entitled to medical benefits from
another employer, but in no event for a period of longer than eighteen
(18) months from the Resignation Date, the Company shall reimburse Ms. Lyne for
the portion of COBRA benefits Ms. Lyne pays in an amount equal to the
contributions that the Company would have made on her behalf had she remained an
employee of the Company (i.e., Ms. Lyne will not be reimbursed for that portion
of the COBRA premium equal to the amount that was deducted from her payroll for
such benefits when she was an employee).

 

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     6. Promptly after the end of the Employment Term, Ms. Lyne shall submit to
the Company a reimbursement request, with supporting documentation as required
by the Company, for any expenses incurred through such date with respect to
which Ms. Lyne is entitled to be reimbursed pursuant to Section 4 of the
Employment Agreement (“Reimbursable Expenses”) and the Company shall promptly
reimburse Ms. Lyne for such expenses (or pay such expenses directly if requested
pursuant to the following sentence). Ms. Lyne shall promptly pay any expenses
that Ms. Lyne incurred with respect to which the Company could be liable (e.g.,
expenses incurred on any corporate credit card if the Company may be liable for
the payment thereof); except that Ms. Lyne may request the Company to pay
directly, in accordance with the Company’s policy and procedure, any
Reimbursable Expenses incurred on her Company American Express Corporate Card.
     7. Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to such terms in the Employment Agreement.
     8. This Agreement, the Employment Agreement (as amended hereby) and the
Waiver and Release of Claims constitute the complete and final agreement between
the parties and supersede and replace all prior or contemporaneous agreements,
negotiations, or discussions relating to the subject matter of this Agreement,
the Employment Agreement and the Waiver and Release of Claims. This Agreement
may not be amended except in a writing signed by each of the parties hereto. No
waiver of any right set forth in this Agreement shall be effective unless set
forth in a writing signed by the party against whom the waiver is to be
enforced. All provisions and portions of this Agreement are severable. If any
provision or portion of this Agreement or the application of any provision or
portion of this Agreement shall be determined to be invalid or unenforceable to
any extent or for any reason, all other provisions and portions of this
Agreement shall remain in full force and shall continue to be enforceable to the
fullest and greatest extent permitted by law. This Agreement shall be binding
upon and inure to benefit of each party’s respective successors and permitted
assigns. The word “including” shall mean “including without limitation.” As used
herein, the plural includes the singular and the singular includes the plural,
unless such a construction of such sentence would be unreasonable. Titles and
headings to Sections in this Agreement are inserted for convenience only and are
not intended to be a part of or to affect the meaning or interpretation of the
Agreement. The parties acknowledge that they are entering into this Agreement
after consulting with counsel and based upon equal bargaining power and that the
attorneys for each party have had an equal opportunity to participate in the
negotiation and preparation of this Agreement. The terms of this Agreement shall
not be interpreted in favor of or against any party on account of the
draftsperson, but shall be interpreted solely for the purpose of fairly
effectuating the intent of the parties hereto expressed herein.

 

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     9. Except for issues or matters as to which federal law is applicable, this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of New York without giving effect to the conflicts of law
principles thereof. The federal and state courts located in New York County, New
York, shall have sole and exclusive jurisdiction over any dispute arising out of
or relating to this Agreement, and each party hereby expressly consents to the
jurisdiction of such courts and waives any objection (whether on grounds of
venue, residence, domicile, inconvenience of forum or otherwise), to such a
proceeding brought before such a court.
     By signing below, the Company and Ms. Lyne acknowledge that they have
carefully read and understood the terms of this Agreement, enter into this
Agreement knowingly, voluntarily and of their own free will, understand its
terms and significance and intend to abide by its provisions, including the
Waiver and Release of Claims, without exception.
     MARTHA STEWART LIVING OMNIMEDIA, INC.

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

 

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Exhibit A
WAIVER AND RELEASE OF CLAIMS
1. General Release. In consideration of the payments and benefits to be made
pursuant to that Separation Agreement dated as of June 10, 2008 (the
“Agreement”), Susan Lyne (the “Employee”), with the intention of binding the
Employee and the Employee’s heirs, executors, administrators and assigns, does
hereby waive, release, remise, acquit and forever discharge Martha Stewart
Living Omnimedia, Inc. (the “Company”) and each of its subsidiaries and
affiliates (collectively, the “Company Affiliated Group”), the respective
present and former directors, officers, employees, representatives, agents,
attorneys, employee benefits plans (and the fiduciaries thereof) and attorneys
of each of the foregoing, and the successors, predecessors and assigns of each
of the foregoing (together with each member of the Company Affiliated Group,
each a “Company Released Party” and collectively, the “Company Released
Parties”), of and from any and all claims, actions, causes of action,
complaints, charges, demands, rights, obligations, damages, debts, sums of
money, accounts, financial obligations, suits, expenses, attorneys’ fees, liens
and liabilities of whatever kind or nature in law, equity or otherwise, whether
accrued, absolute, contingent, unliquidated or otherwise and whether now known
or unknown, suspected or unsuspected which the Employee, individually or as a
member of a class, now has, owns or holds, or has at any time heretofore had,
owned or held, or may at any time hereafter up to and including the Date of
Termination (as defined under the Employment Agreement) have, own or hold,
against any Company Released Party in any capacity (an “Action”), including,
without limitation, any and all Actions (i) arising out of or in any way
connected with the Employee’s service to any member of the Company Affiliated
Group (or the predecessors thereof) in any capacity, or the termination of such
service in any such capacity, (ii) for severance or vacation benefits, unpaid
wages, salary or incentive payments, (iii) for breach of contract, wrongful
discharge, impairment of economic opportunity, defamation, intentional
infliction of emotional harm or other tort and (iv) for any violation of
applicable state and local labor and employment laws (including, without
limitation, all laws concerning harassment, discrimination, retaliation and
other unlawful or unfair labor and employment practices), any and all Actions
based on the Employee Retirement Income Security Act of 1974 (“ERISA”), and any
and all Actions arising under the civil rights laws of any federal, state or
local jurisdiction, including, without limitation, Title VII of the Civil Rights
Act of 1964 (“Title VII”), the Americans with Disabilities Act (“ADA”),
Sections 503 and 504 of the Rehabilitation Act, the Family and Medical Leave
Act, the Age Discrimination in Employment Act (“ADEA”), the New York State
Constitution, the New York Human Rights Law, the New York Labor Law, the New
York Civil Rights Law, the New York City Human Rights Law, the New York
Retaliatory Action by Employers Law, the New York Non-Discrimination for Legal
Actions Law and the New York Wage and Hour Law or any other statute, laws,
ordinances, or regulations of any jurisdiction, excepting only:
     (a) rights of the Employee under this Waiver and Release of Claims, rights
under the Agreement, and rights under the Employment Agreement (as amended by
the Agreement);
     (b) rights of the Employee under any of the Equity Agreements (as defined
in the Agreement);
     (c) the right of the Employee to receive COBRA continuation coverage in
accordance with applicable law;
     (d) rights to indemnification the Employee may have (i) under applicable
corporate law, (ii) under the by-laws or certificate of incorporation of any
Company Released Party, (iii) the Employment Agreement; or (iv) as an insured
under any director’s and officer’s liability insurance policy now or previously
in force; and

 

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     (e) claims for benefits under any health, disability, retirement, deferred
compensation, life insurance or other, similar employee benefit plan or
arrangement of the Company Affiliated Group.
Employee represents and warrants that she is the sole and lawful owner of all
right, title and interest in and to every Action and other matters that is being
released above and that no other party has received any assignment or other
right of substitution or subrogation to any such claim or matter. Employee also
represents that she has the full power and authority to execute this Waiver and
Release of Claims. With respect to the foregoing release, Employee hereby waives
all rights or protection under section 1542 of the Civil Code of California or
any similar law of any other state, territory, country or any political division
thereof, to the extent applicable (such waiver is not intended to indicate that
the law of any jurisdiction other than New York is applicable to this Waiver and
Release of Claims). Section 1542 provides:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.
2. Release by Company. The Company does hereby release, remise, acquit and
forever discharge the Employee from any and all known Actions arising out of or
in any way connected with the Employee’s service to any member of the Company
Affiliated Group.
3. No Admissions, Complaints or Other Claims. The Employee acknowledges and
agrees that this Waiver and Release of Claims is not to be construed in any way
as an admission of any liability whatsoever by any Company Released Party, any
such liability being expressly denied. The Employee also acknowledges and agrees
that she has not, with respect to any transaction or state of facts existing
prior to the date hereof, filed any Actions against any Company Released Party
with any governmental agency, court or tribunal.
4. Application to all Forms of Relief. This Waiver and Release of Claims applies
to any relief no matter how called, including, without limitation, wages, back
pay, front pay, compensatory damages, liquidated damages, punitive damages for
pain or suffering, costs and attorney’s fees and expenses.
5. Specific Waiver. The Employee specifically acknowledges that his acceptance
of the terms of this Waiver and Release of Claims is, among other things, a
specific waiver of any and all Actions under Title VII, ADEA, ADA and any state
or local law or regulation in respect of discrimination of any kind; provided,
however, that nothing herein shall be deemed, nor does anything herein purport,
to be a waiver of any right or claim or cause of action which by law the
Employee is not permitted to waive.
6. Additional Covenants.
     (a) Return of Company Material. The Employee shall on the last day of the
Employment Term (as defined in the Employment Agreement between the Employee and
the Company dated as of November 11, 2004 (the “Employment Agreement”)) return
to the Company all Company Material (as defined below). For purposes of this
Section 6, “Company Material” means any documents, files and other property and
information of any kind belonging or relating to (i) any member of the Company
Affiliated Group, (ii) the current and former suppliers, creditors, directors,
officers, employees, agents and customers of any of them or (iii) the
businesses, products, services and operations (including, without limitation,
business, financial and accounting practices) of any of them, in each case
whether tangible or intangible (including, without limitation, credit cards,
building and office access cards, keys, computer equipment, cellular telephones,

 

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pagers, electronic devices, hardware, manuals, books, files, documents, records,
software, customer data, research, financial data and information, memoranda,
surveys, correspondence, statistics and payroll and other employee data, and any
copies, compilations, extracts, excerpts, summaries and other notes thereof or
relating thereto), excluding only information (x) that is generally available
public knowledge or (y) that relates exclusively to the Employee’s compensation
or employee benefits.
     (b) Cooperation. Following the end of the Employment Term, the Employee
shall reasonably cooperate with the Company upon reasonable request of the Board
of Directors and be reasonably available to the Company with respect to matters
arising out of the Employee’s services to the Company Affiliated Group.
     (c) Injunctive Relief. In the event of a breach or threatened breach by the
Employee of this Section 5, the Employee agrees that the Company shall be
entitled to injunctive relief in a court of appropriate jurisdiction to remedy
any such breach or threatened breach, the Employee acknowledging that damages
would be inadequate or insufficient, and that in connection with seeking such
injunctive relief the Company shall not be required to show any actual damage or
the inadequacy of any remedy at law or to post a bond or other security.
7. Voluntariness. The Employee acknowledges and agrees that she is relying
solely upon her own judgment; that the Employee is over eighteen years of age
and is legally competent to sign this Waiver and Release of Claims; that the
Employee is signing this Waiver and Release of Claims of her own free will; that
the Employee has read and understood the Waiver and Release of Claims before
signing it; and that the Employee is signing this Waiver and Release of Claims
in exchange for consideration that she believes is satisfactory and adequate.
The Employee also acknowledges and agrees that she has been informed of the
right to consult with legal counsel, has been encouraged to do so and has had
sufficient opportunity to do so. The Employee agrees that she is not relying on
any representations, whether written or oral, not set forth in this Waiver and
Release of Claims, in determining to execute this Waiver and Release of Claims.
8. Complete Agreement/Amendment/Waiver/Severability/Interpretation. The
Agreement, the Employment Agreement (as amended by the Agreement) and this
Waiver and Release of Claims constitute the complete and final agreement between
the parties and supersede and replace all prior or contemporaneous agreements,
negotiations, or discussions relating to the subject matter of this Waiver and
Release of Claims, the Agreement and the Employment Agreement. This Waiver and
Release of Claims may not be amended except in a writing signed by each of the
parties hereto. No waiver of any right set forth in this Waiver and Release of
Claims shall be effective unless set forth in a writing signed by the party
against whom the waiver is to be enforced. All provisions and portions of this
Waiver and Release of Claims are severable. If any provision or portion of this
Waiver and Release of Claims or the application of any provision or portion of
the Waiver and Release of Claims shall be determined to be invalid or
unenforceable to any extent or for any reason, all other provisions and portions
of this Waiver and Release of Claims shall remain in full force and shall
continue to be enforceable to the fullest and greatest extent permitted by law.
This Waiver and Release of Claims shall be binding upon and inure to benefit of
each party’s respective successors and permitted assigns. The word “including”
shall mean “including without limitation.” As used herein, the plural includes
the singular and the singular includes the plural, unless such a construction of
such sentence would be unreasonable. Titles and headings to Sections in this
Waiver and Release of Claims are inserted for convenience only and are not
intended to be a part of or to affect the meaning or interpretation of the
Waiver and Release of Claims. The parties acknowledge that they are entering
into this Waiver and Release of Claims after consulting with counsel and based
upon equal bargaining power and that the attorneys for each party have had an
equal opportunity to participate in the negotiation and preparation of this
Waiver and Release of Claims. The terms of this Waiver and Release of Claims
shall not be interpreted in favor of or against any party on

 

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account of the draftsperson, but shall be interpreted solely for the purpose of
fairly effectuating the intent of the parties hereto expressed herein.
     9. Acceptance and Revocability. The Employee acknowledges that she has been
given a period of twenty-one (21) days within which to consider this Waiver and
Release of Claims, unless applicable law requires a longer period, in which case
the Employee shall be advised of such longer period and such longer period shall
apply. The Employee may accept this Waiver and Release of Claims at any time
within this period of time by signing the Waiver and Release of Claims and
returning it to the Company. This Waiver and Release of Claims shall not become
effective or enforceable until seven (7) calendar days after the Employee signs
it. The Employee may revoke her acceptance of this Waiver and Release of Claims
at any time within that seven (7) calendar day period by sending written notice
to the Company to the attention of General Counsel. Such notice must be received
by the Company within the seven (7) calendar day period in order to be effective
and, if so received, would void this Waiver and Release of Claims for all
purposes.
     10. Effect of Unenforceability of Release. In the event that the Employee
or any of her heirs, successors or assigns initiates an Action in respect of any
portion of this Waiver and Release of Claims that is held to be null and void or
otherwise determined not to be enforceable by the Company for any reason
(whether as part of such Action or otherwise), then, in addition to any other
remedy available to the Company hereunder, the Employee shall promptly repay to
the Company any payments made to her pursuant to, and/or forfeit any other
compensation provided for in, the Agreement.
     10. Governing Law/Jurisdiction. Except for issues or matters as to which
federal law is applicable, this Waiver and Release of Claims shall be governed
by and construed and enforced in accordance with the laws of the State of New
York without giving effect to the conflicts of law principles thereof. The
federal and state courts located in New York County, New York, shall have sole
and exclusive jurisdiction over any dispute arising out of or relating to this
Waiver and Release of Claims, and each party hereby expressly consents to the
jurisdiction of such courts and waives any objection (whether on grounds of
venue, residence, domicile, inconvenience of forum or otherwise), to such a
proceeding brought before such a court.

                  /s/ Susan Lyne
 
             
 
 
             

Susan Lyne