EXHIBIT 10.46
MARTHA STEWART LIVING OMNIMEDIA, INC. DIRECTOR DEFERRAL PLAN

1.   Purpose and History of the Plan. The purpose of the Martha Stewart Living
Omnimedia, Inc. Director Deferral Plan (“Plan”) is to provide for the deferral
of Fees paid to Directors. The Plan is an unfunded nonqualified deferred
compensation plan subject to the requirements of Section 409A of the Internal
Revenue Code of 1986 (“Section 409A”).       The Directors had the right to
defer the Fees under the Company’s Non-Employee Director Stock and Option
Compensation Plan (“Non-Employee Director Plan”). The Non-Employee Director Plan
was terminated, as of May 20, 2008. On May 20, 2008, the Company adopted the
Omnibus Stock and Option Compensation Plan (the “Omnibus Plan”). This Plan is
the plan document for purposes of Section 409A under which all Fees payable to
the Directors have been deferred prior to the Effective Date and under which all
Fees will be deferred upon and following the Effective Date. To the extent that
Fees would have been payable to a Director prior to May 20, 2008, in the form of
Stock, absent a deferral election, such Stock will be attributable to the
Non-Employee Director Plan. To the extent that Fees would have been payable to a
Director on or after May 20, 2008, in the form of Stock, absent a deferral
election, such Stock will be attributable to the Omnibus Plan.   2.  
Definitions.       “Board” shall mean the Board of Directors of the Company.    
  “Annual Retainer” shall mean the annual retainer fees for a Director in
connection with his or her service as a member of the Board for any calendar
year of the Company.       “Company” shall mean Martha Stewart Living Omnimedia,
Inc.       “Director” shall mean a non-employee director of the Company.      
“Effective Date” shall mean the date on which the Plan was adopted by the Board.
      “Fair Market Value” shall mean the closing price of the Stock on the
composite transaction tape of the New York Stock Exchange on such date or, if
there are no reported sales on such date, on the last day prior to such date on
which there were sales of the Stock on the New York Stock Exchange or if the
Stock is not listed on such exchange, on any other national securities exchange
on which the Stock is listed or on the Nasdaq Stock Market. If there is no
regular public trading market for such Stock, the fair market value of the Stock
shall be determined by the Board or a committee of the Board.

 

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    “Fees” shall mean the Annual Retainer and any shares of the Stock that are
paid to a Director in lieu of the Director’s Annual Retainer pursuant to a
Mandatory Stock Grant or Share Election, each as defined below.      
“Separation Date” shall mean the date of the Director’s separation from service
with the Company (within the meaning of Section 409A) for any reason.      
“Stock” shall mean the Company’s Class A common stock.   3.   Stock in Lieu of
Retainer.

  a.   Mandatory Stock in Lieu of Annual Retainer. Each Director shall receive
in lieu of cash the number of shares of Stock equal in value to 25% of the
Annual Retainer (the “Mandatory Stock Grant”). Unless deferred pursuant to the
terms of this Plan, 25% of the shares of Stock subject to the Mandatory Stock
Grant shall be transferred on or about the first business day after the end of
each calendar quarter (but in no event later than the date that is ten
(10) business days after the end of each calendar quarter), and the number of
shares of Stock in the Mandatory Stock Grant shall be determined by dividing
(i) the product obtained by multiplying the then-existing Annual Retainer by 25%
by (ii) the Fair Market Value of a share of Stock on the last business day of
such calendar quarter.     b.   Elective Stock in Lieu of Annual Retainer. Each
Director who delivers to the Company an election to receive in addition to the
Mandatory Stock Grant a portion of his or her Annual Retainer in the form of
Stock (such additional portion, the “Share Election”), shall receive in lieu of
cash an number of shares of Stock equal in value to such cash as calculated in
accordance with Section 3c below. A Share Election can only be made in
increments of 25% of the Annual Retainer and in no event will exceed 75% of the
Annual Retainer (the “Share Election Percentage”). Unless deferred pursuant to
the terms of this Plan, the shares of Stock subject to the Share Election shall
be transferred on or about the first business day after the end of each calendar
quarter (but in no event later than the date that is ten (10) business days
after the end of each calendar quarter), and the number of shares shall be
determined by dividing (i) the product obtained by multiplying the then-existing
Share Election Percentage by 25% by (ii) the Fair Market Value of a share of
Stock on the last business day of such calendar quarter The Share Election will
remain effective until the first calendar year immediately following the year in
which a Director elects to revoke the Share Election.     c.   Number of Shares.
The shares to be issued pursuant to Section 3(a) and 3(b) shall be summed, and
only whole numbers of shares shall be delivered pursuant to this Section 3, with
any fractional shares being paid in cash.

4.   Fees. Each Director shall be given an opportunity by the Company to elect
(“Deferral Election”) to defer receipt of all or a portion of the Fees that the
Director has the opportunity to earn, including the Annual Retainer and the
Mandatory Stock Grant and Share Election, during the next succeeding calendar
years.

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  a.   To the extent permitted under Section 409A, the Deferral Election must be
in writing and shall be delivered to the Company no later than December 31 of
the calendar year (or such earlier time specified by the Company) immediately
preceding the calendar year in which the Fees to be deferred under the Plan will
be earned by the Director providing service to the Company (the “Election
Deadline”). The Election shall be irrevocable after the Election Deadline. The
Election shall specify the applicable percentage of the Fees (in the form of
cash or Stock) that such Director elects to defer in 25% increments.     b.   If
a Director elects to defer all or a portion of the Director’s Mandatory Stock
Grant or Share Election, such Director shall have the number of shares of Stock
so deferred credited to a “Share Account” maintained by the Company.     c.   If
a Director elects to defer all or a portion of the Annual Retainer, such
deferred Annual Retainer shall be credited to a “Cash Account” maintained by the
Company. Amounts credited to a Cash Account shall accrue interest (credited to
the Cash Account quarterly) at the prime rate as published in the Wall Street
Journal as in effect from time to time.     d.   For the calendar year in which
a Director is first elected to the Board, to the extent permitted under
Section 409A, the Director may elect, within thirty (30) days after the date he
or she was elected as a Director, to defer Fees payable for services to be
performed after the election.     e.   A Deferral Election, once made, shall be
irrevocable for the calendar year with respect to which it is made and shall
remain in effect for future calendar years, unless modified or revoked by a
subsequent Deferral Election that is delivered to the Company prior to
December 31 and only applicable with respect to subsequent calendar years. For
the avoidance of doubt, a Deferral Election cannot be revoked with respect to
the year in which the revocation is delivered to the Company and can only be
revoked if the revocation is delivered to the Company prior to December 31 for
the revocation to commence with the next following calendar year.     f.  
Whenever cash dividends are paid by the Company with respect to outstanding
Stock, there shall be credited to a Director’s Share Account additional shares
of Stock equal to (i) the aggregate dividend that would be payable on
outstanding shares of Stock equal to the number of shares credited to such Share
Account on the record date of the dividend, divided by (ii) the Fair Market
Value of the Stock on the last trading business day immediately preceding the
date of payment of the dividend. Any cash dividend amount that is not sufficient
to be credited to a Director’s Share Account as one whole share of Stock shall
be credited to the Director’s Cash Account.

5.   Time of Payment. 100% of the payment in respect of a Director’s Share
Account and Cash Account shall be made in a lump sum within sixty (60) days
after the Separation Date; provided, however that any payment shall be delayed
to the extent necessary to avoid the taxes, if any, imposed by Code
Section 409A(a)(2)(B)(i) and in such event, any such delayed amount to which the
Director would otherwise be entitled during the six (6) month period

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    immediately following the Separation Date will be paid on the first business
day following the expiration of such six (6) month period.   6.   Form of
Payment. Payment in settlement of a Director’s Share Account shall be made by
the Company in shares of Stock and payment in settlement of a Director’s Cash
Account shall be made by the Company in cash or by check.   7.   Administration
of the Plan. The Plan shall be administered by the Company. The Company shall
have full power, discretion and authority to interpret and administer the Plan,
except that the Company shall have no power to take any action specifically
delegated to the Board under the Plan. The Company’s interpretations and actions
shall, except as otherwise determined by the Board, be final, conclusive and
binding on all persons for all purposes.   8.   Amendment or Termination of the
Plan. The Board may, at any time, amend or terminate the Plan, and the Company
through the actions of one or more of its officers may, at any time, amend the
Plan to comply with applicable law (including, without limitation, Section 409A)
but no amendment or termination shall, without the written consent of a
Director, reduce the Director’s rights with respect to any Fees previously
deferred under the Plan; provided, however, that any such Plan termination shall
comply with Treasury Regulation Section 1.409A-3(j)(4)(ix).   9.   No Right to
Renomination. Nothing in the Plan shall confer upon any Director the right to be
nominated for reelection to the board of directors of the Company.   10.  
Payments upon Death. In the event of a Director’s death, payments in settlement
of any Share Account and/or Cash Account shall be made in a single lump sum
payment within sixty (60) days after the Director’s death to the beneficiary
designated by the Director in accordance with procedures established by the
Company. To be effective, a beneficiary designation must be signed, dated and
delivered to the Company. In the absence of a valid or effective beneficiary
designation, the Director’s surviving spouse will be his or her beneficiary or,
if there is no surviving spouse, the Director’s estate will be his or her
beneficiary.   11.   Governing Law. The Plan and all actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
New York.   12.   No Tax Representation. The Company does not make any
representation as to the tax treatment of participating in the Plan. Directors
are encouraged to consult a qualified tax advisor before participating in the
Plan. The Plan is intended to comply with the provisions of Section 409A.
However, the Company makes no representation that the benefits provided under
this Plan will comply with Section 409A (or any other law) and makes no
undertaking to prevent Section 409A from applying to the benefits provided under
this Plan or to mitigate its effects (or the effects of any other law) on any
deferrals or payments made under this Plan.

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