Exhibit 10.5

EXECUTION VERSION

SEPARATION AGREEMENT AND GENERAL RELEASE

MARTHA STEWART LIVING OMNIMEDIA, INC. (including its current and former
subsidiaries, and affiliates; the current and former officers, directors, agents
and employees of each of the foregoing; and the successors and assigns of each
of the foregoing; which shall be collectively hereinafter referred to as “the
Company”), and Peter Hurwitz (including his successors, assigns, estate, heirs,
executors, administrators and attorneys, which shall be collectively hereinafter
referred to as “you” or “Mr. Hurwitz”) understand that Mr. Hurwitz’ employment
will be terminated effective October 1, 2011 (the “Termination Date”), and agree
to the following (the “Agreement”) in full and final resolution of all matters
between them.

 

1. On and as of the Termination Date, you will relinquish all of your positions
as an officer and/or director of the Company and your employment with the
Company will terminate. You agree to sign any documents reasonably requested by
the Company to confirm or effectuate the foregoing. From the date hereof until
the Termination Date, you will make yourself available, at such times (which may
be substantially full-time) and at such places as mutually agreeable to you and
the Company, to assist the Company in the transition of your responsibilities
and to assist the special committee of the Board of Directors of the Company as
needed.

In addition, you agree that at any time after the Termination Date, you will
cooperate with the Company and its attorneys in connection with any existing or
future litigation against the Company, whether administrative, civil, or
criminal in nature, in which and to the extent the Company deems your
cooperation necessary, and that you will make yourself reasonably available,
consistent with your other professional responsibilities, to confer with the
Company’s attorneys, representatives and other personnel as reasonably necessary
to assist the Company and/or provide truthful testimony as a witness. The
Company will reimburse you, upon proper accounting, for reasonable expenses and
disbursements incurred by you in assisting the Company pursuant to this
paragraph and will pay you a reasonable per diem for each full business day you
are required to devote to assisting the Company in connection with any such
litigation.

 

2. Subject to this Agreement becoming effective in accordance with Section 17
hereof and your compliance with the provisions of this Agreement, you will be
entitled to receive:

 

  a. Your base salary through the Termination Date, which shall be paid in
accordance with the Company’s regular payroll practices;

 

  b. Your accrued unpaid PTO, if any, with respect to the period ending on the
Termination Date, which shall be paid no later than 30 days after the
Termination Date;

 

  c. A severance payment of $680,000, which shall be paid in a lump sum no later
than 45 days after the Termination Date;

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  d. Accelerated vesting, which will become effective as of the Termination
Date, of your outstanding unvested stock options and restricted stock units
(other than any performance based awards) that would next vest if not for your
termination of employment as of October 1, 2011 (which awards are set forth on
Schedule A hereto);

 

  e. Extension of the period for exercising your vested stock options to one
year from the Termination Date (or the end of the remaining term, if shorter);
and

 

  f. Continuation of your rights to indemnification under the Company’s
certificate of incorporation, bylaws or other corporate governance document, or
any applicable insurance policy.

 

3. All benefits coverage for you (including your dependents) shall end on the
last day of the month in which the Termination Date occurs. Note that under
COBRA, you have the option to extend your health care coverage for up to
eighteen months. To the extent that you elect under COBRA to extend certain
benefits, you shall be responsible directly for the entire cost of such
benefits; provided, however, that the Company will reimburse you for the
applicable COBRA premiums for the period commencing on the Termination Date and
ending on the earlier of the nine (9) month anniversary of the Termination Date
or your eligibility for other employer-provided health care coverage. Further
information regarding COBRA and the applicable forms shall be provided under
separate cover. If you have a Flexible Spending Account, you shall have ninety
(90) days from your Termination Date to claim eligible expenses incurred on or
prior to your Termination Date; provided that you may have an opportunity to
elect under COBRA to continue to make contributions to your Flexible Spending
Account through the remainder of the calendar year in which the Termination Date
occurs, in which case (and provided you made such contributions) you would be
able claim, for a period of ninety (90) days from the end of such calendar year,
to claim eligible expenses incurred through the end of such calendar year.

 

4. Your contributions to the Company’s 401(k) plan will cease effective on the
Termination Date. Merrill Lynch is the Company’s 401(k) plan administrator.
Further information and important tax information will be provided under
separate cover.

 

5.

In consideration of the Company’s agreements set forth in this Agreement,
Mr. Hurwitz releases and forever discharges the Company from any and all causes
of action, claims, demands, damages, liabilities, liens costs and expenses
(including without limitation attorneys’ fees) (collectively, “Claims”) of every
kind and nature whatsoever, whether known or unknown, related in any way to any
acts, failures to act, omissions, facts or circumstances occurring on or prior
to the date of this Agreement, including but not limited to any and all Claims
(i) arising out of or in any way related to your employment with the Company
and/or the termination of such employment, including without limitation Claims
for additional salary, bonus, incentive, commission, benefits, expenses,
vacations, back pay or front pay; (ii) in tort, including but not limited to
wrongful or retaliatory discharge in violation of public policy, emotional
distress, slander, defamation,

 

/s/ PH

 

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  and interference with contractual relations; (iii) in contract, whether
express or implied; (iv) under any Company policy, procedure, benefit plan or
other agreement; or (v) under any and all federal, state or local laws or
ordinances, including but not limited to Title VII of the Civil Rights Act of
1964, Title IX of the Education Amendments of 1972, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, the Employee
Retirement Income Security Act (excluding those involving vested benefits in the
Company’s 401(k) plan), the Fair Labor Standards Act, the Federal Family and
Medical Leave Act, the Sarbanes-Oxley Act, 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 Wage and Hour Law, the New York Whistle Blower Law, the New
York Retaliatory Action By Employers Law, the New York Non-Discrimination for
Legal Actions Law, the New York Human Rights Law, and the New York City Human
Rights Law, for harassment or discrimination on the basis of any protected
classification, whistle blowing, or retaliation of any kind; or any other cause
of action. You represent and warrant that you are the sole and lawful owner of
all right, title and interest in and to every Claim and other matter that you
are releasing hereby and that no other party has received any assignment or
other right of substitution or subrogation to any such claim or matter. You also
represent that you have the full power and authority to execute this Agreement
on behalf of yourself and the other parties that may be included in the
definition of Mr. Hurwitz above.

Additionally, you covenant never to bring any action or proceeding against the
Company related to any claim released hereby. Notwithstanding the foregoing,
this Agreement (i) does not extend to those rights which as a matter of law
cannot be waived; (ii) does not limit any right you may have to file a charge or
complaint with any state or federal agency or to participate or cooperate in
such a matter (but you do pursuant to this Agreement waive the right to obtain
any monetary damages resulting from any action or proceeding that may be brought
by any state or federal agency); (iii) does not limit you rights to payments
under this Agreement or your rights to benefits under the Company’s benefit
plans (other than any severance plan) in accordance with the terms of such
plans; and (iv) does not limit any right you may have to indemnification under
the Company’s certificate of incorporation, bylaws or other corporate governance
document, or any applicable insurance policy.

 

6. Mr. Hurwitz affirms, by signing this Agreement, that no claims against the
Company are currently pending regarding any issues relating to or arising out of
his employment or the termination thereof, and agrees not to file any such
actions against the Company in any court, or in any other forum for his monetary
benefit, in the future, except for any action which may be necessary to enforce
the terms of this Agreement.

 

7. The Company affirms, by signing this Agreement, that the Board of Directors
of the Company is not aware of any claims that the Company may have against you
arising out of your employment with the Company.

 

8.

Mr. Hurwitz agrees that on or before the Termination Date he shall turn over to
the Company any property, material, documents and/or equipment furnished to
and/or maintained by him, in whatever form of media (including in printed form
or stored

 

/s/ PH

 

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  magnetically, optically or electronically) in connection with his employment
with the Company (including but not limited to books, laptop computer, cell
phone, personal digital assistant, identification card, product, merchandise,
catalogs, samples, employee handbook, customer records, price lists, accounts
receivable and accounts payable records, computer records and printouts,
supplier records, data analysis and any and all Company-related records on his
home computers, cell phones and personal digital assistants) unless the Company
otherwise agrees in writing to allow you to retain any such property, material,
documents and/or equipment. You shall promptly submit to the Company a
reimbursement request, with appropriate supporting documentation, for any
outstanding expenses that may be reimbursable under the Company’s regular
policy. You shall promptly pay any expenses that you incurred with respect to
which the Company could be liable (e.g., expenses incurred on the Company’s
corporate credit card); if those expenses were properly incurred in connection
with the Company’s business, you shall submit those expenses with appropriate
supporting documentation to the Company and the Company shall reimburse you
therefore.

 

9. Except as may otherwise be required by valid legal process, Mr. Hurwitz
agrees that he will not disclose or use for any purpose any trade secrets or
proprietary or confidential Company information acquired by him during his
employment. In the event that Mr. Hurwitz receives legal process concerning such
information, he shall provide reasonable advance notice to the Company of such
process and cooperate with the Company in responding to such process. In
responding to any such process, the Company may, at its option and at its
expense, designate counsel to represent Mr. Hurwitz. As used in this Agreement,
“confidential information” shall, without limitation, include:

 

  a. Financial information, such as earnings, assets, debts, prices, pricing
structure, volume of sales or other financial data;

 

  b. Supply and service information, such as the names and addresses of
suppliers of goods and services, terms of supply or service or of particular
transactions, related information about potential suppliers to the extent that
such information is not generally known to the public, and to the extent that
the combination of suppliers or use of a particular supplier though generally
known or available, yields advantages to the Company, the details of which are
not generally known;

 

  c. Marketing and pricing information, such as details about ongoing or
proposed marketing programs, agreements by or on behalf of the Company, sales
forecasts, results of marketing efforts, and information about impending
transactions;

 

  d. Personnel information, such as employees’ personal or medical histories,
compensation or other terms of employment, actual or proposed promotions,
hiring, resignations, disciplinary actions, terminations or reasons therefore,
training methods, performance information or any other employee information;

 

  e.

Non-public information acquired in your capacity as general counsel of the
Company regarding the legal or business affairs of the Company (including its

 

/s/ PH

 

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  current and former subsidiaries, and affiliates; the current and former
officers, directors, agents and employees of each of the foregoing; and the
successors and assigns of each of the foregoing), whether or not such
information is covered by the attorney/client privilege; or

 

  f. Customer information, such as any compilation of past, or existing or
prospective retail or wholesale customers’ names, addresses or backgrounds,
records of purchases and prices, proposals or agreements between customers and
the Company, status of customers accounts or credit, or related information
about actual or prospective customers.

 

10. For a one-year period from the date of this Agreement, Mr. Hurwitz agrees
not to, directly or indirectly, solicit any of the Company’s employees to leave
the employment of the Company, or induce, request or cause any Company employee
or any customer, supplier, licensee or business relation of the Company to
(i) reduce, cancel or terminate any business relationship with the Company, or
seek to do any of the foregoing or (ii) alter or attempt to alter the terms of
such business relationship in a manner adverse to the Company. Nothing in this
section limits your obligations under the Confidentiality and Non-Disclosure
Agreement you entered into with the Company as part of your employment. If, at
any time, the provisions of this paragraph shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this paragraph shall be considered divisible and shall become
and be immediately amended to only such area, duration and scope of activity as
shall be considered divisible and shall become and be immediately amended to
only such area, duration and scope of activity shall be determined to be
reasonable and enforceable by the court or other body having jurisdiction over
the matter; and you agree that this paragraph as so amended shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein. You agree that the remedies at law for any breach or threat of breach by
you of this paragraph will be inadequate, and that, in addition to any other
remedy to which the Company may be entitled at law or in equity, the Company
will be entitled to seek a temporary or permanent injunction or injunctions or
temporary restraining order or orders to prevent breaches thereof, and in
connection with seeking or obtaining any such relief, the Company shall not be
required to allege or prove any actual damage or the inadequacy of any remedy at
law and shall not be required to post any bond or other security. Your agreement
shall not be deemed to prohibit you from opposing such relief on the basis of a
dispute of facts related to any such application.

 

11. Mr. Hurwitz agrees to keep the existence and terms of this Agreement and the
circumstances leading up to such Agreement and his departure from the Company
confidential. Accordingly, Mr. Hurwitz shall not disclose such information to
any person or entity, including but not limited to current, former or future
employees of the Company. This confidentiality requirement, however, shall not
prohibit Mr. Hurwitz from: (1) disclosure to his spouse, attorney or tax
agencies; (2) disclosure as otherwise required by valid legal process (subject
to the limitations in the second and third sentences of Section 9 hereof); or
(3) disclosing the confidentiality and non-interference provisions of this
Agreement to any prospective or actual employer or anyone acting as his agent or
on his behalf.

 

/s/ PH

 

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12. Mr. Hurwitz understands that if he should violate any provision of this
Agreement, the Company may take legal action to enforce the Agreement, and may
be entitled to any and all other equitable and legal remedies which may be
available to it. Mr. Hurwitz understands and agrees that in the event of his
intentional breach of the provisions of paragraphs 8 through 11 in particular,
the Company, after affording to Mr. Hurwitz notice of such alleged breach and a
reasonable opportunity to cure (if capable of being cured), shall be entitled to
cancel its portion of the Agreement, withhold any payment or other benefits to
be provided under this Agreement and/or shall be entitled to his return of the
payments already made to Mr. Hurwitz under this Agreement. Mr. Hurwitz
acknowledges that his compliance with paragraphs 8 through 11 of this Agreement
is necessary to protect the business and goodwill of the Company, and that a
breach will result in irreparable and continuing damage to the Company, for
which money damages may not provide adequate relief. Consequently, Mr. Hurwitz
agrees that, in the event he breaches or threatens or attempts to breach this
portion of the Agreement, the Company shall be entitled to seek temporary
restraining orders and preliminary or permanent injunctions in order to prevent
the occurrence of continuation of such harm and money damages insofar as they
can be determined, and Mr. Hurwitz further agrees that in connection with any
such request for relief by the Company, the Company shall not be required to
prove that the Company’s remedies at law are inadequate and the Company shall
not be required to post any bond or other security. Mr. Hurwitz acknowledges
that these provisions are reasonably and properly required for the protection of
the Company. In any proceeding brought by either party to enforce its rights
under the Agreement, the prevailing party shall be entitled to the recovery of
reasonable attorneys’ fees.

 

13. The parties acknowledge that this Agreement is not an admission on either of
their parts. Accordingly, this Agreement may not be admissible in any forum as
an admission of any kind; provided that this sentence shall not prohibit either
party from admitting into evidence the terms of this Agreement for the sole
purpose of enforcing such terms. The parties further agree that questions
regarding the interpretation of the language of the Agreement shall not be
presumptively interpreted against the drafter as the Agreement is a product of
negotiations between the parties.

 

14. Mr. Hurwitz acknowledges and understands that:

 

  a. the above-referenced consideration is the total payment he will receive
from the Company and exceeds that to which he would otherwise be entitled should
he determine not to execute this Agreement;

 

  b. he shall no longer be considered an employee of the Company after the
Termination Date, and therefore, that the benefits of employment, other than
those specifically referenced in this Agreement, will not be available nor
accrue after such date;

 

/s/ PH

 

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  c. he is not entitled to any additional payments under the Company’s policies,
benefit or commission plans, or any expressed or implied agreement with the
Company other than as set forth in this Agreement; and

 

  d. it is in exchange for the good and sufficient consideration provided in
this Agreement that Mr. Hurwitz agrees to the provisions herein.

 

15. Mr. Hurwitz acknowledges that he has the right, and has been advised by the
Company, to consult with an attorney, and that he has done so to the extent he
desired prior to executing this Agreement. Mr. Hurwitz understands that he is
entitled to fully consider this Agreement for a period of up to 21 days. In the
event you sign the Agreement prior to the expiration of the time to consider
this Agreement, the remaining time shall be waived. Accordingly, this Agreement
shall not become effective or enforceable, nor shall any consideration be paid,
until after both parties have signed it and eight (8) days have elapsed from
Mr. Hurwitz executing it, providing Mr. Hurwitz has not revoked his Agreement in
writing before that date. Mr. Hurwitz also understands that he may revoke this
Agreement for up to seven (7) days following its execution by sending written
notice to Tanya Saffadi.

 

16. The Company will respond to requests for employment references from
prospective employers by directing such requests to the Human Resource
Department which will solely confirm Mr. Hurwitz’ dates of employment and job
title, as well as his salary upon his written authorization

 

17. Should any provision of this Agreement be held to be illegal, void or
unenforceable, such provision shall be of no force and effect. However, the
illegality or unenforceability of any such provision shall have no effect upon,
and shall not impair the enforceability of, any other provision of this
Agreement.

 

18. This Agreement contains the complete understanding between the Company and
Mr. Hurwitz related to the subject matter hereto, and supersedes all prior
agreements and understandings between the Company and Mr. Hurwitz related to
subject matter, but excluding the Confidentiality and Non-Disclosure Agreement
and the Intellectual Property and Proprietary Information Agreement previously
executed by Mr. Hurwitz, which is incorporated herein by reference). Each party
agrees that it is not relying on any representations, whether written or oral,
not set forth in this Agreement, in determining to execute this Agreement. This
Agreement may not be modified, changed or altered by any oral promise or
statement, nor shall any written modification of this Agreement be binding on
the Company until such modification is approved in writing by an officer of the
Company. In signing this Agreement, the parties are not relying on any fact,
statement or assumption not set forth in this Agreement.

 

19.

You may not assign any of your rights or obligations under this Agreement
without obtaining the express written consent of the Company. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of each
party’s respective successors and permitted assigns. This Agreement is made
under, and shall be governed by and construed under, the laws of the State of
New York, without reference to

 

/s/ PH

 

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  principles of choice of law that might call for application of the substantive
law of another jurisdiction. 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 Mr. Hurwitz indicate 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 without exception.

 

MARTHA STEWART LIVING OMNIMEDIA, INC. By:  

/s/ Charles Koppelman

   

9-13-2011

      Date

/s/ Peter Hurwitz

   

9-13-2011

Peter Hurwitz     Date

 

/s/ PH

 

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Schedule A

Equity Awards Subject to Accelerated Vesting

 

Type

   Grant Date    Vest Date    Amount to Vest      Option Price  

NQ

   3/1/2010    3/1/2012      5,000       $ 5.48   

NQ

   3/1/2011    3/1/2012      24,750       $ 3.95   

RSU

   3/1/2011    3/1/2012      12,500      

 

/s/ PH