Document:

EX-10.6

Exhibit 10.6

MARTHA STEWART LIVING OMNIMEDIA, INC.

OMNIBUS STOCK AND OPTION COMPENSATION PLAN

NOTICE OF STOCK OPTION GRANT

Optionee:

Charles Koppelman

[address]

     You have been granted an option (the “Option”) to purchase Common Stock of Martha
Stewart Living Omnimedia, Inc. (the “Company”), as follows:

	 	 	 	 	 
	 	 	Date of Grant:

	 	October 1, 2008
	 	 	 
	 	 
	 	 	Exercise Price Per Share:

	 	$8.53
	 	 	 
	 	 
	 	 	Total Number of Shares:

	 	600,000 
	 	 	 
	 	 
	 	 	Total Exercise Price:

	 	$5,118,000
	 	 	 
	 	 
	 	 	Type of Option:

	 	___ Incentive Stock Option
	 	 	 
	 	 
	 	 	 

	 	   X    Nonstatutory Stock Option
	 	 	 
	 	 
	 	 	Expiration Date:

	 	September 30, 2015
	 	 	 
	 	 
	 	 	Vesting Schedule:

	 	So long as your Service continues, the Shares underlying this Option shall vest and become exercisable in accordance with the following schedule:
	 	 	 
	 	 
	 	 	 

	 	33% of the Total Number of Shares subject to this Option shall vest on October 1, 2009;
	 	 	 
	 	 
	 	 	 

	 	33% of the Total Number of Shares subject to this Option shall vest on October 1, 2010; and
	 	 	 
	 	 
	 	 	 

	 	34% of the Total Number of Shares subject to this Option shall vest on October 1, 2011.
	 	 	 
	 	 
	 	 	 

	 	Notwithstanding the foregoing, all Shares subject to this Option shall fully vest and become exercisable

 

 

	 	 	 	 	 
	 	 	 

	 	upon the earlier of: (1) a Change in Control (as defined below) provided you are still in Service at that time; (2)the termination of your employment by the Company without Cause; and (3) your voluntary resignation for Good Reason (as such terms are defined below).
	 	 	 
	 	 
	 	 	 

	 	For purposes of this Option, a Change in Control shall mean:
	 	 	 
	 	 
	 	 	 

	 	(1) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of 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 (as defined below) of the Company (as such term is defined below for purposes of this definition); 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 July 25, 2008;
	 	 	 
	 	 
	 	 	 

	 	(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

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	 	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
	 	 	 
	 	 
	 	 	 

	 	(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.
	 	 	 
	 	 
	 	 	 

	 	For purposes of this Option, Cause shall mean that the Board has made a good faith determination, after providing you with reasonably detailed written notice and a reasonable opportunity to be heard on the issues at a Board meeting, that any of the following has occurred:
	 	 	 
	 	 
	 	 	 

	 	(1) the willful and continued failure by you to substantially perform your material duties to the Company (other than due to mental or physical

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	 	disability) after written notice specifying such failure and the manner in which you may rectify such failure in the future;
	 	 	 
	 	 
	 	 	 

	 	(2) you have engaged in willful, intentional misconduct that has resulted in material damage to the Company’s business or reputation;
	 	 	 
	 	 
	 	 	 

	 	(3) you have been convicted of a felony; or
	 	 	 
	 	 
	 	 	 

	 	(4) you have engaged in fraud against the Company or misappropriated Company property (other than incidental property).
	 	 	 
	 	 
	 	 	 

	 	For purposes of this definition, no act or failure by you shall be considered “willful” if such act is done by you in the good faith belief that such act is or was in the best interests of the Company or one or more of its
businesses. Nothing in this definition shall be construed to prevent the Executive from contesting the Board’s determination that Cause exists.
	 	 	 
	 	 
	 	 	 

	 	For purposes of this Option, Good Reason shall mean the occurrence, without your 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, your positions, titles, duties or responsibilities from, or the assignment to you of duties inconsistent with, those set forth in your
employment agreement dated as of September 2008 (the “Employment Agreement”) (or as subsequently amended in accordance with such agreement);
	 	 	 
	 	 
	 	 	 

	 	(2) a material breach of your Employment Agreement by the Company that continues after the reasonable notice and opportunity to cure;
	 	 	 
	 	 
	 	 	 

	 	(3) the Company’s requiring you to be based at a location in excess of 35 miles from the location of your principal job location or office specified in your Employment Agreement, except for required travel on the Company’s
business to an extent substantially consistent with your position; or

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	 	(4) a reduction by the Company of your base salary or target annual bonus percentage as in effect on the effective date of your Employment Agreement, or as the same shall be increased from time to time.
	 	 	 
	 	 
	 	 	 

	 	Your right to terminate employment in a termination for Good Reason shall not be affected by your incapacity due to physical or mental illness. Subject to the requirements set forth above, your continued employment
shall not constitute a consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.
	 	 	 
	 	 
	Termination
	 	Period:

	 	You may exercise this Option for 3 months after termination of your Service except as set forth in Section 4 of the Stock Option Agreement and in no event may you
exercise this Option after the Expiration Date. Notwithstanding the foregoing, in the event of a Change in Control (defined above) during your Service, you may exercise this Option at
any time until the date that is five (5) years after the consummation of the Change in Control or, if later, the expiration of the post-termination exercise period, as set forth in the
first sentence above; provided that in no event may you exercise this Option after the Expiration Date. You are responsible for keeping track of these exercise periods following a
termination of your Service for any reason. The Company will not provide further notice of such periods.

     Unless otherwise defined in this Notice of Stock Option Grant, the terms used herein shall
have the meanings assigned to them in the Plan.

     By your signature and the signature of the Company’s representative below, you and the Company
agree that this Option is granted under and governed by the terms and conditions of the Martha
Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan and the Stock Option
Agreement, all of which are attached to, and made a part of, this document.

     In addition, you agree and acknowledge that your rights to any Shares underlying this Option
will be earned only as you provide Service over time, that this Option is not being granted to you
as consideration for services you rendered to the Company (or any Parent, Subsidiary, or Affiliate)
prior to your Date of Grant, and that nothing in this Notice of Stock Option Grant or the attached
documents confers upon you any right to continue your employment or consulting relationship with
the Company (or any Parent,

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Subsidiary, or Affiliate) for any period of time, nor does it interfere in any way with your
right or the Company’s (or any Parent’s, Subsidiary’s, or Affiliate’s) right to terminate that
relationship at any time, for any reason, with or without cause.

     This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument.

	 	 	 	 	 	 	 
	OPTIONEE:

	 	 	 	MARTHA STEWART LIVING

OMNIMEDIA, INC.	 	 
	 
	 	 	 	 	 	 
	/s/ Charles Koppelman

	 	 	 	By: /s/ Howard Hochhauser	 	 
	 

Signature

	 	 
	 	 

	 	 
	 
	 	 	 	 	 	 
	Charles Koppelman

	 	 	 	Title:  Chief Financial Officer	 	 
	 

Print Name

	 	 	 	 

	 	 

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MARTHA STEWART LIVING OMNIMEDIA, INC.

OMNIBUS STOCK AND OPTION COMPENSATION PLAN

STOCK OPTION AGREEMENT

     1. Grant of Option. Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the
“Company”), hereby grants to the Optionee named in the Notice of Stock Option Grant
attached to this Stock Option Agreement (the “Optionee”), an option (the “Option”)
to purchase the total number of shares of Common Stock (the “Shares”) set forth in the Notice of
Stock Option Grant (the “Notice”), at the exercise price per Share set forth in the Notice
(the “Exercise Price”) subject to the terms, definitions and provisions of the Company’s
Omnibus Stock and Option Compensation Plan (the “Plan”), which is incorporated in this
Stock Option Agreement (the “Agreement”) by reference. Unless otherwise defined in this
Agreement, the terms used in this Agreement shall have the meanings defined in the Plan.

     This Option is intended to be an Incentive Stock Option as defined in Section 422 of the Code
only to the extent so designated in the Notice, and to the extent it is not so designated or to the
extent this Option does not qualify as an Incentive Stock Option, it is intended to be a
Nonstatutory Stock Option. Notwithstanding the foregoing, even if designated as an Incentive Stock
Option, if the Shares subject to this Option (and all other incentive stock options granted to
Optionee by the Company or any Parent or Subsidiary, including under other plans of the Company)
that first become exercisable in any calendar year have an aggregate fair market value (determined
for each Share as of the date of grant of the option covering such Share) in excess of $100,000,
the Shares in excess of $100,000 shall be treated as subject to a Nonstatutory Stock Option in
accordance with applicable law.

     2. Exercise of Option.

          (a) Right to Exercise. This Option shall be exercisable during its term in accordance
with the Vesting Schedule, Termination Period and Expiration Date set forth in the Notice, Section
4 below and with the applicable provisions of the Plan. This Option may not be exercised for a
fraction of a share.

          (b) Method of Exercise.

               (i) This Option shall be exercisable by execution and delivery of the Notice of Exercise
attached hereto as Exhibit A or of any other form of written notice approved for such
purpose by the Company which shall state Optionee’s election to exercise this Option, the number of
Shares in respect of which this Option is being exercised, and such other representations and
agreements as to the holder’s investment intent with respect to such Shares as may be required by
the Company pursuant to the provisions of the Plan. Such written notice shall be signed by
Optionee and shall be delivered to the Company by such means as are determined by the Committee in
its

 

 

discretion to constitute adequate delivery. The written notice shall be accompanied by
payment of the aggregate Exercise Price for the purchased Shares.

               (ii) As a condition to the exercise of this Option and as further set forth in Section 13 of
the Plan, Optionee agrees to make adequate provision for federal, state or other tax or withholding
obligations, if any, which arise upon the grant, vesting or exercise of this Option, or disposition
of Shares, whether by withholding, direct payment to the Company, or otherwise.

               (iii) The Company is not obligated, and will have no liability for failure, to issue or
deliver any Shares upon exercise of this Option unless such issuance or delivery would comply with
all applicable laws, rules and regulations, with such compliance determined by the Company in
consultation with its legal counsel. This Option may not be exercised until such time as the Plan
has been approved by the Company’s stockholders, or if the issuance of such Shares upon such
exercise or the method of payment of consideration for such Shares would constitute a violation of
any applicable laws, rules or regulations, including any applicable U.S. federal or state
securities laws or any other law or regulation, including any rule under Part 221 of Title 12 of
the Code of Federal Regulations as promulgated by the Federal Reserve Board. As a condition to the
exercise of this Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by applicable laws, rules or regulations. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred to Optionee on the
date on which this Option is exercised with respect to such Shares.

               (iv) Subject to compliance with all applicable laws, rules and regulations, this Option shall
be deemed to be exercised upon receipt by the Company of the appropriate written notice of exercise
accompanied by the Exercise Price and the satisfaction of any applicable withholding obligations.

     3. Method of Payment. Payment of the Exercise Price shall be by any of the following,
or a combination of the following, at the election of Optionee: (a) cash, (b) check, (c) Cashless
Exercise, or (d) surrender of previously owned Shares.

     4. Termination of Relationship. Following the date of termination of Optionee’s
Service for any reason (the “Termination Date”), Optionee may exercise this Option only as
set forth in the Notice and this Section 4. If Optionee does not exercise this Option within the
Termination Period set forth in the Notice or the termination periods set forth below, this Option
shall terminate in its entirety. In no event may this Option be exercised after the Expiration
Date set forth in the Notice. In the event of termination of Optionee’s Service other than as a
result of Optionee’s Disability, death or for Cause, Optionee may, to the extent Optionee is vested
in the Option Shares at the Termination Date, exercise this Option during the Termination Period
set forth in the Notice. Subject to the consummation of a Change in Control, as described in the
Notice, in the event of any other termination, Optionee may exercise this Option only as described
below:

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          (a) Termination upon Disability of Optionee. In the event of termination of
Optionee’s Service as a result of Optionee’s Disability, Optionee may, but only within 12 months
from the Termination Date, exercise this Option to the extent Optionee is vested in the Option
Shares.

          (b) Death of Optionee. In the event of the death of Optionee while in Service or
within 3 months following the termination of Optionee’s Service, this Option may be exercised at
any time within 12 months following the date of death by any beneficiary properly designated by the
Optionee or, if no such beneficiary exists, by the Optionee’s estate or by a person who acquired
the right to exercise this Option by bequest or inheritance, but only to the extent Optionee is
vested in the Option Shares.

          (c) Termination for Cause. In the event Optionee’s Service is terminated for Cause,
this Option shall terminate immediately upon such termination for Cause. In the event Optionee’s
employment or consulting relationship with the Company is suspended pending investigation of
whether such relationship shall be terminated for Cause, all Optionee’s rights under this Option,
including the right to exercise this Option, shall be suspended during the investigation period.

     5. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution. The designation of a beneficiary
does not constitute a transfer. This Option may be exercised during the lifetime of Optionee only
by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.

     6. Authorization to Release Necessary Personal Information.

          (a) Optionee hereby authorizes and directs Optionee’s employer to collect, use and transfer in
electronic or other form, any personal information (the “Data”) regarding Optionee’s
employment, the nature and amount of Optionee’s compensation and the facts and conditions of
Optionee’s participation in the Plan (including, but not limited to, Optionee’s name, home address,
telephone number, date of birth, social security number (or any other social or national
identification number), salary, nationality, job title, number of shares held and the details of
all Awards or any other entitlement to Shares awarded, cancelled, exercised, vested, unvested or
outstanding) for the purpose of implementing, administering and managing Optionee’s participation
in the Plan. Optionee understands that the Data may be transferred to the Company or any of its
Parent, Subsidiaries, or Affiliates, or to any third parties assisting in the implementation,
administration and management of the Plan, including any requisite transfer to a broker or other
third party assisting with the administration of this Option under the Plan or with whom shares
acquired pursuant to this Option or cash from the sale of shares underlying this Option may be
deposited. Optionee acknowledges that recipients of the Data may be located in different countries,
and those countries may have data privacy laws and protections different from those in the country
of Optionee’s residence. Furthermore, Optionee acknowledges and understand that the transfer of the

3

 

Data to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties is
necessary for Optionee’s participation in the Plan.

          (b) Optionee may at any time withdraw the consents herein by contacting Optionee’s local human
resources representative in writing. Optionee further acknowledges that withdrawal of consent may
affect Optionee’s ability to exercise or realize benefits from this Option, and Optionee’s ability
to participate in the Plan.

     7. No Entitlement or Claims for Compensation.

          (a) Optionee’s rights, if any, in respect of or in connection with this Option or any other
Award is derived solely from the discretionary decision of the Company to permit Optionee to
participate in the Plan and to benefit from a discretionary Award. By accepting this Option,
Optionee expressly acknowledges that there is no obligation on the part of the Company to continue
the Plan and/or grant any additional Awards to Optionee. This Option is not intended to be
compensation of a continuing or recurring nature, or part of Optionee’s normal or expected
compensation, and in no way represents any portion of a Optionee’s salary, compensation, or other
remuneration for purposes of pension benefits, severance, redundancy, resignation or any other
purpose.

          (b) Neither the Plan nor this Option or any other Award granted under the Plan shall be deemed
to give Optionee a right to become or remain an Employee, Consultant or director of the Company, a
Parent, a Subsidiary, or an Affiliate. The Company and its Parents and Subsidiaries and Affiliates
reserve the right to terminate Optionee’s Service at any time, with or without cause, and for any
reason, subject to applicable laws, the Company’s Articles of Incorporation and Bylaws and a
written employment agreement (if any), and Optionee shall be deemed irrevocably to have waived any
claim to damages or specific performance for breach of contract or dismissal, compensation for loss
of office, tort or otherwise with respect to the Plan, this Option or any outstanding Award that is
forfeited and/or is terminated by its terms or to any future Award.

          (c) Optionee acknowledges that he or she is voluntarily participating in the Plan.

          (d) The future value of the underlying Shares is unknown and cannot be predicted with
certainty. If the underlying Shares do not increase in value, the Option will have no value. If
Optionee exercises the Option and obtains Shares, the value of the Shares acquired upon exercise
may increase or decrease in value, even below the Exercise Price.

     8. Electronic Delivery. The Company may, in its sole discretion, decide to deliver
any documents related to the Option granted under and participation in the Plan or future options
that may be granted under the Plan by electronic means or to request Optionee’s consent to
participate in the Plan by electronic means. Optionee hereby consents to receive such documents by
electronic delivery and, if requested, to agree to

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participate in the Plan through an on-line or electronic system established and maintained by
the Company or a third party designated by the Company.

     9. Translation. If this Agreement or any other document related to the Plan is
translated into a language other then English and if the translated version is different from the
English version, the English version will take precedence.

     10. Effect of Agreement. Optionee acknowledges receipt of a copy of the Plan and
represents that he or she is familiar with the terms and provisions thereof (and has had an
opportunity to consult counsel regarding the Option terms), and hereby accepts this Option and
agrees to be bound by its contractual terms as set forth herein and in the Plan. Optionee hereby
agrees to accept as binding, conclusive and final all decisions and interpretations of the
Committee regarding any questions relating to this Option. In the event of a conflict between the
terms and provisions of the Plan and the terms and provisions of the Notice and this Agreement, the
Plan terms and provisions shall prevail.

     11. Miscellaneous.

          (a) Governing Law. This Agreement and all acts and transactions pursuant hereto and
the rights and obligations of the parties hereto shall be governed, construed and interpreted in
accordance with the laws of the State of Delaware, without giving effect to principles of conflicts
of law.

          (b) Entire Agreement; Enforcement of Rights. This Agreement, together with the Notice
and the Plan, sets forth the entire agreement and understanding of the parties relating to the
subject matter herein and therein and merges all prior discussions between the parties. Except as
contemplated under the Plan, no modification of or amendment to this Agreement, nor any waiver of
any rights under this Agreement, shall be effective unless in writing signed or, if permitted by
the Company, electronically accepted, by the parties to this Agreement. The failure by either
party to enforce any rights under this Agreement shall not be construed as a waiver of any rights
of such party.

          (c) Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of
this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of
this Agreement shall be enforceable in accordance with its terms.

          (d) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or 48 hours
after being deposited in the mail, as certified or registered mail, with postage prepaid, and
addressed to the Company at its principal corporate offices and to Optionee at the address
maintained for Optionee in the Company’s records.

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          (e) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights and
obligations of Optionee under this Agreement may not be assigned without the prior written consent
of the Company.

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EXHIBIT A

NOTICE OF EXERCISE

	 	 	 
	To:

	 	Martha Stewart Living Omnimedia, Inc.
	Attn:

	 	Administrator of the Omnibus Stock and Option Compensation Plan
	Subject:

	 	Notice of Intention to Exercise Stock Option

     This Notice of Exercise constitutes official notice that the undersigned intends to exercise
Optionee’s option to purchase                                 shares of Martha Stewart Living Omnimedia, Inc. Common
Stock, under and pursuant to the Company’s Omnibus Stock and Option Compensation Plan (the “Plan”)
and the Notice of Stock Option Grant and Stock Option Agreement (the “Agreement”) dated
                    , as follows:

	 	 	 	 	 	 	 
	 

	 	Number of Shares:
	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Exercise Price per Share:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Total Exercise Price:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Method of Payment
of Exercise Price:	 	 	 	 
	 

	 	 	 	 

	 	 
	 	 	The shares should be registered in the name (s) of:	 	 

                                                             and

                                                            .1

     By signing below, I hereby agree to be bound by all of the terms and conditions set forth in
the Plan and the Agreement. If applicable, proof of my right to purchase the shares pursuant to
the Plan and the Agreement is enclosed.2

Dated:                                        

	 	 	 
	 

	 	 
	(Signature)

	 	(Signature)3
	 
	 	 
	 

	 	 
	(Please Print Name)

	 	(Please Print Name)
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	(Full Address)

	 	(Full Address)

 

			
	1	 	If more than one name is listed, please specify whether
the owners will hold the shares as community property or as joint tenants with
the right of survivorship.
	 
	2	 	Applicable if someone other than the Optionee (e.g., a
death beneficiary) is exercising the stock option.
	 
	3	 	Each person in whose name shares are to be registered
must sign this Notice of Exercise.EX-10.7

Exhibit 10.7

MARTHA STEWART LIVING OMNIMEDIA, INC.

OMNIBUS STOCK AND OPTION COMPENSATION PLAN

RESTRICTED STOCK GRANT AGREEMENT

     This Restricted Stock Grant Agreement (the “Agreement”) is made and entered into as of
October 1, 2008 by and between Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the
“Company”), and Wenda Harris Millard pursuant to the Martha Stewart Living Omnimedia, Inc.
Omnibus Stock and Option Compensation Plan (the “Plan”). To the extent any capitalized
terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the
Plan, which is attached to, and made a part of, this Agreement. In the event of a conflict between
the terms and provisions of the Plan and the terms and provisions of this Agreement, the Plan terms
and provisions shall prevail.

     In consideration of the mutual agreements herein contained and intending to be legally bound
hereby, the parties agree as follows:

     1. Restricted Shares. Pursuant to the Plan, the Company hereby transfers to you, and
you hereby accept from the Company, a Stock Grant consisting of 50,000 Shares (the “Restricted
Shares”), on the terms and conditions set forth herein and in the Plan.

     2. Vesting of Restricted Shares. So long as your Service continues, the Restricted
Shares shall vest in accordance with the following schedule: 33% of the total number of Restricted
Shares shall vest on October 1, 2009; 33% of the total number of Restricted Shares shall vest on
October 1, 2010; and 34% of the total number of Restricted Shares shall vest on October 1, 2011.

Notwithstanding the foregoing, upon the earlier of: (a) a Change in Control (defined below) during
your Service; (b) the Company’s termination of your employment without Cause (defined below); or
(c) your resignation for Good Reason (defined below), all Restricted Shares shall fully vest
immediately.

For purposes of this Agreement, a Change in Control shall mean:

     (a) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of 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 (as defined below) of the Company (as such term is defined below for purposes of
this definition); provided that this subsection (a) 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 June 11,
2008;

     (b) 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);

     (c) 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;

     (d) 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

     (e) 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.

For purposes of this Agreement, Cause shall mean that the Board has made a good faith
determination, after providing you with reasonably detailed written notice and a reasonable
opportunity to be heard on the issues at a Board meeting, that any of the following has occurred:

     (a) the willful and continued failure by you to substantially perform your material duties to
the Company (other than due to mental or physical disability) after written notice specifying such
failure and the manner in which you may rectify such failure in the future;

     (b) you have engaged in willful, intentional misconduct that has resulted in material damage
to the Company’s business or reputation;

     (c) you have been convicted of a felony; or

2

 

     (d) you have engaged in fraud against the Company or misappropriated Company property (other
than incidental property).

For purposes of this definition, no act or failure by you shall be considered “willful” if such act
is done by you in the good faith belief that such act is or was in the best interests of the
Company or one or more of its businesses. Nothing in this definition shall be construed to prevent
the Executive from contesting the Board’s determination that Cause exists.

For purposes of this Agreement, Good Reason shall mean the occurrence, without your express prior
written consent, of any one or more of the following:

     (a) a material diminution of, or material reduction or material adverse alteration in, your
title (except as may occur in response to a comment from a regulatory or governmental agency),
reporting status or authority to exercise Pre-Effective Date Duties, and Responsibilities (defined
below), or the assignment to you of duties inconsistent with those set forth in your employment
agreement dated as of September, 2008 (the “Employment Agreement”) (or as subsequently amended in
accordance with such agreement) resulting in a materially adverse change to your duties and
responsibilities; provided, however, that the following shall not constitute Good Reason: the
assignment to, or exercise by, the Chairman of the Board, the Company’s other Co-CEO and/or any
other officer(s) appointed by the Chairman of the Board or the Board, as the case may be, of (and
any related diminution, reduction, alteration or elimination of your authority to exercise) any
Post-Effective Date Duties and Responsibilities (defined below), regardless of whether you have
exercised any such Post-Effective Date Duties and Responsibilities; and provided further that any
diminution, reduction or adverse alteration in your authority to exercise any Pre-Effective Date
Duties and Responsibilities (the “Reduced Pre-Effective Date Duties and Responsibilities”) shall be
disregarded for the purposes of this subsection to the extent that you have authority to exercise
any Post-Effective Date Duties and Responsibilities that are of approximately comparable importance
to the Company as the Reduced Pre-Effective Date Duties and Responsibilities;

     (b) a material diminution, material reduction or materially adverse alteration to your
Post-Effective Date Duties and Responsibilities as exercised by you in the ordinary course prior to
the effective date of your Employment Agreement;

     (c) a material breach of your Employment Agreement by the Company that continues after the
reasonable notice and opportunity to cure;

     (d) the Company’s requiring you to be based at a location in excess of 35 miles from the
location of your principal job location or office specified in your Employment Agreement, except
for required travel on the Company’s business to an extent substantially consistent with your
position; or

     (e) a reduction by the Company of your base salary as in effect on the effective date of your
Employment Agreement, or as the same shall be increased from time to time.

“Pre-Effective Date Duties and Responsibilities” shall mean duties and responsibilities exercised
by you in your capacity as President — Media of the Company prior to the effective date of your
Employment Agreement with respect to assets owned by the Company prior to such effective

3

 

date. “Post-Effective Date Duties and Responsibilities” shall mean duties and responsibilities
other than Pre-Effective Date Duties and Responsibilities, and notwithstanding anything to the
contrary may include, without limitation, any duties and responsibilities related to any assets or
operations that were or may be acquired by the Company on or after the effective date of your
Employment Agreement at the discretion of the Board. Your right to terminate employment in a
termination for Good Reason shall not be affected by your incapacity due to physical or mental
illness. Subject to the requirements set forth above, your continued employment shall not
constitute a consent to, or a waiver of rights with respect to, any circumstance constituting Good
Reason hereunder.

     3. Termination of Service. Except as set forth in Section 2 above, in the event of
the termination of your Service for any reason, all unvested Restricted Shares shall be immediately
forfeited without consideration. For purposes of facilitating the enforcement of the provisions of
this Section 3, you agree that the Company may issue stop-transfer instructions on the Restricted
Shares to the Company’s transfer agent, may require that Restricted Shares be held by a broker
designated by the Company, or may otherwise hold the Restricted Shares in escrow, until the
Restricted Shares have vested and you have satisfied all applicable obligations with respect to the
Restricted Shares, including any applicable tax obligations set forth in Section 5 below. Any new,
substituted or additional securities or other property which is issued or distributed with respect
to the unvested Restricted Shares shall be subject to the same terms and conditions as are
applicable to the unvested Restricted Shares under this Agreement and the Plan.

     4. Election to Recognize Income in the Year of Grant. Under Section 83 of the Code,
the Fair Market Value of the Restricted Shares on the date the Restricted Shares vest will be
taxable as ordinary income at that time. You understand and acknowledge that you may elect to be
taxed at the time the Restricted Shares are acquired in an amount equal to the Fair Market Value of
the Restricted Shares at that time, rather than the date the Restricted Shares vest, by filing an
election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days
after the date of this Agreement. YOU ACKNOWLEDGE AND AGREE THAT IT IS YOUR SOLE RESPONSIBILITY,
AND NOT THE COMPANY’S RESPONSIBILITY, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF
YOU REQUEST THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON YOUR BEHALF.

     5. Taxes. You agree to make arrangements satisfactory to the Company for the
satisfaction of any applicable tax obligations that arise in connection with the Restricted Shares
which, at the sole discretion of the Committee, may include (i) having the Company withhold Shares
from the Restricted Shares held in escrow, or (ii) tendering Shares to the Company, in either case,
equal in value to the amount necessary to satisfy any such tax obligation. The Company shall not
be required to release the Restricted Shares from the stop-transfer instructions or escrow unless
and until such obligations are satisfied.

     6. Tax Advice. You represent, warrant, and acknowledge that the Company has made no
warranties or representations to you with respect to the income tax consequences of the
transactions contemplated by this Agreement, and you are in no manner relying on the Company or the
Company’s representatives for an assessment of such tax consequences. YOU UNDERSTAND THAT THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO

4

 

CHANGE. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING ANY STOCK GRANT AWARD. NOTHING
STATED HEREIN IS INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING
TAXPAYER PENALTIES.

     7. Non-Transferability of Restricted Shares. Restricted Shares which have not vested
pursuant to Section 2 above shall not be anticipated, assigned, attached, garnished, optioned,
transferred, or made subject to any creditor’s process, whether voluntarily or involuntarily or by
the operation of law. Notwithstanding the foregoing, you may at any time designate a beneficiary
or enter into a will or any similar arrangement which, in each case, provides for the transfer of
vested Restricted Shares upon your death.

     8. Restriction on Transfer. Regardless of whether the transfer or issuance of the
Restricted Shares has been registered under the Securities Act or has been registered or qualified
under the securities laws of any state, the Company may impose additional restrictions upon the
sale, pledge, or other transfer of the Restricted Shares (including the placement of appropriate
legends on stock certificates, if any, and the issuance of stop-transfer instructions to the
Company’s transfer agent) if, in the judgment of the Company and the Company’s counsel, such
restrictions are necessary in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state, or any other law.

     9. Stock Certificate Restrictive Legends. Stock certificates evidencing the
Restricted Shares, if any, may bear such restrictive legends as the Company and the Company’s
counsel deem necessary under applicable law or pursuant to this Agreement.

     10. Representations, Warranties, Covenants, and Acknowledgments. You hereby agree
that in the event the Company and the Company’s counsel deem it necessary or advisable in the
exercise of their discretion, the transfer or issuance of the Restricted Shares may be conditioned
upon you making certain representations, warranties, and acknowledgments relating to compliance
with applicable securities laws.

     11. Voting and Other Rights. Subject to the terms of this Agreement, you shall have
all the rights and privileges of a stockholder of the Company while the Restricted Shares are held
in escrow, including the right to vote and to receive dividends (if any).

     12. Authorization to Release Necessary Personal Information. You hereby authorize and
direct your employer to collect, use and transfer in electronic or other form, any personal
information (the “Data”) regarding your employment, the nature and amount of your
compensation and the facts and conditions of your participation in the Plan (including, but not
limited to, your name, home address, telephone number, date of birth, social security number (or
any other social or national identification number), salary, nationality, job title, number of
shares held and the details of all Awards or any other entitlement to shares awarded, cancelled,
exercised, vested, unvested or outstanding) for the purpose of implementing, administering and
managing your participation in the Plan. You understand that the Data may be transferred to the
Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties assisting in the
implementation, administration and management of the Plan, including any requisite transfer to a
broker or other third party assisting with the administration of this Stock Grant under the Plan or

5

 

with whom shares acquired pursuant to this Stock Grant or cash from the sale of such shares
may be deposited. You acknowledge that recipients of the Data may be located in different
countries, and those countries may have data privacy laws and protections different from those in
the country of your residence. Furthermore, you acknowledge and understand that the transfer of the
Data to the Company or any of its Parent, Subsidiaries, or Affiliates, or to any third parties is
necessary for your participation in the Plan. You may at any time withdraw the consents herein by
contacting your local human resources representative in writing. You further acknowledge that
withdrawal of consent may affect your ability to realize benefits from this Stock Grant, and your
ability to participate in the Plan.

     13. No Entitlement or Claims for Compensation.

          (a) Your rights, if any, in respect of or in connection with this Stock Grant or any other
Award is derived solely from the discretionary decision of the Company to permit you to participate
in the Plan and to benefit from a discretionary Award. By accepting this Stock Grant, you
expressly acknowledge that there is no obligation on the part of the Company to continue the Plan
and/or grant any additional Awards to you. This Stock Grant is not intended to be compensation of
a continuing or recurring nature, or part of your normal or expected compensation, and in no way
represents any portion of a your salary, compensation, or other remuneration for purposes of
pension benefits, severance, redundancy, resignation or any other purpose.

          (b) Neither the Plan nor this Stock Grant or any other Award granted under the Plan shall be
deemed to give you a right to become or remain an Employee, Consultant or director of the Company,
a Parent, a Subsidiary, or an Affiliate. The Company and its Parents and Subsidiaries and
Affiliates reserve the right to terminate your Service at any time, with or without cause, and for
any reason, subject to applicable laws, the Company’s Articles of Incorporation and Bylaws and a
written employment agreement (if any), and you shall be deemed irrevocably to have waived any claim
to damages or specific performance for breach of contract or dismissal, compensation for loss of
office, tort or otherwise with respect to the Plan, this Stock Grant or any outstanding Award that
is forfeited and/or is terminated by its terms or to any future Award.

     14. Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight
(48) hours after being deposited in the mail, as certified or registered mail, with postage
prepaid, and addressed to the Company at its principal corporate offices and to you at the address
maintained for you in the Company’s records.

     15. Entire Agreement; Enforcement of Rights. This Agreement, together with the Plan,
sets forth the entire agreement and understanding of the parties relating to the subject matter
herein and therein and merges all prior discussions between the parties. Except as contemplated
under the Plan, no modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties to this Agreement.
The failure by either party to enforce any rights under this Agreement shall not be construed as a
waiver of any rights of such party.

6

 

     16. Governing Law. This Agreement and all acts and transactions pursuant hereto and
the rights and obligations of the parties hereto shall be governed, construed, and interpreted in
accordance with the laws of the State of Delaware, without giving effect to principles of conflicts
of law.

     17. Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of
this Agreement shall be interpreted as if such provision were so excluded, and (iii) the balance of
this Agreement shall be enforceable in accordance with its terms.

     18. Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of and be enforceable by the Company’s successors and assigns. Your rights and
obligations under this Agreement may not be assigned without the prior written consent of the
Company.

     19. Electronic Delivery. The Company may, in its sole discretion, decide to deliver
any documents related to this Stock Grant under the Plan and participation in the Plan or future
Awards that may be granted under the Plan by electronic means or to request your consent to
participate in the Plan by electronic means. You hereby consent to receive such documents by
electronic delivery and, if requested, to agree to participate in the Plan through an on-line or
electronic system established and maintained by the Company or a third party designated by the
Company.

     20. Language. If you have received this Agreement or any other document related to
the Plan translated into a language other than English and if the translated version is different
than the English version, the English version will control.

     21. Acceptance of Agreement. You must expressly accept the terms and conditions of
your Stock Grant as set forth in this Agreement by signing and returning to the Company within 90
days after the Company sends this Agreement to you. If you do not accept your Stock Grant in the
manner instructed by the Company, your Stock Grant will be subject to cancellation.

     22. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one instrument.

* * * *

(Signature Page Follows)

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this ___day of October
1, 2008.

MARTHA STEWART LIVING OMNIMEDIA, INC.

	 	 	 	 	 
	By: 
	 	/s/ Howard Hochhauser	 	 
	 

	 	 

(Signature)
	 	 
	 
	 	 	 	 
	Name:
	 	Howard Hochhauser	 	 
	 

	 	 

	 	 
	Title:
	 	Chief Financial Officer	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	RECIPIENT: Wenda Harris Millard	 	 
	 
	 	 	 	 
	By:

	 	/s/ Wenda Harris Millard	 	 
	 

	 	 	 	 
	 

	 	(Signature)	 	 

	 	 	 	 	 
	Address:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 	 	 

	 	 	 	 	 
	Telephone Number:
	 	 	 	 
	 

	 	 

	 	 

	 	 	 	 	 
	E-mail Address:
	 	 	 	 
	 

	 	 

	 	 

8

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