2002 Executive Severance Pay Plan - Martha Stewart Living Omnimedia Inc.
MARTHA STEWART LIVING OMNIMEDIA, INC.
2002 EXECUTIVE SEVERANCE PAY PLAN
Martha Stewart Living Omnimedia, Inc. hereby adopts this Martha Stewart Living
Omnimedia, Inc. 2002 Executive Severance Pay Plan (the "Plan") effective as of
August 9, 2002.
The purpose of the Plan is to better provide for the retention of key executives
through providing them with a higher degree of financial security, on the terms
and conditions hereinafter stated. The Plan is intended to be a severance pay
plan governed by Title I of the Employee Retirement Income Security Act of 1974,
as amended, primarily for the purpose of providing benefits for a select group
of management or highly compensated employees. All benefits under the Plan will
be paid solely from the general assets of the Company.
ARTICLE I
Definitions
"Bonus Benefit" has the meaning given in Section 2.06 of this Plan.
"Company" means Martha Stewart Living Omnimedia, Inc.
"Denial Notice" has the meaning set forth in Section 4.03(2) of this Plan.
"Disability" means a Total Disability under the Company's long-term disability
insurance policy, or such comparable term under any successor policy which the
Company may secure after the date hereof, as interpreted by the Plan
Administrator.
"Effective Date" means August 9, 2002.
"Eligible Participant" has the meaning given in Section 2.02 of this Plan.
"Employment Severance Date" means the date of termination of employment of a
Participant.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Good Reason" shall have the meaning given in Section 3.01 of this Plan.
"Involuntary Termination for Cause" has the meaning given in Section 3.02 of
this Plan.
"Involuntary Termination for Disability" means any termination of a
Participant's employment with the Company initiated by the Company as a result
of such Participant's disability.
"Participant" means any eligible executive who is made a participant in the Plan
by action of the Plan Administrator as specified herein.
"Plan" means The Martha Stewart Living Omnimedia, Inc. 2002 Executive Severance
Pay Plan.
"Plan Administrator" means the Compensation and Management Development Committee
of the Board of Directors of the Company, or, if such Board of Directors so
determines, another committee of the Board or the Board itself.
"Qualifying Involuntary Termination" means any termination of a Participant's
employment with the
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Company initiated by the Company other than an Involuntary Termination for Cause
or an Involuntary Termination for Disability.
"Termination for Cause" has the meaning given in Section 3.02 of the Plan.
"Voluntary Termination for Good Reason" has the meaning given in Section 3.01 of
this Plan.
"Voluntary Termination without Good Reason" means any termination of employment
initiated by a Participant other than a Voluntary Termination for Good Reason.
ARTICLE II
Eligibility; Participation; Benefits
Section 2.01. Participation in the Plan. The Plan Administrator may
designate any executive of the Company to be a Participant,
and may vary the terms of a Participant's participation on a
case by case basis. Promptly following such designation, each
Participant shall be notified of his or her participation in a
formal communication from the Plan Administrator or the
Company, provided that any variation in the terms of a
Participant's participation from the default terms of this
Plan shall be clearly explained to the Participant in such
communication. Participation in the Plan shall be determined
in the Plan Administrator's sole discretion. Once participant
has commenced, a Participant shall remain a Participant until
the first to occur of (i) the termination of his or her
employment under circumstances not giving rise to a right to
severance benefits under the Plan, (ii) the completion of the
delivery of all severance benefits under the Plan following
the termination of his or her employment under circumstances
giving rise to a right to such benefits, and (iii) the
termination or expiration of the Plan pursuant to Article V
before termination of the Participant's employment or the
giving of notice by a Participant under Section 3.01 hereof.
Section 2.02. Benefits Eligibility. A Participant shall become entitled to a
severance benefit in the event he or she experiences a
Voluntary Termination For Good Reason or a Qualifying
Involuntary Termination, provided that all of the conditions
set forth in Section 2.03 are satisfied and the termination is
not described in Section 2.04. Any Participant who becomes so
entitled shall be deemed an "Eligible Participant."
Section 2.03. Conditions. As conditions to entitlement of each Participant
to severance benefits under this Plan, such Participant must,
following the Employment Severance Date, (i) execute, and not
revoke, a Waiver and Release of Claims Form pursuant to
Section 6.01 of the Plan; (ii) return to the Company all
property of the Company held by such Participant, (iii)
reaffirm in writing such Participant's agreement to abide by
the confidentiality agreement entered into by such Participant
in connection with such Participant's employment with the
Company or, if no such agreement exists, enter into an
agreement in form and substance comparable to that typically
entered into by comparably situated executives upon commencing
employment with the Company, (iv) reasonably cooperate with
the Company to complete the transition of matters with which
such Participant is familiar or responsible to other
executives or employees and to make himself or herself
reasonably available to answer questions or assist in matters
which may require attention after such Participant's
Employment Severance Date, and (v) execute and deliver to the
Company a certificate attesting to the satisfaction of such of
the foregoing conditions as the Plan Administrator may, in its
sole discretion, require.
Section 2.04. Ineligible Terminations of Employment. A Participant will not
be eligible for a severance benefit under this Plan if his or
her employment with the Company terminates for any one of the
following reasons:
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1) death of the Participant;
2) Involuntary Termination for Disability;
3) Voluntary Termination without Good Reason; or
4) Involuntary Termination for Cause.
Section 2.05. Amount of Severance Payment. An Eligible Participant shall
receive (i) continued payment of his or her base salary during
the period from the Employment Severance Date until the second
anniversary of his or her Employment Severance Date, at the
rate in effect as of his or her Employment Severance Date;
provided, that during the twelve-month period beginning on the
first anniversary of his or her Employment Severance Date the
amount of such continued base salary shall be reduced (but not
below zero) by the amount of the base salary earned and any
other guaranteed cash compensation (including any guaranteed
bonus) earned, if any, from other employment during such
twelve-month period (regardless of when paid) and (ii) a
one-time bonus payment equal to 100% of such Eligible
Participant's target annual bonus in effect as of his or her
Employment Severance Date.
For purposes of this Section, no reduction in salary or target
annual bonus of a Participant shall be taken into account in
determining his or her severance benefits, if such change or
reduction formed the basis of a claim for Voluntary
Termination for Good Reason or was instituted just prior to,
or after, the giving of an employment termination notice by
the Company or the Participant.
Section 2.06. Form and Times of Payment. All severance benefits that
take the form of continuation of base salary shall be paid
according to the Company's regular payroll procedure.
Severance benefits that take the form of payment of an
Eligible Participant's target annual bonus (a "Bonus Benefit")
shall be paid in a lump sum in accordance with the Company's
general annual bonus payment schedule first following the
Eligible Participant's Employment Severance Date, provided
that, if the Company does not pay bonuses generally with
respect to the calendar year in which the Employment Severance
Date occurs, then such Eligible Participant's Bonus Benefit
shall be paid during February of the year following the year
in which the Employment Severance Date occurred.
Section 2.07. Benefit Continuation Provisions. An Eligible Participant
shall also be entitled to the following severance benefits:
1) Health and Life Insurance. The Eligible Participant
shall continue to be covered by the Company's health and
life insurance plans on the same terms and conditions as
apply to similarly situated active employees of the
Company, until the earlier of (i) the end of the period
during which the Eligible Participant is entitled to
salary continuation under Section 2.06 above (without
regard to any Offset), and (ii) the date on which the
Participant first becomes eligible for benefits of the
same type under a plan or plans provided by a subsequent
employer.
2) Equity Awards. The Eligible Participant shall become
immediately vested in, and restrictions shall lapse on,
any and all outstanding equity awards of such Eligible
Participant, including stock options and restricted
stock grants.
3) Outplacement benefits. Eligible Participants shall be
entitled to reimbursement for outplacement services of
his or her choice if utilized in good faith of up to a
maximum of $30,000.
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ARTICLE III
Termination Of Employment
Section 3.01 Voluntary Termination For Good Reason. If a Participant
terminates his or employment with the Company pursuant to the
following terms, such termination shall be deemed a "Voluntary
Termination for Good Reason":
1) Within ninety (90) days after the Participant first
learns of an event that constitutes "Good Reason" (as
defined below), the Participant gives the Company ninety
(90) calendar days' advance written notice of his or her
intent to terminate in a Voluntary Termination for Good
Reason, which notice sets forth in reasonable detail the
facts and circumstances giving rise to the Good Reason
on which such termination shall be based; and
2) The Company fails to remedy the facts and circumstances
giving rise to such Good Reason in a prompt and
responsive fashion taking into account such facts and
circumstances, but in any rate within such ninety-day
period, provided that (i) if a fact, event or
circumstance is by its nature not subject to remedy, the
discontinuance of such fact, event or circumstance on a
prospective basis shall be deemed a cure thereof, and
(ii) in the event the Company takes deliberate actions
with respect to a Participant that repeatedly give rise
to Good Reasons which the Company subsequently cures,
the Company shall forfeit the ability to cure such Good
Reasons with respect to such Participant.
"Good Reason" shall mean, without the Participant's express
prior written consent, the occurrence of any one or more of
the following:
(a) a material reduction or material adverse alteration in
the Participant's position, title, duties, or
responsibilities from those in effect as of the
Effective Date (or as subsequently amended with the
consent of the Participant);
(b) the Company's requiring the Participant to be based at a
location in excess of thirty-five (35) miles from the
location of the Participant's principal job location or
office as of the Effective Date, except for required
travel on the Company's business to an extent
substantially consistent with the Participant's present
business obligations, provided that any re-assignment
from the Company's Westport, CT facilities to its New
York City facilities, or vice versa, shall not violate
this provision if there is a reasonable business
justification for the re-assignment;
(c) a reduction by the Company of the Participant's Base
Salary or target annual bonus percentage as in effect on
the Effective Date, or as the same shall be increased
from time to time;
(d) the failure of the Company to provide the Participant
with employee benefits that are at least as favorable as
those provided to other similarly situated executives of
the Company from time to time; and
(e) the failure of the Company to comply with the
requirements of Section 5.03 below.
The Participant's right to terminate employment in a Voluntary
Termination for Good Reason shall not be affected by the
Participant's incapacity due to physical or mental illness.
Subject to the requirements set forth above, the Participant's
continued
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employment shall not constitute a consent to, or a waiver of
rights with respect to, any circumstance constituting Good
Reason herein.
Section 3.02. Involuntary Termination For Cause. If the Plan Administrator,
in the exercise of good faith and reasonable judgment, and
after giving the Participant notice and an opportunity to be
heard by the Plan Administrator, determines that any of the
following has occurred, and the Participant is terminated
accordingly, it shall be deemed a "Termination for Cause":
1) the Participant has failed to perform his or her
material duties to the Company after written notice and
a reasonable opportunity to cure;
2) the Participant has engaged in willful, intentional
misconduct that has resulted in material damage to the
Company's business or reputation;
3) the Participant has been convicted of a felony;
4) the Participant has engaged in fraud against MSO or
misappropriated MSO property (other than incidental
property); or
5) the Participant has failed to comply with the Company's
employment policies and rules after written notice and a
reasonable opportunity to cure, provided that, pursuant
to the standard policies of the Company in effect at the
time, whether or not such policies are written, and any
disciplinary procedures set forth therein or commonly
followed, such failure to comply with such employment
policies and rules would otherwise give rise to
termination.
ARTICLE IV
Administration of the Plan
Section 4.01. Administrator. The general administration of the Plan and the
responsibility for carrying out the provisions of the Plan
will be placed with the Plan Administrator. The Plan
Administrator may be notified at the following address:
Martha Stewart Living Omnimedia, Inc.
11 West 42nd Street
New York, New York 10036
Attention: Plan Administrator
c/o General Counsel
Section 4.02. Duties and Powers. The Plan Administrator will have all powers
necessary and or helpful to administering the Plan in all its
details. This authority includes, but is not limited to,
determining eligibility for participation and, where clearly
stated in the designation of Plan participation and
subsequently in the notice to a Participant of Plan
participation, varying the terms of the Plan with respect to a
particular Participant; making rules and regulations for the
administration of the Plan that are consistent with the terms
and provisions of the Plan; construing all terms, provisions,
conditions, and limitations of the Plan, and resolving
ambiguities, correcting deficiencies, and supplying omissions;
determining all questions arising out of, or in connection
with, cases in which the Plan Administrator deems such a
determination advisable. The Plan Administrator shall have the
full discretion to exercise the powers conferred by this Plan,
and all such acts and determinations will be final, binding,
and conclusive upon all interested parties. The Plan
Administrator shall also have the authority to designate other
individuals to exercise the powers of the Plan Administrator
on its behalf.
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Section 4.03. Claims Procedures.
1) All claims for benefits shall be in writing and shall be
filed with the Plan Administrator.
2) The Plan Administrator shall determine whether or not to
accept a claim for benefit within 60 days after
receiving it. If the Plan Administrator wholly or
partially denies a Participant's claim for benefits, the
Plan Administrator shall as promptly as practicable give
the claimant written notice of such denial (a "Denial
Notice"), setting forth:
(a) The specific reason(s) for the denial;
(b) Specific reference to pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information which
must be submitted to perfect the claim, and an explanation of
why such material or information is necessary; and
(d) An explanation of the Plan's review procedure as set forth in
Section 4.03(3) below.
3) If a Participant wishes to contest the denial or partial
denial of a claim for benefits under the Plan, he or she
shall so notify the Plan Administrator in writing within
30 days after receiving the Denial Notice. The
Participant shall have a period of 60 days from the date
he or she receives the Denial Notice to submit to the
Plan Administrator written materials or information in
support of his or her claim (which shall include any
materials or information requested in the Denial
Notice), and if the Participant so requests, the Plan
Administrator shall afford the Participant the
opportunity, before the end of such 60-day period, to
meet with the Plan Administrator to discuss his or her
claim. The Plan Administrator shall make a final
determination with respect to such claim within 30 days
following the end of such 60-day period, and shall
notify the Participant of such decision as promptly as
practicable.
ARTICLE V
Plan Amendment and Termination; Successors
Section 5.01. Amendment and Termination. The Plan, and any part thereof, is
subject to amendment, waiver, or individual adjustment by the
Plan Administrator at any time and from time to time, for any
reason, provided that no such amendment, waiver, adjustment or
termination shall decrease or otherwise adversely affect the
rights or entitlements possessed by a Participant, whether
prior to or after such Participant's Employment Severance
Date, and whether with respect to benefits under the Plan to
which a Participant is then entitled or with respect to which
such Participant may become entitled upon a Voluntary
Termination for Good Reason of a Qualifying Involuntary
Termination, without such Participant's written consent.
Section 5.02. Plan Expiration. The Plan shall expire on December 31,
2004. No terminations of employment for Participants occurring
after such expiration shall give rise to any rights to
severance benefits under the Plan, but such expiration shall
have no effect on severance payments and benefits to which an
Eligible Participant whose Employment Severance Date occurs on
or prior to such date are entitled.
Section 5.03 Successors. The Company shall cause this Plan to be
assumed by any successor of the Company, whether such
succession occurs by merger, asset acquisition, or otherwise.
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Section 5.04 Governing Law. This Plan shall be governed by the laws of the
State of Delaware.
ARTICLE VI
Waiver and Release of Claims Form
Section 6.01. Signing the Waiver and Release Form. To receive severance
benefits under the Plan, an Eligible Participant must sign,
and not revoke, a Waiver and Release of Claims in the form
attached hereto as Exhibit A, with such changes thereto as the
Company shall reasonably provide.
[Exhibit A Omitted]
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