Employment Agreement - Martha Stewart Living Omnimedia LLC and Helen Murphy
[LETTERHEAD OF MARTHA STEWART LIVING OMNIMEDIA LLC]
September 3, 1999
Ms. Helen Murphy
46 Roundabend Road
Tarrytown, New York 10591
Dear Helen:
We are very glad that you have agreed to join the staff of Martha Stewart
Living Omnimedia LLC ("MSLO"). This letter is to confirm the material terms of
your employment. Your appointment as an executive officer of MSLO is being made
by the MSLO board of directors (the "Board of Directors").
1. POSITION: Your position will be Chief Financial Officer, subject to review
on an annual basis.
2. TERM: You shall begin work at MSLO as soon as is reasonably practicable,
provided that you shall begin no later than October 15, 1999 (the date on
which you begin, the "Start Date"), and your employment shall continue
until terminated by either you or MSLO.
3. DUTIES: Your duties will be the customary duties of a chief financial and
administrative officer. You will devote your full business time, attention
and energies to the performance of your duties, which shall not prohibit
you from engaging in other incidental activities such as personal financial
management and charitable activities, so long as such other activities do
not materially interfere with the performance of your duties hereunder. You
will directly report to MSLO's Chief Executive Officer, President and Board
of Directors, and it will be your responsibility to keep each of the
foregoing appropriately informed of matters relating to your duties
hereunder.
4. COMPENSATION: Your MSLO compensation level is Grade 41; and your initial
base salary will be $480,000 per year. This is payable as earned in 13
equal payments during each year. You will be eligible for periodic salary
review and increase, which will occur at least every other year, and will
be based upon your performance and the performance of MSLO, as the policies
of MSLO provide for senior executives at your
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level in effect from time to time. Notwithstanding the foregoing, at least
every other year you shall receive a salary increase that is at least equal
to a reasonable cost-of-living adjustment, as determined by the
Compensation Committee of the Board, provided this increase shall not be
incremental to any other salary increase you receive.
5. BONUS: You will receive an annual bonus at the same time as other senior
executives of MSLO (currently payable during the first quarter of a year
with respect to the prior year). Your target annual bonus shall be 75% of
your base salary. The actual annual bonus paid may be greater or less than
such target based upon (i) the compensation policies MSLO may establish
from time to time, and (ii) the performance of MSLO against certain goals
and targets set by MSLO's Executive Office (consisting of the Chief
Executive Officer and the President) or the Board of Directors (or the
Compensation Committee thereof). Currently, actual annual bonuses vary
from target annual bonuses by up to plus or minus 50%. For purposes of
clarification, you shall be entitled to a pro rata bonus for the period in
1999 commencing on the Start Date.
6. ADDITIONAL BONUSES: In addition to your regular bonus payable pursuant to
Paragraph 5 hereof, and any Special Bonus payable pursuant to paragraph 13
hereof, you shall be entitled to receive a signing bonus of $200,000,
payable within one week following the Start Date. Additionally, you shall
be entitled to a bonus of $247,500 payable on the one-year anniversary of
the Start Date, provided that you are still employed by MSLO as of such
date.
7. BENEFITS: You will receive such employee benefits, subject to any
eligibility requirements, as MSLO from time to time generally provides to
other senior executives (other than Martha Stewart).
8. LONG-TERM INCENTIVE PLANS: You are being granted options to purchase 85,715
Class A LLC Units in MSLO pursuant to the Option Agreement (the "Option
Agreement") attached hereto as Exhibit A. Additionally, you will be
eligible for additional option grants (other than at the time of an initial
public offering of MSLO's or its successor's equity) and to participate in
other long-term incentive programs of MSLO as the Board of Directors and/or
the Compensation Committee thereof determine from time to time.
9. VACATION: You will be entitled to four weeks of vacation annually.
10. SEVERANCE. In the event your employment with MSLO is terminated by MSLO
without Cause (as defined below), or you terminate your employment within
30 days following a Change in Control (as defined in the Option Agreement)
(a "Change of Control Termination"), (i) you shall promptly be paid any
accrued but unpaid salary,
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accrued but unused vacation time, un-reimbursed expenses which otherwise
would be reimbursed in the normal course and vested benefits under any MSLO
benefit plan in which you then are a participant, (ii) you shall promptly
be paid an annual bonus with respect to the year in which your employment
is terminated, pro-rated to your date of termination at a rate equal to
your target bonus, as well as any bonus previously declared but not yet
paid with respect to a completed year of service, provided that in the
event no bonus has yet been declared with respect to a completed year of
service as of the date of your termination of employment you shall promptly
receive a bonus equal to your target bonus with respect to such completed
year, (iii) the options being granted to you pursuant to the Option
Agreement will be treated as set forth therein and any other unvested MSLO
options which may be granted to you after the date hereof that are
scheduled to vest during the forty-eight months immediately following the
date of your termination shall be treated in a manner at least
substantially comparable to the treatment of the options granted to you
pursuant to the Option Agreement, which terms shall be reflected in any
option agreements governing any such subsequent grants, (iv) you shall
promptly be paid twelve months of your base salary and an amount equal to
your then target bonus, and (v) in the event any such termination occurs
within the first twelve months following the Start Date, you shall be paid
an additional $236,250. The entitlements set forth in clauses (i) through
(v) above are cumulative.
11. CAUSE. "Cause" shall mean (i) your failure to perform your material duties
hereunder after written notice and a reasonable opportunity to cure, (ii)
your willful, intentional misconduct that results in material damage to
MSLO's business or reputation, (iii) your commission of a type of felony
with respect to which incarceration is a typical punishment, (iv) your
fraud or misappropriation of MSLO property (other than incidental
property), or (iv) your failure to comply with MSLO's employment policies
and rules after written notice and a reasonable opportunity to cure,
provided that pursuant to the standard policies of MSLO in effect at the
time (and any disciplinary procedures set forth therein) such failure to
comply with MSLO's employment policies and rules would otherwise give rise
to termination. Any termination for Cause must be approved by the Board of
Directors.
12. CONSTRUCTIVE TERMINATION. In the event that (A)(i) MSLO breaches any of its
obligations under this letter, or your title or salary are diminished, or
(ii) your responsibilities are diminished or modified in a manner that is
inconsistent in any material respect with the position of Chief Financial
Officer, (B) you give MSLO notice of your intent to exercise your rights
under this provision within 10 business days after you become aware of an
event described in (A) above, (C) MSLO fails to fully cure such event
within 10 business days after receiving such notice, and (D) you terminate
your employment with MSLO within 10-business-days after conclusion of the
10 business day period afforded to MSLO to fully cure such event, then such
termination will be deemed to be a termination by MSLO without Cause.
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13. SPECIAL BONUS. On the four-and-one-half year anniversary of the Start Date
(the "Special Bonus Date"), you will be entitled to a bonus (the "Special
Bonus"), which Special Bonus shall in no case exceed $3 million, equal to:
($868,417,917 - Peak Capitalization) x 0.00814292561
"Peak Capitalization" equals the product of (i) the average of the ten
highest closing prices of the common stock of Martha Stewart Living
Omnimedia, Inc.("MSLO, Inc.") over any 20 consecutive trading days during
the six-month period immediately prior to the Special Bonus Date (the
"Measurement Period"), and (ii) the number of shares of MSLO, Inc. common
stock into which MSLO's LLC interests are converted, in the aggregate, in
the merger occurring immediately prior to MSLO, Inc.'s initial public
offering, as equitably adjusted for splits, stock dividends, etc.
Notwithstanding the foregoing:
(i) no Special Bonus shall be payable in the event (a) the calculation
of the Special Bonus amount results in a negative number, (b) your
employment by MSLO terminates prior to the fourth anniversary of
the Start Date for reasons other than your death or disability or
a termination by MSLO without Cause, (c) your employment with MSLO
is terminated at any time prior to the Special Bonus Date by MSLO
for Cause, or (d) there is no initial public offering of MSLO,
Inc.'s common stock prior to the Special Bonus Date (as such date
may be modified under clause (ii) below); and
(ii) in the event of your death or disability, the termination of your
employment by MSLO without Cause, or Change of Control
Termination, in each case prior to the fourth anniversary of the
Start Date, the Special Bonus shall be payable as follows:
(1) (A) in the event of death or disability, the Special Bonus
Date shall be the one year anniversary of the date of
termination of employment and the Measurement Period shall be
the twelve-month period following the date of termination of
employment, and (B) in the event of a termination without
Cause or a Change of Control Termination, the Special Bonus
Date shall be the three-month anniversary of the date of
termination of employment and the Measurement Period shall be
the three-month period following the date of termination of
employment;
(2) in lieu of using the number $868,417,917 in the calculation of
the Special Bonus, a number shall be employed that is equal to
$500,000,000 if termination of employment occurs on the Start
Date and $868,417,917 if termination of employment occurs on
the fourth anniversary of the Start
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Date, and for any termination date between such dates the
number employed shall be interpolated on a straight-line basis
(e.g., if termination occurred on the second anniversary of
the Start Date the number would be $684,208,958); and
(3) the Special Bonus shall not be greater than $0 if a
termination of employment occurs on the Start Date, and
$3,000,000 if termination of employment occurs on the fourth
anniversary of the Start Date, and for any termination date
between such dates the maximum amount of the Special Bonus
shall be interpolated on a straight-line basis (e.g. if
termination occurred on the second anniversary of the Start
Date the maximum amount of the Special Bonus would be
$1,500,000).
14. CONFIDENTIALITY: You have signed the MSLO standard confidentiality
agreement in the form attached hereto as Exhibit B.
15. AT WILL STATUS: You specifically understand and agree that your employment
hereunder shall be at all times on an "at will" basis, and nothing
contained herein shall be construed as establishing any other relationship
between you and MSLO.
16. NON-SOLICITATION. In the event your employment with MSLO ceases for any
reason other than due to a termination by MSLO without Cause, you shall not
(i) for a period of one year following the date of such termination, hire
for any position (on your own behalf or on behalf of any third party) any
person who was an employee of MSLO during the six-month period prior to the
date of your termination, or (ii) for the eighteen month period commencing
on the date six months prior to the date of your termination of employment,
solicit or induce any employee of MSLO to terminate their employment with
MSLO (on your own behalf or on behalf of any third party).
If the foregoing accurately sets forth our agreement, please sign this
letter and the enclosed job description and return it to me.
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We are very excited that you will be working with us at Martha Stewart
Living Omnimedia. I think that you will enjoy the collaborative atmosphere, and
I know that we will enjoy having you here.
Very truly yours,
MARTHA STEWART LIVING
OMNIMEDIA LLC
By: /s/ Martha Stewart
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Name: Martha Stewart
Title: Chairman and Chief
Executive Officer
ACCEPTED AND AGREED:
/s/ Helen Murphy
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Helen Murphy
Date: September 3, 1999
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