LLC Unit Option Agreement

EXHIBIT 10.19





LLC UNIT OPTION AGREEMENT



THIS LLC UNIT OPTION AGREEMENT (this "Agreement"), made and entered into as of this 3rd day of September, 1999, by and between Martha Stewart Living Omnimedia LLC, a Delaware limited liability company (the "Company"), and Helen Murphy (the "Executive").



WHEREAS, the Company has agreed pursuant to the Employment Letter to award the Executive an option to acquire Class A LLC Units of the Company (the "Class A LLC Units") on the terms and conditions set forth in this Agreement.



NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows:



1. Grant of Option. Pursuant to, and subject to, the terms and conditions set forth herein, the Company hereby grants to the Executive an option to acquire 85,715 Class A LLC Units (the "Option"), which number is based on the implied current outstanding capitalization of the Company of a total of 10,526,316 units of all classes.



2. Grant Date. The Grant Date of the Option granted hereby is September 3, 1999.



3. Identification of Option. The Option granted hereby is not an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").



4. Exercise Price. The exercise price per Class A LLC Unit subject to the Option granted hereby is $47.50.



5. Vesting. Subject to the Executive's continued employment with the Company, such Option shall become vested in four equal annual installments, beginning on the last day before the first anniversary of the Start Date; provided, however, that upon a Termination of Employment by the Company without Cause or upon the occurrence of a Change in Control of the Company, in either case prior to the last day before the fourth anniversary of the Start Date, any portion of the Option that is not then vested shall become fully vested and exercisable.



6. Term. (a) Option Term. The Option shall expire on the earliest of the dates set forth in clauses (b) through (d) below, as applicable, or if earlier, the tenth anniversary of the Grant Date.



(b) Termination by Death. If the Executive incurs a Termination of Employment by reason of death, the Option may thereafter be exercised, to the extent then vested and exercisable, for a period of one year from the date of such death or, if earlier, until the tenth anniversary of the Grant Date.









(c) Termination by Reason of Disability or Retirement. If the Executive incurs a Termination of Employment by reason of Disability or Retirement, the Option may thereafter be exercised by the Executive, to the extent it was vested and exercisable at the time of termination, for a period of one year from the date of such Termination of Employment or, if earlier, until the tenth anniversary of the Grant Date; provided, however, that if the Executive dies within such period, any unexercised portion of the Option shall, notwithstanding the expiration of such period, continue to be exercisable to the extent to which it was vested and exercisable at the time of death for a period of one year from the date of such death or, if earlier, until the tenth anniversary of the Grant Date.



(d) Other Termination. (A) If the Executive incurs a Termination of Employment for Cause, the Option shall thereupon terminate and cease to be exercisable; and (B) if the Executive incurs a Termination of Employment for any reason other than death, Disability, Retirement or for Cause, the Option, to the extent it was then vested and exercisable at the time of termination may be exercised during the three-month period following the date of such Termination of Employment or, if earlier, until the tenth anniversary of the Grant Date; provided, however, that if the Executive dies within such three-month period, any unexercised portion of the Option shall, notwithstanding the expiration of such three-month period, continue to be exercisable to the extent to which it was vested and exercisable at the time of death for a period of one year from the date of such death or, if earlier, until the tenth anniversary of the Grant Date.



(e) Notwithstanding any other provision of this Section 6 to the contrary, in the event the Executive incurs a Termination of Employment other than for Cause during the 24-month period following a Change in Control, any portion of the Option may thereafter be exercised by the Executive, to the extent it was vested and exercisable at the time of termination, including on such accelerated basis as provided in Sections 5 and 7(a), for one year from such date of termination or, if earlier, until the tenth anniversary of the Grant Date.



7. Exercise; Method of Exercise. (a) The vested portion of the Option shall become exercisable at the earliest of an IPO, a Change in Control or a Termination of Employment without Cause, subject in each case to the provisions of this Section 7. Subject to the provisions of this Section 7, the Option may be exercised, in whole or in part, at any time after the Option has become vested and exercisable and during the option term by giving written notice of exercise to the Company specifying the number of Class A LLC Units or shares of Common Stock, as the case may be, subject to the Option to be purchased. Such notice shall be accompanied by payment in full of the purchase price by certified or bank check or such other instrument as the Company may accept.



(b) Method of Exercise After an IPO.



(i) After an IPO, if approved by the Committee, payment in full

or in part may also be made in the form of unrestricted shares (by

delivery of such share(s) or by attestation) already owned by the

Executive of the same class as the common stock for which the Option

becomes exercisable in connection with the conversion of the











Company into a corporation (the "Common Stock") subject to the Option

(based on the Fair Market Value of the Common Stock on the date the

Option is exercised); provided that such already owned Common Stock

have been held by the Executive for at least six months at the time of

exercise or had been purchased on the open market.



(ii) In addition, after an IPO, payment in full or in part may

also be made by either or both of the following methods, as selected by

the Committee:



(A) by instructing the Committee to withhold a

number of shares of such Common Stock having a Fair Market Value

on the date of exercise equal to the aggregate exercise price of

the Option; or



(B) by delivering a properly executed exercise

notice to the Company, together with a copy of irrevocable

instructions to a broker to deliver promptly to the Company the

amount of sale or loan proceeds necessary to pay the purchase

price, and, if requested, reduced by the amount of any federal,

state, local or foreign withholding taxes. To facilitate the

foregoing, the Company may enter into agreements for coordinated

procedures with one or more brokerage firms.



(c) No Class A LLC Units or Common Stock shall be issued prior to the time that full payment therefor has been made; provided that the issuance of Class A LLC Units or Common Stock shall be subject to Section 10 hereof. The Executive shall have all of the rights of a shareholder of the Company holding Class A LLC Units or the Common Stock that is subject to the Option (including, if applicable, the right to receive dividends and, after an IPO, to vote the Common Stock), when the Executive has given written notice of exercise and has paid in full for such Class A LLC Units or Common Stock; provided, that, prior to an IPO, the Executive's rights shall be limited as set forth in Sections 10, 11 and 12 hereof.



8. Change in Capitalization. In the event of any change in corporate capitalization, such as a stock split or an extraordinary corporate transaction, such as any merger, consolidation, spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code) or any partial or complete liquidation of the Company, the Board of Directors of the Company (the "Board") or the Compensation Committee of the Board (the "Committee") may make such substitution or adjustments to reflect such change or transaction in (i) the number, kind and option price of equity subject to the Option; and/or (ii) such other equitable adjustment as it may determine to be appropriate in its sole discretion; provided, however, that the number of units or shares subject to the Option shall always be a whole number and; provided, further, that if any such substitution or adjustment to reflect such change or transaction is made with respect to the options outstanding pursuant to the Company's Nonqualified Class A LLC Unit/Stock Option Plan or the Company's













1999 Stock Incentive Plan, the same substitution or adjustment shall be made with respect to the Option.



9. Conditions to Option Grant; Option Transfer Restrictions. (a) Nontransferability of Option. The Option shall not be transferable by the Executive other than (i) by will or by the laws of descent and distribution or (ii) as otherwise expressly permitted by the Committee including, if so permitted, pursuant to a transfer to the Executive's immediate family, whether directly or indirectly or by means of a trust or partnership or otherwise. For purposes of this Agreement, unless otherwise determined by the Committee, "immediate family" shall mean the Executive's children, spouse and grandchildren (the persons referred to in the above clauses (i) and (ii), the "Permitted Transferees"). The Option shall be exercisable, subject to the terms of this Agreement, only by the Executive, the guardian or legal representative of the Executive, or any person to whom the Option is transferred pursuant to this paragraph, it being understood that the terms "holder" and "Executive" include such guardian, legal representative and other transferee.



10. Restrictions on LLC Units and Common Stock; Conditions to Exercise. (a) Notwithstanding any other provision of this Agreement made pursuant thereto, the Company shall not be required to issue or deliver any certificate or certificates for Class A LLC Units or shares of Common Stock under this Agreement prior to fulfillment of all of the following conditions:



(i) any registration or other qualification of such Class A

LLC Units or shares of Common Stock under any state or federal law or

regulation, or the maintaining in effect of any such registration or

other qualification which the Committee shall, in its absolute

discretion upon the advice of counsel, deem necessary or advisable; and



(ii) obtaining any other consent, approval, or permit from any

state or federal governmental agency which the Committee shall, in its

absolute discretion after receiving the advice of counsel, determine to

be necessary or advisable.



(b) Securities Law Restrictions. As a condition to exercise of the Option granted hereby at any time prior to the date on which an IPO occurs, the Executive (i) will be required to make representations, warranties and agreements with respect to the Class A LLC Units obtained through such exercise substantially similar to the representations, warranties and agreements as set forth in Exhibit A hereto, as the Committee may reasonably determine based on the advice of counsel; (ii) understands and agrees that she will not offer, resell, transfer or otherwise dispose of the Class A LLC Units obtained through such exercise other than as provided in this Agreement and pursuant to an available exemption from registration under Securities Act or pursuant to an effective registration statement, if any; and (iii) shall agree to be subject to any other restrictions as the Committee may reasonably deem necessary based on the advice of counsel to comply with all applicable la ...