founded by Martha Stewart in 1997, Martha Stewart Living Omnimedia, Inc. ("MSLO" or the Company) is a media and merchandising company.

The original Complaint charges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between January 8, 2002 and July 24, 2002. Among other things, the Complaint alleges that Stewart sold 100% of her personally held common stock of ImClone, Inc. based on insider information obtained from Samuel Waksal ("Waksal"), ImClone's CEO and a personal friend of Stewart's. The Complaint further alleges that the insider information allowed Stewart to sell all of her 4,000 shares of ImClone common stock on December 27, 2001, one day before devastatingly negative news regarding ImClone was publicly disclosed for the first time, sending the price of ImClone common stock plummeting. On January 18, 2002, the Complaint charges, the Securities and Exchange Commission, Justice Department and U.S. House Energy and Commerce Committee began investigating whether Waksal had warned certain of his relatives and friends of the negative developments prior to the public disclosure of such developments, allowing them to avoid the massive losses resulting from the subsequent public disclosure. According to the Complaint, despite knowing of her illicit insider-sales and the foreseeability that the government's investigations would uncover her wrongdoing and have a materially adverse impact on MSLO's business (which depended in large part on Stewart's reputation and public image), Stewart failed to disclose her activities to the public. Instead, the Complaint alleges, Stewart, along with the other Defendants, sold a total of $79 million in MSLO common stock, with many Defendants selling nearly all of their MSLO common stock. As alleged in the Complaint, the public first learned of Stewart's complicity in the high-profile ImClone scandal on June 6, 2002, with the publication of a media report--setting-off a precipitous decline in MSLO's stock price. The impact of Stewart's involvement in the ImClone scandal on MSLO's business was, according to the Complaint, not known to the public until July 24, 2002, when the Company announced that the circumstances were negatively impacting its revenues and earnings, causing MSLO to slash earnings estimates for the third quarter of 2002 by half and reducing guidance for the entire-year 2002. On July 24, the price of MSLO common stock dropped to below $7.50 per share -- a 60% drop in one month.

According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2006, on February 3, 2003, the Company was named as a Defendant in a Consolidated and Amended Class Action Complaint, filed in the United States District Court for the Southern District of New York, by Plaintiffs purporting to represent a class of persons who purchased common stock in the Company between January 8, 2002 and October 2, 2002. In re Martha Stewart Living Omnimedia, Inc. Securities Litigation, 02-CV-6273 (JES). The Consolidated Class Action Complaint also names Martha Stewart and seven of the Company’s other present or former officers (Gregory R. Blatt, Sharon L. Patrick, and five other Company officers) as Defendants. All such individuals other than Martha Stewart are collectively referred to herein as the “Individual Defendants.” The action consolidated seven class actions previously filed in the Southern District of New York. The claims in the Consolidated Class Action Complaint arise out of Ms. Stewart’s sale of 3,928 shares of ImClone Systems stock on December 27, 2001. The Plaintiffs assert violations of Sections 10(b) (and rules promulgated thereunder), 20(a) and 20A of the Securities Exchange Act of 1934. The Plaintiffs allege that MSLO, Ms. Stewart and the Individual Defendants omitted material information and made statements about Ms. Stewart’s sale that were materially false and misleading. The Plaintiffs allege that, as a result of these false and misleading statements, the market price of the Company’s stock was inflated during the putative class periods and dropped after the alleged falsity of the statements became public. The Plaintiffs further alleged that the Individual Defendants traded MSLO stock while in possession of material non-public information, but as explained below, all such allegations have been dismissed. The Consolidated Class Action Complaint seeks certification as a class action, damages, attorneys’ fees and costs, and further relief as determined by the court. By stipulation of the parties, and an order of the court entered November 10, 2003, all claims asserted in the Consolidated Class Action Complaint pursuant to Section 20A (Insider Trading) of the Securities Exchange Act against the Individual Defendants, and all remaining claims against the Individual Defendants, other than Mr. Blatt and Ms. Patrick, were dismissed without prejudice.

As summarized by the same SEC filing, on May 19, 2003, the Company’s motion to dismiss the Consolidated Class Action Complaint was denied. The matter was then pending, and discovery continued.

According to a press release dated November 8, 2006, Martha Stewart will pay $5 million to settle a class action lawsuit related to her securities-fraud trial, MSLO said in a filing with the Securities and Exchange Commission. MSLO plans to pay roughly $15 million of the $30 million total, and the Company expects its insurers to pay about $10 million. The New York-based Company said in the previous month it recorded an $18.2 million litigation-reserve charge to cover the costs of settling the lawsuit. Stewart was convicted in March 2004 on four charges of obstructing justice and lying to prosecutors in connection with her sale of ImClone. Earlier this year, Stewart settled civil insider-trading charges with the Securities and Exchange Commission, agreeing to $195,000 in fines, and a five-year ban on serving as a director of a public company.

According to a press release dated May 30, 2007, the United States District Court for the Southern District of New York (Judge John E. Sprizzo) ruled to approve a $30 million settlement for shareholders of MSLO who purchased its common stock between January 8, 2002 and October 2, 2002. The action, In re Martha Stewart Living Omnimedia, Inc. Securities Litigation, alleged that Martha Stewart, MSLO and other MSLO company executives misled investors by issuing a number of materially false and misleading statements regarding the risks to MSLO and to its Company brand as a result of damage to Martha Stewart's reputation stemming from the government's investigation into her December 27, 2001 sale of ImClone common stock. This settlement was unique in that Martha Stewart personally contributed $5 million of her own funds towards the $30 million settlement fund. The settlement represents a significant portion of class members' estimated damages arising from Defendants' alleged wrongful conduct.