KMART SETTLES SUIT WITH MARTHA STEWART COMPANY

Extends Retail Partnership Until 2009

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NEW YORK (AdAge.com) -- Kmart Corp. announced it has reached an agreement with Martha Stewart Living Omnimedia to settle a lawsuit related to the retailer's Martha Stewart Everyday housewares brand.

Kmart agreed to extend the licensing

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deal with Omnimedia by another two years to 2009 and expand it to new product categories, such as ready-to-assemble furniture. The deal eliminates some minimum royalty guarantees for individual products, while maintaining guarantees in the total contract.

Kmart filed a lawsuit in February against Omnimedia, charging the lifestyle media mogul's company with demanding excessive royalties for the housewares line. Since then, Ms. Stewart was convicted on charges of lying to federal investigators probing her sale of stock in troubled biotech company Imclone Systems.

After her conviction, Ms. Stewart stepped down as chairman-CEO of her company, bringing up questions about the future of the Martha Stewart brand in general and the Kmart merchandise line in particular.

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