Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into as of the 16th day
of March, 2009 (the “Effective Date”), by and between Darrell Webb (the
“Executive”) and Jo-Ann Stores, Inc., an Ohio corporation (the “Company”).

Recitals

WHEREAS, the Executive presently serves as President and Chief Executive Officer
of the Company pursuant to a letter agreement with the Company effective as of
June 27, 2006, as amended (the “Existing Letter Agreement”);

WHEREAS, the Executive presently serves as the Chairman of the Board of
Directors of the Company (the “Board”);

WHEREAS, the Executive and the Company wish to provide for the continued
employment of the Executive on the terms and conditions set forth herein; and

WHEREAS, effective as of the date hereof, the Executive and the Company intend
that the Existing Letter Agreement shall cease to be of any force or effect.

Agreement

NOW, THEREFORE, in consideration of the premises and of the mutual covenants
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:

1. Employment. The Company hereby continues to employ the Executive, and the
Executive hereby agrees to continue such employment, effective as of the
Effective Date, upon the terms and conditions set forth herein. This Agreement,
along with the Agreement between the Executive and the Company dated
February 19, 2008 (the “Severance Agreement”), sets forth the terms and
conditions of the Executive’s employment by the Company, represents the entire
agreement of the parties with respect to that subject, and supersedes all prior
understandings and agreements with respect to that subject. Without limiting the
foregoing sentence, effective as of the Effective Date, this Agreement
supersedes in its entirety the Existing Letter Agreement.

2. Position and Duties.

(a) Duties. Subject to Section 2(e) below, the Executive shall be employed by
the Company as President and Chief Executive Officer, and subject to Section
2(e) below, the Executive shall continue to serve as Chairman of the Board. The
Executive shall be responsible for the general management of the affairs of the
Company and shall perform all duties incidental to such positions which may be
required by law and all such other duties as are properly required by the Board.
The Executive shall report directly to the Board. The Executive also shall
serve, without additional compensation, as an officer and director of each of
the other members of the Company’s affiliated group, as determined by the Board,
provided, that such service does not interfere with the performance of the
Executive’s responsibilities as an employee in accordance with this Agreement.

(b) Engaging in Other Employment. While employed by the Company, the Executive
shall devote his full time and attention to the Company and its affiliates and
shall not be employed by any other person or entity. Subject to Section 14 of
the Severance Agreement, the Executive may reasonably participate as a member in
community, civic, or similar organizations and may pursue personal investments,
so long as such activities do not interfere with the performance of the
Executive’s responsibilities as an employee in accordance with this Agreement,
provided that the Executive may serve on corporate boards (other than the Board)
with the approval of the Board, which approval shall not be unreasonably
withheld.

(c) Loyal and Conscientious Performance. The Executive shall act at all times in
compliance with the policies, rules and decisions adopted from time to time by
the Company, its Board and any employing affiliates and perform all the duties
and obligations required of him by this Agreement in a loyal and conscientious
manner.

(d) Location. The Executive’s principal office shall be at the principal
executive offices of the Company in Hudson, Ohio. Except for required business
travel to an extent substantially consistent with the business travel
obligations of other senior Company executives, the Executive will not be
required to relocate to a new principal place of business that is more than
fifty (50) miles (by straight line measurement) from such location.

(e) Chairman Role. During the Term, the Company shall use its best efforts to
cause the Executive to be reelected as Chairman of the Board, unless, at any
time during the Term, the Board adopts a policy that its Chief Executive Officer
should not serve as Chairman of the Board, in which case the Executive shall
cease to serve as Chairman of the Board upon the effective date of such action
by the Company.

3. Term of Employment. The term of the Executive’s employment pursuant to this
Agreement shall commence on the Effective Date and end on August 1, 2011, unless
terminated earlier pursuant to the provisions of this Agreement (the “Term”).

4. Base Salary. During the Term, the Company shall pay the Executive an
annualized base salary (“Annual Base Salary”) at a rate of $875,000, payable in
regular installments in accordance with the Company’s normal payroll practices.
During the Term, the Annual Base Salary shall be reviewed by the Board or a
committee thereof, for increase or decrease, at such time as the salaries of
other senior executives of the Company are reviewed generally. If so adjusted,
the Annual Base Salary shall be adjusted for all purposes of this Agreement.

5. Annual Incentive. For each fiscal year during the Term, the Executive shall
be eligible to participate in an annual incentive plan under terms and
conditions no less favorable than other senior executives of the Company;
provided that the Executive’s “target” annual incentive opportunity shall be
100% of his Annual Base Salary (or such other percentage as determined by the
Board or a committee thereof from time to time) (the “Target Bonus”). The
Executive’s payment under the annual incentive plan shall be based on meeting
predetermined performance objectives established by the Board or a committee
thereof. The annual incentive, if earned, will be paid to the Executive by the
Company no later than two and a half months after the later of (i) the end of
the applicable performance period, or (ii) the end of the calendar year in which
the performance period ends. Nothing contained in this Section 5 will guarantee
the Executive any specific amount of annual incentive compensation, or prevent
the Board or a committee thereof from establishing performance goals and
compensation targets applicable only to the Executive.

6. Equity Awards. The Company will cause equity awards (the “LTIP Awards”) to be
made to the Executive as provided in this Section 6. Except for the LTIP Awards
set forth below, and unless otherwise determined by the Board or a committee
thereof, the Executive shall not be entitled to any equity awards for the 2010
fiscal year and each other fiscal year commencing during the Term.

(a) Options. On the Effective Date, the Company will grant to the Executive a
nonqualified stock option to purchase the Company’s common stock (an “Option”),
which Option shall have a value (as determined below) equal to $400,000. The
exercise price of the Option will be the closing price of the Company’s common
stock on the Effective Date. The normal expiration date of the Option will be
the seventh anniversary of the Effective Date. The Option will become ratably
vested and exercisable on the four successive anniversaries of the Effective
Date, subject to the Executive’s continued employment with the Company and its
affiliates until the relevant vesting dates. The number of shares of the
Company’s common stock subject to the Option shall be determined pursuant to a
Black-Scholes option pricing model incorporating the same assumptions used for
determining the number of stock options granted as of the Effective Date to
other senior executives of the Company. Except as specifically provided herein,
the terms and conditions of the Option shall be subject to the terms of the
Jo-Ann Stores, Inc. 2008 Incentive Compensation Plan (“Incentive Compensation
Plan”) and the award agreement evidencing the grant of the Option, as provided
to senior executives generally.

(b) Performance Shares. On the Effective Date, the Company will grant to the
Executive a performance share award (a “Performance Share Award”) with respect
to a number of shares of the Company’s common stock with a value (determined
pursuant to the same methodology used for such purpose in respect of performance
share grants made as of the Effective Date to other senior executives of the
Company) equal, at target, to $400,000. The Compensation Committee of the Board
shall establish the performance goals and payout schedule (which shall be
consistent with the long-term incentive corporate performance goals and payout
schedule established for other senior executive officers) for the Executive
based upon performance during the 2010 fiscal year. The Performance Share Award
will be paid to the Executive in the form of restricted shares of the Company’s
common stock (with each performance share corresponding to one restricted share
of the Company’s common stock), based on the extent to which the performance
goals for the 2010 fiscal year are achieved, as determined by the Compensation
Committee of the Board. To the extent the performance goals for the 2010 fiscal
year are not met, the Performance Share Award will be forfeited and will cease
to be outstanding. The restricted shares granted under the Performance Share
Award will vest twenty-five percent (25%) per year over four years, commencing
on the date that the restricted shares are granted, subject to the Executive’s
continued employment with the Company and its affiliates until the relevant
vesting dates. Except as specifically provided herein, the terms and conditions
of the Performance Share Award shall be subject to the terms of the Incentive
Compensation Plan and the award agreement evidencing the grant of the
Performance Share Award, as provided to senior executives generally.

(c) Restricted Stock Award. On the Effective Date, the Company will grant to the
Executive an award of restricted stock (a “Restricted Stock Award”) with respect
to a number of shares of the Company’s common stock with a value (determined
pursuant to the same methodology used for such purpose in respect of restricted
stock grants made as of the Effective Date to other senior executives of the
Company) equal to $4,000,000. Two-thirds (2/3) of the shares underlying the
Restricted Stock Award will vest on the second anniversary of the Effective Date
and one-third (1/3) of the shares underlying the Restricted Stock Award will
vest on the third anniversary of the Effective Date, subject to the Executive’s
continued employment with the Company and its affiliates until the relevant
vesting dates. Except as specifically provided herein, the terms and conditions
of the Restricted Stock Award shall be subject to the terms of the Incentive
Compensation Plan and the award agreement evidencing the grant of the Restricted
Stock Award, as provided to senior executives generally.

7. Benefits; Expense Reimbursements. During the Term, and except as otherwise
provided in Section 6 of this Agreement, the Executive shall be eligible to
participate in all welfare, perquisites, fringe benefit, qualified or
nonqualified deferred compensation and retirement plans, and other benefit
plans, practices, policies and programs, maintained by the Company applicable to
senior executives of the Company generally, in each case as amended from time to
time. The Executive shall be reimbursed for all reasonable travel and other
out-of-pocket expenses actually and properly incurred by the Executive during
the Term in connection with carrying out his duties hereunder in accordance with
the Company’s policies, as may be in effect from time to time, for its senior
executives generally.

8. Termination.

(a) Notwithstanding anything to the contrary contained herein, the Executive’s
employment may be terminated prior to the end of the Term as follows:

(i) automatically, upon the death or “Disability” (as defined in the Severance
Agreement) of the Executive;

(ii) by the Executive, for any reason or no reason, in which case the date of
termination shall be the date specified in the notice of termination; provided
that if the Executive terminates employment without “Good Reason (before a
Change of Control)” (as defined in the Severance Agreement), then the Executive
agrees to provide the Company with at least one year’s advance written notice
prior to such termination (the “Notice Period”); and

(iii) by the Company for any reason or no reason, in which case the date of
termination shall be the date specified in the notice of termination.

(b) The Executive hereby covenants and agrees that if he voluntarily terminates
employment pursuant to Section 8(a)(ii) without “Good Reason (before a Change of
Control)” (as defined in the Severance Agreement) and prior to the expiration of
the Notice Period, then for the remainder of the Notice Period, the Executive
shall not, without the prior written consent of the Company, on the Executive’s
own behalf or on the behalf of any person, firm or company, directly or
indirectly, attempt to influence, persuade or induce, or assist any other person
in so persuading or inducing, any of the employees of the Company (or any of its
affiliates) to give up his or her employment with the Company (or any of its
affiliates), and the Executive shall not directly or indirectly solicit or hire
employees of the Company (or any of its subsidiaries or affiliates) for
employment with any other employer. The Executive agrees and acknowledges that
the promises and obligations made by the Company in this Agreement (specifically
including, but not limited to, the LTIP Awards provided for under Section 6
hereof) constitute sufficient consideration for the covenants contained in this
Section 8(b).

(c) Notwithstanding any other provision of this Agreement, upon the termination
of the Executive’s employment for any reason, unless otherwise requested by the
Board, the Executive shall immediately resign from all positions that he holds
or has ever held with the Company and its affiliated group (and with any other
entities with respect to which the Company or its affiliates have requested the
Executive to perform services), including, without limitation, the Board and all
boards of directors of the Company’s affiliated group. The Executive hereby
agrees to execute any and all documentation to effectuate such resignations upon
request by the Company, but he shall be treated for all purposes as having so
resigned upon termination of his employment, regardless of when or whether he
executes any such documentation.

9. Effect of Termination.

(a) Except as otherwise provided in this Section 9, upon any termination of
employment, the Executive’s entitlement to severance payments and benefits shall
be governed exclusively by the Severance Agreement, the Incentive Compensation
Plan and the terms of the award agreements evidencing the LTIP Awards.

(b) Notwithstanding the foregoing, and in addition to the benefits and payments
provided under the agreements and plans listed in Section 9(a) hereof, if the
Executive’s employment is terminated by the Company without “Cause” or by the
Executive with “Good Reason (before a Change of Control)” (as those terms are
defined in the Severance Agreement), the Executive’s Restricted Stock Award
outstanding at the time of termination (to the extent then not already vested)
will vest immediately.

10. Successors.

(a) This Agreement is personal to the Executive and is not assignable by the
Executive. This Agreement shall inure to the benefit of and be enforceable by
the Executive’s legal representatives. This Agreement shall inure to the benefit
of and be binding upon the Company and its affiliates, and their respective
successors and assigns.

(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) of all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform the Company’s obligations under this Agreement in the same manner and to
the same extent that the Company would be required to perform them if no such
succession had taken place.

11. Notice. Any notice to be given hereunder by either party to the other must
be in writing and be effectuated either by personal delivery in writing or by
mail, registered or certified, postage prepaid, with return receipt requested.
Mailed notices shall be addressed to the parties at the following addresses:

 
If to the Company or any affiliate:
Chairman, Compensation Committee
Jo-Ann Stores, Inc.
5555 Darrow Road
Hudson, OH 44236
cc: General Counsel
Jo-Ann Stores, Inc.
5555 Darrow Road
Hudson, OH 44236
cc:Derek D. Bork, Esq.
Thompson Hine LLP
3900 Key Center
127 Public Square
Cleveland, OH 44114
If to the Executive:

At the most recent contact information on file in the payroll records of the
Company.

12. Waiver of Breach. The waiver by any party to a breach of any provision in
this Agreement cannot operate or be construed as a waiver of any subsequent
breach by a party.

13. Severability. The invalidity or unenforceability of any particular provision
in this Agreement shall not affect the other provisions hereof, and this
Agreement shall be construed in all respects as if the invalid or unenforceable
provision were omitted.

14. Withholding. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local, foreign or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.

15. Employment at Will. The Executive and the Company acknowledge that, except
as may otherwise be provided under any other written agreement between the
Executive and the Company, or any of its affiliates, the employment of the
Executive by the Company or any of its affiliates is “at will” and the
Executive’s employment may be terminated at any time.

16. Amendment. No modifications or amendments of the terms and conditions herein
shall be effective unless in writing and signed by the parties or their
respective duly authorized agents.

17. Governing Law; Disputes.

(a) To the extent not preempted by the laws of the United States, the laws of
the state of Ohio, applicable to contracts made and to be performed wholly
within that state, shall be the controlling law in all matters relating to this
Agreement.

(b) The parties agree that any dispute or controversy arising under or in
connection with this Agreement shall be settled pursuant to the terms and
conditions of Section 12 of the Severance Agreement. Notwithstanding the
foregoing, the Company shall not be required to seek or participate in
arbitration regarding any breach by the Executive of his agreements in Section
8(b) hereof, but may pursue its remedies for such breach in a court of competent
jurisdiction in Cleveland, Ohio. If, at the time of enforcement of Section 8(b),
a court holds that the restrictions stated therein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.

(c) The Executive acknowledges and agrees that the Company would be damaged
irreparably in the event the provisions of Section 8(b) hereof were not
performed in accordance with their specific terms or were otherwise breached and
that money damages would be an inadequate remedy for any such non-performance or
breach. Therefore, the Executive agrees that that Company shall be entitled, in
addition to other rights and remedies existing in its favor, to an injunction or
injunctions to prevent any breach or threatened breach of any of such provisions
and to enforce such provisions specifically (without posting a bond or other
security).

18. Mitigation. In no event will the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts
(including amounts for damages for breach) payable to the Executive under any of
the provisions of this Agreement and those amounts will not be reduced simply
because the Executive obtains other employment.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

JO-ANN STORES, INC.

  /s/ Beryl Raff
By: Beryl Raff
Title: Chairman, Compensation Committee

EXECUTIVE

  /s/ Darrell Webb
Darrell Webb