**Exhibit 10.6****AGREEMENT**THIS AGREEMENT (“Agreement”) is made as of the 27th day of July, 2006, between J0-ANNSTORES, INC., an Ohio corporation (the “Company”), and Jim Kerr (“Executive”).The Company is entering into this Agreement in recognition of the importance of Executive’sservices to the continuity of management of the Company and based upon its determination that itwill be in the best interests of the Company to encourage Executive’s continued attention anddedication to Executive’s duties as a general matter and in the potentially disruptivecircumstances of a possible Change of Control of the Company. (As used in this Agreement, the term“Change of Control” and certain other capitalized terms have the meanings ascribed to them inSection 17 at the end of this Agreement.)The Company and Executive agree, effective as of the date first set forth above (the “EffectiveDate”), as follows:1. ***Severance Benefits Upon Certain Terminations Occurring Before a Change of Control.***If, beforethe occurrence of a Change of Control, Executive’s employment with the Company is terminated (a) bythe Company without Cause, or (b) by Executive for Good Reason, Executive shall be entitled to thefollowing as Severance Benefits:     (a) The Company shall pay Executive an amount equal to Executive’s Base Salary for eighteen(18) months payable in consecutive bi-weekly installments at the same times and in the sameamounts as if Executive had remained in the employ of the Company and had continued to earnExecutive’s Base Salary for such eighteen (18) month period.     (b) The Company shall continue to provide Executive with the welfare benefits of medicalinsurance, dental insurance, and group term life insurance for the eighteen (18) monthsfollowing the Termination Date, except that     (i) the Company may stop providing medical insurance and dental insurance coverageearlier if and when Executive accepts full time employment with a subsequent employer thatgenerally makes medical insurance available to its executives and Executive is eligible forthat coverage with the subsequent employer; and     (ii) the Company may stop providing group term life insurance earlier if and whenExecutive accepts full time employment with a subsequent employer and that employer providesExecutive with group term life insurance coverage.
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     (iii) If the Termination Date occurs during a fiscal year in which a bonus was earnedunder any Company sponsored bonus plan, the Executive will be entitled to a pro-rata portionof that fiscal year’s bonus based on the attainment of the performance metrics. Thispro-rata bonus will be paid at its normal time at the end of the fiscal year.The benefits to be provided by the Company pursuant to this paragraph shall be provided toExecutive at the same cost to Executive, and at the same coverage level, as is applicable tocontinuing executives in comparable positions from time to time during the period the benefitsare continued.2. ***Change of Control Severance Benefits Upon Certain Terminations Occurring After a Change ofControl.***If, after the occurrence of a Change of Control, Executive’s employment with the Companyis terminated (a) by the Company without Cause, or (b) by Executive for Good Reason, Executiveshall be entitled to the following as Change of Control Severance Benefits:     (a) The Company shall make a lump sum cash payment to Executive, not later than ten businessdays after the Termination Date, in an amount equal to two times the sum of (i) Executive’s BaseSalary plus (ii) the greater of (A) Executive’s average annual bonus earned over the three fullfiscal years of the Company ended before the Termination Date, or (B) Executive’s target annualbonus established for the bonus plan year in which the Termination Date occurs. If Executive hasbeen employed by the Company for fewer than three (3) but at least one (1) full fiscal year of theCompany ended before the Termination Date, the average of the bonuses earned in the two (2) fullfiscal years of the Company ended before the Termination Date, or the amount of the bonus earned inthe one full fiscal year of the Company ended before the Termination Date, as the case may be,shall be substituted for the average referred to in (A) above.     (b) If the Termination Date occurs after the end of a bonus year under any Companysponsored bonus plan and before the bonus with respect to that bonus year has been paid, theCompany shall pay to Executive, not later than ten business days after the Termination Date, anamount equal to the bonus for that bonus year to which Executive would have been entitled hadthe bonus plan for that bonus year remained in effect without any change and had Executiveremained in the employ of the Company through the date on which bonuses for that bonus year werepaid.     (c) The Company shall make a lump sum cash payment to Executive, not later than tenbusiness days after the Termination Date, in an amount equal to the greater of (i) Executive’sunpaid targeted annual bonus, established for the bonus year in which the Termination Dateoccurs, multiplied by a fraction, the numerator of which is the number of days Executive wasemployed by the Company in the bonus year through the Termination Date, and the denominator ofwhich is 365, or(b) the bonus amount specifically guaranteed to Executive for that bonus year under anyother agreement between the Company and Executive.
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     (d) The Company shall continue to provide Executive with the welfare benefits of medicalinsurance, dental insurance, and group term life insurance through the second anniversary of theTermination Date, except that     (i) the Company may stop providing medical insurance and dental insurance coverageearlier if Executive accepts full time employment with a subsequent employer that generallymakes medical insurance available to its executives and Executive is eligible for thatcoverage with the subsequent employer; and     (ii) the Company may stop providing group term life insurance earlier if Executiveaccepts full time employment with a subsequent employer and that employer provides Executivewith group term life insurance coverage.     (e) The benefits to be provided by the Company pursuant to this paragraph shall be providedto Executive at the same cost to Executive, and at the same coverage level, as in effect as ofthe Termination Date.     (f) All stock options granted to Executive then outstanding will become fully exercisableas of the date of the Change of Control, and all restrictions and conditions applicable torestricted stock granted to Executive will be deemed to have been satisfied as of the date ofthe Change of Control.3. ***Earned But Unpaid Base Salary and Accrued Paid Time Off Pay Payable Upon Any Termination ofEmployment; Treatment of Long-Term Incentive Awards.***Upon any termination of Executive’semployment for any reason and at any time, the Company shall pay to Executive (or, whereappropriate, to Executive’s Beneficiary), not later than ten days after the Termination Date, (a)all earned but unpaid Base Salary through the Termination Date, and (b) an amount equal to theaggregate dollar value of all paid time off earned but not taken by Executive (“Accrued Paid TimeOff Pay”) before the Termination Date. In addition, upon any termination of Executive’semployment, all outstanding long-term incentive awards shall be subject to the treatment providedunder the applicable long-term incentive plan of the Company except as explicitly providedotherwise in this Agreement. .4. ***Termination Due to Retirement, Disability, or Death.***If Executive’s employment is terminateddue to Retirement, Disability, or death while this Agreement remains in effect (whether before orafter the occurrence of a Change of Control), neither Executive nor Executive’s Beneficiaries willbe entitled to Severance Benefits or Change of Control Severance Benefits under either of Sections1 or 2 but Executive or Executive’s Beneficiaries, as appropriate, will be entitled to the paymentsprovided for in Section 3and to such benefits as may beprovided under the terms of the Company’s disability, retirement, survivor’s benefits, insurance,and other applicable plans and programs of the Company then in effect.5. ***Termination for Cause or by Executive other than for Good Reason.***If Executive’s employment isterminated either by the Company for Cause or by
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Executive other than for Good Reason while thisAgreement remains in effect (whether before or after the occurrence of a Change of Control) andSection 6 does not apply, neither Executive nor Executive’s Beneficiaries will be entitled toSeverance Benefits or Change of Control Severance Benefits under either of Sections 1 or 2 butExecutive or Executive’s Beneficiaries, as appropriate, will be entitled to the payments providedfor in Section 3and the Company shall pay to Executive such other amounts to which Executive isentitled under any compensation plans of the Company, at the time such payments are due. Except asprovided in this Section 5, the Company shall have no further obligations to Executive under thisAgreement.6. ***Special Provision Applicable Only if Executive is Terminated both in Advance of and inContemplation of a Change of Control.***If Executive is terminated by the Company (a) incontemplation of and not more than six full calendar months before the occurrence of a Change ofControl, and (b) under circumstances such that if the termination had occurred immediately afterthat Change of Control Executive would have been entitled to Change of Control Severance Benefitsunder Section 2 above, then the Company shall pay and provide to Executive all of the amounts andbenefits specified in Section 2, reduced by such amounts and such benefits, if any, that theCompany has otherwise paid and provided to Executive pursuant to Section 1 above. The Companyshall make any cash payment required pursuant to this Section 6 within ten days of the occurrenceof the Change of Control.7. ***Change of Control Ignored if Employment Continues for More than Two Years Thereafter.***IfExecutive’s employment continues for more than two years following the occurrence of any Change ofControl, that particular Change of Control will deemed never to have occurred for purposes of thisAgreement.8. ***Term of Agreement, Right to Severance Benefits Upon Determination by Company Not to Renew.***          8.1. ***Term.***This Agreement shall be effective as of the Effective Date and shall thereafter applyto any termination of Executive’s employment occurring on or before July 27, 2009. Unless thisAgreement is earlier terminated pursuant to its terms, on July 27, 2009 and on July 27 of eachsucceeding year thereafter (a “Renewal Date”), the term of this Agreement shall be automaticallyextended for an additional year unless eitherparty has given notice to the other, at least one year in advance of that Renewal Date, that theAgreement shall not apply to any termination of Executive’s employment occurring after that RenewalDate.          8.2. ***Right to Severance Benefits.***If the Company gives Executive notice that this Agreement shallnot apply to any termination of Executive’s employment occurring after a particular Renewal Date,Executive shall have the right to terminate Executive’s employment at any time during the firstthree months of the final year during which this Agreement is thereafter scheduled to be effective(e.g., if the Company gives notice that the Agreement is not to apply to any termination after July
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31, 2009, at any time during the months of August, September, and October 2008) and Executive shallthereupon be entitled to receive Severance Benefits to the same extent as if all of the conditionsto Executive’s right to receive Severance Benefits under Section 2 had been satisfied.9. ***Excise Tax.***If there is any conflict between the provisions of this Section 9 and any other provision of thisAgreement regarding payments to be made or benefits to be provided to Executive under thisAgreement following a Change of Control, the provisions of this Section 9 shall govern.          9.1. ***Acknowledgement.***The Company and Executive acknowledge that, following a Change of Control,one or more payments or distributions to be made by the Company to or for the benefit of Executive(whether paid or payable or distributed or distributable pursuant to the terms of this Agreement,under some other plan, agreement, or arrangement, or otherwise, and including, without limitation,any income recognized by Executive upon exercise of an option granted by the Company to acquireCommon Shares issued by the Company) (a “Payment”) may be determined to be an Excess ParachutePayment that is not deductible by the Company for federal income tax purposes and with respect towhich Executive will be subject to an excise tax because of Sections 280G and 4999, respectively,of the Code (hereinafter referred to respectively as “Section 280G” and “Section 4999”).          9.2. ***Procedure.***If Executive’s employment is terminated after a Change of Control occurs, theAccounting Firm, which, subject to any inconsistent position asserted by the Internal RevenueService, shall make all determinations required to be made under this Section 9, shall determine(a) the maximum amount of Parachute Payments that Executive may receive without becoming subject tothe excise tax imposed by Section 4999 and without the Company suffering a loss of deduction underSection 280G (this maximum amount being the “280G Limit”) and (b) whether, if all Payments weremade without regard to this Section 9, any Payment would be an ExcessParachute Payment. The Accounting Firm shall communicate its determination, together with detailedsupporting calculations, to the Company and to Executive within 30 days after the Termination Dateor such earlier time as is requested by the Company. The Company and Executive shall cooperatewith each other and the Accounting Firm and shall provide necessary information so that theAccounting Firm may make all such determinations. The Company shall pay all of the fees of theAccounting Firm for services performed by the Accounting Firm as contemplated in this Section 9.          9.3. ***Reduction or Gross Up if Payments Would Constitute Excess Parachute Payments.***If any Paymentwould, if made without regard to this Section 9, constitute an Excess Parachute Payment, either (a)the payments to be made to Executive under this Agreement without regard to this Section 9 shall bereduced as provided in Section 9.4, or (b) the Company shall make all of the payments to be made toExecutive under all of the provisions of this Agreement other than this
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Section 9 and, in addition,the Company shall make the Gross Up Payments specified in Section 9.5.          9.4. ***Reduction in Payments if Aggregate Parachute Payments Would Otherwise not Exceed 110% of 280GLimit.***If the aggregate value of all Parachute Payments does not exceed 110% of the 280G Limit, thepayments to be made to Executive under this Agreement shall be reduced, but not below zero, by suchamount so that the aggregate value of the Parachute Payments actually made to Executive will be OneDollar ($1.00) less than the 280G Limit.          9.5. ***Gross Up Payment if Aggregate Parachute Payments Exceed 110% of 280G Limit.*** If the aggregatevalue of all Parachute Payments exceeds 110% of the 280G Limit and Executive is therefore subjectto the excise tax under Section 4999 on Excess Parachute Payments received (the “Excise Tax”), theCompany shall, in addition to making all other Payments to Executive, make additional payments(“Gross Up Payments”) to Executive, from time to time and at the same time as Parachute Paymentsare made to Executive, in such lump sum amount or amounts as are sufficient, from time to time, toplace Executive in the same net after tax position that Executive would have been in if (a)Executive had to bear (without any Gross Up Payment under this Section 9.5) the Excise Tax withrespect to 10% of all Parachute Payments received by Executive, (b) the Excise Tax did nototherwise apply to any Payments, and (c) Executive had not incurred any interest charges orpenalties with respect to the imposition any portion of the Excise Tax. For purposes of thisSection 9, all payments received by Executive from the Company (whether under this Agreement orotherwise and including all Gross Up Payments received by Executive) shall be deemed to be subjectto Federal and state tax at the highest marginal tax rates applicable to Executive in the year inwhich the Gross Up Payment is made.          9.6. ***Imposition of Excise Tax Following Reduction of Payments Prescribed by Section 9.4.***If,notwithstanding a reduction of payments to Executive under this Agreement as contemplated bySection 9.4, it is ultimately determined by a court or pursuant to a final determination by theInternal Revenue Service that any payment received by Executive is an Excess Parachute Payment andExecutive is therefore obligated to pay Excise Tax with respect to any Payments, the Company shallmake Gross Up Payments to Executive from time to time, in such lump sum amount or amounts as aresufficient, from time to time, to place Executive in the same net after tax position that Executivewould have been in if no such Payments constituted Excess Parachute Payments subject to the ExciseTax, the reduction of Parachute Payments prescribed by Section 9.4 had been made exactly asintended (i.e., to the extent but only to the extent necessary to avoid the Excise Tax), andExecutive had not incurred any interest charges or penalties with respect to the imposition of anyExcise Tax.          9.7. ***Imposition of Additional Excise Tax Following Payment of Gross Up Prescribed by Section 9.5.***If the Internal Revenue Service determines that any Payment gives rise, directly or indirectly, toliability on the part of Executive for the
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Excise Tax (and/or any penalties and/or interest withrespect to any Excise Tax) in excess of the amount, if any, previously determined by the AccountingFirm, the Company shall make further additional cash payments to Executive not later than the duedate of any payment indicated by the Internal Revenue Service with respect to these matters, insuch amounts as are necessary to put Executive in the same position, after payment of all federaland state taxes (whether income taxes, Excise Taxes, or other taxes) and any and all penalties andinterest with respect to any such taxes, as Executive would have been in if the Accounting Firm hadanticipated the later determination by the Internal Revenue Service and the Company had madeappropriate Gross Up Payments to the extent contemplated by Section 9.5 in the first instance.          9.8. ***Potential Contest by the Company of Internal Revenue Service Determination.***If the Companydesires to contest any determination by the Internal Revenue Service with respect to the amount ofExcise Tax, Executive shall, upon receipt from the Company of an unconditional written undertakingto indemnify and hold Executive harmless (on an after tax basis) from any and all adverseconsequences that might arise from the contesting of that determination, cooperate with the Companyin that contest at the Company’s sole expense. Nothing in this Section 9.8 shall require Executiveto incur any expense other than expenses with respect to which the Company has paid to Executivesufficient sums so that after the payment of the expense by Executive and taking into account thepayment by the Company with respect to that expense and any and all taxes that may be imposed uponExecutive as a result of Executive’s receipt of that payment, the net effect is no cost toExecutive. Nothing in this Section 9.8 shall require Executive to extend the statute oflimitations with respect to any item or issue in Executive’s tax returns other than, exclusively,the Excise Tax. If, as the result of the contest of any assertion by the Internal Revenue Servicewith respect to Excise Tax, Executive receives a refund of Excise Tax previously paid and/or anyinterest with respect thereto, Executive shall promptly pay to the Company such amount as willleave Executive, net of the repayment and all tax effects, in the same position, after all taxesand interest, that he would have been in if the refunded Excise Tax had never been paid.10. ***Outplacement Assistance.***Following a termination of employment in which Severance Benefits orChange of Control Severance Benefits are payable hereunder the Company shall provide Executive withoutplacement services obtained by the Company at its cost and commensurate with the outplacementservices typically provided by the Company to Executives who left the employ of the Company beforethe Effective Date of this Agreement until Executive obtains subsequent employment or selfemployment.11. ***The Company’s Payment Obligation.***          11.1. ***Payment Obligations Absolute.***The Company’s obligation to make the payments and provide thebenefits provided for herein shall be absolute and unconditional, and shall not be affected by anycircumstances, including, without limitation, any offset, counterclaim, recoupment, defense, orother right which the
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Company may have against Executive or anyone else. All amounts payable bythe Company hereunder shall be paid without notice or demand. Each and every payment madehereunder by the Company shall be final, and the Company shall not seek to recover all or any partof such payment from Executive or from whomsoever may be entitled thereto, for any reasonswhatsoever.          11.2. ***No Mitigation.***Executive shall not be obligated to seek other employment in mitigation ofthe amounts payable or benefits to be provided under any provision of this Agreement, and theobtaining of any such other employment shall in no event effect any reduction of the Company’sobligations to make the payments or provide any benefits as required under this Agreement, exceptto the limited extent provided above in cases where a subsequent employer provides medical, dentaland/or group term life insurance coverage.          11.3. ***Source of Payments and Benefits.***All payments under this Agreement shall be made solely fromthe general assets of the Company (or from a grantor trust, if any, established by the Company forpurposes of making payments under this Agreement and other similar agreements), and Executive shallhave the rights of an unsecured general creditor of the Company with respect thereto.12. ***Legal Remedies.***          12.1. ***Payment of Legal Fees.***Unless prohibited by law, the Company shall pay all legal fees, costsof arbitration and/or litigation, prejudgment interest, and other expenses incurred in good faithby Executive as a result of the Company’s refusal to provide the Severance Benefits or Change ofControl Severance Benefits to which Executive deems Executive to be entitled under this Agreement,as a result of the Company’s contesting the validity, enforceability, or interpretation of thisAgreement, or as a result of any conflict between the parties pertaining to this Agreement,provided, however, that the Company shall be reimbursed by Executive for all such fees and expensesif, but only if, it is ultimately determined by a court of competent jurisdiction or by thearbitrators, as the case may be, that Executive had no reasonable grounds for the positionpropounded by Executive in the arbitration and/or litigation (which determination need not be madesimply because Executive fails to succeed in the arbitration and/or litigation).          12.2. ***Arbitration.***Subject to the following sentences, any dispute or controversy arising under orin connection with this Agreement shall be settled by mandatory arbitration (in lieu oflitigation), conducted before a panel of three arbitrators sitting in a location selected byExecutive within 50 miles from Hudson, Ohio, in accordance with the rules of the AmericanArbitration Association then in effect. Any dispute which arises with respect to Executive’salleged violation of the prohibition on competition or any other restriction contained in Section14 of this Agreement shall be settled by judicial proceedings (in any court of competentjurisdiction with respect to such dispute or claim). Except as provided above for claims ordisputes under Section 14, judgment may be entered on the award of the arbitrator in any courthaving proper jurisdiction.
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13. ***Withholding.***The Company shall be entitled to withhold from any amounts payable under thisAgreement all taxes as legally shall be required (including, without limitation, any United Statesfederal taxes, and any other state, city, or local taxes).14. ***Noncompetition.***          14.1. ***Prohibition on Competition.***Without the prior written consent of the Company, during theterm of this Agreement, and, if Severance Benefits are paid hereunder, thereafter during the 18month period beginning on the Termination Date or if Change of Control Severance Benefits are paidhereunder, thereafter through the second anniversary of the Termination Date, Executive shall not,as an employee, an officer, or as a director, engage directly or indirectly in any business orenterprise that engages to any significant extent within the United Sates of America in the sale atretail or direct marketing to consumers offabric and craft components. Notwithstanding the foregoing, Executive may purchase and hold forinvestment less than two percent of the shares of any corporation whose shares are regularly tradedon a national securities exchange or in the over-the-counter market.          14.2. ***Disclosure of Information.***Executive acknowledges that Executive has and has had access toand knowledge of certain confidential and proprietary information of the Company, which isessential to the performance of Executive’ s duties as an employee of the Company. Executive willnot, during or after the term of Executive’s employment by the Company, in whole or in part,disclose such information to any person, firm, corporation, association, or other entity for anyreason or purpose whatsoever, nor shall Executive make use of any such information for their ownpurposes.          14.3. ***Covenants Regarding Other Employees.***During the term of this Agreement and thereafter duringany period during which Executive is subject to the restriction set forth in Section 14.1,Executive shall not to attempt to induce any employee of the Company to terminate his or heremployment with the Company or accept employment with any competitor of the Company and Executiveshall not interfere in any similar manner with the business of the Company.15. ***Successors and Assignment.***          15.1. ***Successors to the Company.***The Company will require any successor (whether direct orindirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of thebusiness and/or assets of the Company to expressly assume and agree to perform the Company’sobligations under this Agreement in the same manner and to the same extent that the Company wouldbe required to perform them if no such succession had taken place. Failure of the Company to obtainsuch assumption and agreement prior to the effective date of any such succession shall be a breachof this Agreement and shall entitle Executive to notify the Company that, unless the failure isremedied within 30 days after delivery of the notice from Executive, Executive’s employment willterminate as of the 31st day after the delivery of the notice. If any such notice is given and thefailure is not
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so remedied, Executive will be entitled to receive the same payments and benefitsfrom the Company, and on the same schedule, as if the Company had undergone a Change of Control onthe date of the succession and Executive had thereupon terminated his employment for Good Reason.          15.2. ***Assignment by Executive.***This Agreement shall inure to the benefit of and be enforceable byExecutive and each of Executive’s personal or legal representatives, executors, administrators,successors, heirs, distributes, devisees, and legatees. If Executive dies while anyamount would still be payable to Executive hereunder had Executive continued to live, all suchamounts, unless otherwise provided herein, shall be paid in accordance with the terms of thisAgreement, to Executive’s Beneficiary. If Executive has not named a Beneficiary, then such amountsshall be paid to Executive’s devisee, legatee, or other designee, or if there is no such designee,to Executive’s estate.16. ***Miscellaneous.***          16.1. ***Employment Status.***Except as may be provided under any other agreement between Executiveand the Company, the employment of Executive by the Company is “at will,” and, prior to theeffective date of a Change of Control, may be terminated by either Executive or the Company at anytime, subject to applicable law.          16.2. ***Entire Agreement.***This Agreement sets forth the entire agreement between the parties withrespect to severance benefits to be provided upon any termination of Executive’s employment andsupersedes any and all prior employment, retention, and/or change of control agreements betweenExecutive and the Company other than the offer letter being provided by the Company to Executivecontemporaneously with this Agreement..          16.3. ***Beneficiaries.***Executive may designate one or more persons or entities as the primary and/orcontingent Beneficiaries of any Severance Benefits or Change of Control Severance Benefits owing toExecutive under this Agreement. Such designation must be in the form of a signed writingacceptable to the Committee. Executive may make or change such designation at any time.          16.4. ***Severability.***In the event any provision of this Agreement shall be held illegal or invalidfor any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement,and the Agreement shall be construed and enforced as if the illegal or invalid provision had notbeen included.          16.5. ***Modification.***No provision of this Agreement may be modified, waived, or discharged unlesssuch modification, waiver, or discharge is agreed to in writing and signed by Executive and by anauthorized representative of the Company, or by the respective parties’ legal representatives andsuccessors.          16.6. ***Applicable Law.***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
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performed wholly within that state, shall be the controllinglaw in all matters relating to this Agreement.17. ***Definitions.***Whenever used in this Agreement, the following capitalized terms shall have themeanings set forth below:          17.1. ***“Accounting Firm”***means the independent auditors of the Company for the Fiscal Year precedingthe year in which the Change of Control occurred and such firm’s successor or successors; provided,however, if such firm is unable or unwilling to serve and perform in the capacity contemplated bythis Agreement, the Company shall select another national accounting firm of recognized standing toserve and perform in that capacity under this Agreement, except that such other accounting firmshall not be the then independent auditors for the Company or any of its affiliates (as defined inRule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended).          17.2. ***“280G Limit”***has the meaning assigned to it in Section 9.2.          17.3. ***“Base Salary”***means an amount equal to Executive’s base annual salary at the highestrate payable at any time before the date of a termination. For this purpose, Base Salary shall notinclude bonuses, long-term incentive compensation, or any remuneration other than base annualsalary.          17.4. ***“Beneficial Owner”***shall have the meaning ascribed to such term in Rule 13d-3 of theGeneral Rules and Regulations under the Exchange Act.          17.5. ***“Beneficiary”***means the persons or entities designated or deemed designated by Executivepursuant to Section 15.2 herein.          17.6. ***“Board”***means the Board of Directors of the Company.          17.7. ***“Cause”***shall mean the occurrence of any one or more of the following:     (a) The willful and continued failure by Executive to substantially perform his or hernormal duties (other than any such failure resulting from Executive’s Disability), after awritten demand for substantial performance is delivered to Executive that specificallyidentifies the manner in which the Committee believes that Executive has not substantiallyperformed his or her duties, and Executive has failed to remedy the situation within 30 businessdays of receiving such notice;     (b) Executive’s conviction for committing an act of fraud, embezzlement, theft, or othercriminal act constituting a felony; or     (c) The willful engaging by Executive in gross negligence materially and demonstrablyinjurious to the Company. However, no act, or failure to act on Executive’s part, shall beconsidered “willful” unless done, or omitted to be done,
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by Executive not in good faith andwithout reasonable belief that his or her action or omission was in or not opposed to the bestinterest of the Company.          17.8. ***Change of Control.***A “Change of Control” shall be deemed to have occurred if at any time orfrom time to time while this Agreement is in effect:     (a) Any person (other than the Company, any of its Subsidiaries, any member of either ofthe Founding Families, any employee benefit plan or employee stock ownership plan of theCompany, or any person organized, appointed, or established by the Company for or pursuant tothe terms of any such plan), alone or together with any of its affiliates, becomes theBeneficial Owner of 15% or more (but less than 50%) of the Common Shares then outstanding;     (b) Any person (other than the Company, any of its Subsidiaries, any employee benefit planor employee stock ownership plan of the Company, or any person organized, appointed, orestablished by the Company for or pursuant to the terms of any such plan), alone or togetherwith any of its affiliates, becomes the Beneficial Owner of 50% or more of the Common Sharesthen outstanding;     (c) Any person commences or publicly announces an intention to commence a tender offer orexchange offer the consummation of which would result in the person becoming the BeneficialOwner of 15% or more of the Common Shares then outstanding;     (d) At any time during any period of 24 consecutive months, individuals who were directorsat the beginning of the 24-month period no longer constitute a majority of the members of theBoard of the Company, unless the election, or the nomination for election by the Company’sshareholders, of each director who was not a director at the beginning of the period is approvedby at least a majority of the directors who (i) are in office at the time of the election ornomination and (ii) were directors at the beginning of the period;     (e) A record date is established for determining shareholders entitled to vote upon (i) amerger or consolidation of the Company with another corporation in which those persons who areshareholders of the Company immediately before the merger or consolidation are to receive orretain less than 60% of the stock of the surviving or continuing corporation, (ii) a sale orother disposition of all or substantially all of the assets of the Company, or (iii) thedissolution of the Company;     (f) (i) the Company is merged or consolidated with another corporation and those personswho were shareholders of the Company immediately before the merger or consolidation receive orretain less than 60% of the stock of the surviving or continuing corporation, (ii) there occursa sale or other disposition of all or substantially all of the assets of the Company, or (iii)the Company is dissolved; or
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     (g) Any person who proposes to make a “control share acquisition” of the Company, withinthe meaning of Section 1701.01(Z) of the Ohio General Corporation Law, submits or is required tosubmit an acquiring person statement to the Company.Notwithstanding anything herein to the contrary, if an event described in clause (b), clause (d),or clause (f) above occurs, the occurrence of that event will constitute an irrevocable Change ofControl. Furthermore, notwithstanding anything herein to the contrary, if an event described inclause (c) occurs, and the Board either approves such offer or takes no action with respect to suchoffer, then the occurrence of that event will constitute an irrevocable Change of Control. On theother hand, notwithstanding anything herein to the contrary, if an event described in clause (a),clause (e), or clause (g) above occurs, or if an event described in clause (c) occurs and the Boarddoes not either approve such offer or take no action with respect to such offer as described in thepreceding sentence, and a majority of those members of the Board who were Directors prior to suchevent determine, within the 90-day period beginning on the date such event occurs, that the eventshould not be treated as a Change of Control, then, from and after the date that determination ismade, that event will be treated as not having occurred. If no such determination is made, aChange of Control resulting from any of the events described in the immediately preceding sentencewill constitute an irrevocable Change of Control on the 91st day after the occurrence of the event.          17.9. ***“Change of Control Severance Benefits”***means those payments and benefits that may becomepayable pursuant to Section 2.          17.10. ***“Code”***means the United States Internal Revenue Code of 1986, as amended.          17.11. ***“Committee”***means the Compensation Committee of the Board, or any other committee appointedby the Board to perform the functions of the Compensation Committee.          17.12. ***“Company”***means Jo-Ann Stores, Inc., an Ohio corporation, and its successors.          17.13. ***“Disability”***means permanent and total disability, within the meaning of Code Section22(e)(3), as determined by the Committee in the exercise of good faith and reasonable judgment,upon receipt of and in reliance on sufficient competent medical advice from one or moreindividuals, selected by the Committee, who are qualified to give professional medical advice,provided, however, that Executive must be entitled to disability benefits under the Companysponsored disability plans or programs.          17.14. ***“Exchange Act”***means the United States Securities Exchange Act of 1934, as amended.
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          17.15. ***“Excess Parachute Payment”***has the meaning assigned to that term in Q/A-3 (note thatalthough initial capital letters are used on this term in this Agreement, the Q/As do not useinitial caps for this term).          17.16. ***“Excise Tax”***has the meaning assigned to that term in Section 9.5.          17.17. ***“Founding Families”***means the families consisting of Betty and Martin Rosskamm and Alan andJustine Zimmerman and their respective issue.          17.18. ***“Good Reason” (after a Change of Control)***means, without Executive’s express writtenconsent, the occurrence, after the occurrence of a Change of Control, of any one or more of thefollowing:     (a) Any reduction in Executive’s Base Salary below the amount in effect immediately beforethe Change of Control or, if higher, the amount in effect before any reduction in Executive’sBase Salary made in contemplation of the Change of Control.     (b) Any significant reduction in Executive’s duties, responsibilities, or position withrespect to the Company from the duties, responsibilities, or position as in effect immediatelybefore the Change of Control or as in effect immediately before any reduction in any such itemmade in contemplation of the Change of Control.     (c) Any significant reduction in Executive’s benefits package from the benefit package ineffect immediately before the Change of Control or as in effect immediately before any reductionof the benefit package made in contemplation of the Change of Control.     (d) Any reduction in Executive’s long-term incentive opportunity with the Company.     (e) Any shift of Executive’s principal place of employment with the Company to a locationthat is more than 50 miles (by straight line measurement) from the site of the Company’sheadquarters in Hudson, Ohio at the Effective Time.     (f) Any dissolution or liquidation of the Company.Executive’s continued employment shall not constitute consent to, or a waiver of rights withrespect to, any circumstance constituting Good Reason under this Section 17.18 unless the Companyhas given Executive written notice of the change and Executive has voluntarily agreed in a writingthat specifically refers to this section of this Agreement to accept the change and to waive anypossible reliance on that change as constituting Good Reason.          17.19. ***“Good Reason” (before a Change of Control)***means, without Executive’s express writtenconsent, any reduction in Executive’s Base Salary other
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than a reduction that is in the sameproportion as the reduction of the base salaries of every other executive officer of the Company inconnection with an across-the-board reduction of executive base salaries.          17.20. ***“Gross Up Payment”***has the meaning assigned to that term in Section 9.5 above.          17.21. ***“Payment”***has the meaning assigned to that term in Section 9.1 above.          17.22. ***“Parachute Payment”***has the meaning assigned to that term in Q/A-2 but without reference tosubsection (4) of Q/A-2 (with the effect that a payment otherwise meeting the definition of“Parachute Payment” will be referred to as a Parachute Payment even if the total of all suchParachute Payments is less than three times Executive’s base amount (as defined Q/A-34) (note thatalthough initial capital letters are used on this term in this Agreement, the Q/As do not useinitial caps for this term).          17.23. ***“Person”***shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Actand used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d).          17.24. ***“Q/As”***means the entire series of Questions and Answers set forth in Section 1.280G-1 of the TreasuryRegulations issued under Section 280G of the Code (which Section of regulations is presented inQuestion and Answer format); references to particular Question and Answers will be, for example, to“Q/A-1.”          17.25. ***“Retirement”***means a voluntary termination of Executive’s employment other than for GoodReason after Executive has either (a) attained age 55 and has completed at least ten full years ofcontinuous service with the Company, or (b) has attained age 65 (without regard to length ofservice).          17.26. ***“Severance Benefits”***means those payments and benefits that may become payable before theoccurrence of a Change of Control pursuant to Section 1 above.          17.27. ***“Termination Date”***means the date on which any termination of Executive’s employmentbecomes effective.
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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.      JO-ANN STORES, INC.