EX-4.1



 





Exhibit 4.1




 



JO-ANN STORES, INC.




and




NATIONAL CITY BANK, NATIONAL ASSOCIATION, as Rights Agent




THIRD AMENDED AND RESTATED




RIGHTS AGREEMENT




Dated as of




February 26, 2007




 






















 












TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	Section 1.

	 	Certain Definitions.
	 	 	1	 
	 
	 	 	 	 	 	 
	Section 2.

	 	Appointment of Rights Agent.
	 	 	6	 
	 
	 	 	 	 	 	 
	Section 3.

	 	Issue of Right Certificates.
	 	 	6	 
	 
	 	 	 	 	 	 
	Section 4.

	 	Form of Right Certificates.
	 	 	7	 
	 
	 	 	 	 	 	 
	Section 5.

	 	Countersignature and Registration.
	 	 	8	 
	 
	 	 	 	 	 	 
	Section 6.

	 	Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates.
	 	 	8	 
	 
	 	 	 	 	 	 
	Section 7.

	 	Exercise of Rights; Purchase Price; Expiration Date of Rights;
Null and Void Rights.
	 	 	9	 
	 
	 	 	 	 	 	 
	Section 8.

	 	Cancellation and Destruction of Right Certificates.
	 	 	10	 
	 
	 	 	 	 	 	 
	Section 9.

	 	Reservation and Availability of Common Shares.
	 	 	11	 
	 
	 	 	 	 	 	 
	Section 10.

	 	Common Share Certificate Date.
	 	 	12	 
	 
	 	 	 	 	 	 
	Section 11.

	 	Adjustment of Purchase Price, Exercise Price, Number and Type of Shares or
Number of Rights.
	 	 	12	 
	 
	 	 	 	 	 	 
	Section 12.

	 	Certificates of Adjusted Purchase Price, Exercise Price or Number of Shares.
	 	 	17	 
	 
	 	 	 	 	 	 
	Section 13.

	 	Fractional Rights and Fractional Shares.
	 	 	17	 
	 
	 	 	 	 	 	 
	Section 14.

	 	Rights of Action.
	 	 	18	 
	 
	 	 	 	 	 	 
	Section 15.

	 	Agreement of Right Holders.
	 	 	18	 
	 
	 	 	 	 	 	 
	Section 16.

	 	Right Certificate Holder Not Deemed a Shareholder.
	 	 	19	 
	 
	 	 	 	 	 	 
	Section 17.

	 	Concerning the Rights Agent.
	 	 	19	 
	 
	 	 	 	 	 	 
	Section 18.

	 	Merger or Consolidation or Change of Name of Rights Agent.
	 	 	20	 
	 
	 	 	 	 	 	 
	Section 19.

	 	Duties of Rights Agent.
	 	 	20	 
	 
	 	 	 	 	 	 
	Section 20.

	 	Change of Rights Agent.
	 	 	22	 
	 
	 	 	 	 	 	 
	Section 21.

	 	Issuance of New Right Certificates.
	 	 	23	 
	 
	 	 	 	 	 	 
	Section 22.

	 	Redemption.
	 	 	23	 
	 
	 	 	 	 	 	 
	Section 23.

	 	Notice of Certain Events.
	 	 	24	 
	 
	 	 	 	 	 	 
	Section 24.

	 	Notices.
	 	 	25	 






i









 






	 	 	 	 	 	 	 
	 	 	 	 	Page
	Section 25.

	 	Supplements and Amendments.
	 	 	25	 
	 
	 	 	 	 	 	 
	Section 26.

	 	Successors.
	 	 	26	 
	 
	 	 	 	 	 	 
	Section 27.

	 	Determination and Actions by the Board of Directors, etc.
	 	 	26	 
	 
	 	 	 	 	 	 
	Section 28.

	 	Benefits of this Agreement.
	 	 	26	 
	 
	 	 	 	 	 	 
	Section 29.

	 	Severability.
	 	 	26	 
	 
	 	 	 	 	 	 
	Section 30.

	 	Governing Law.
	 	 	26	 
	 
	 	 	 	 	 	 
	Section 31.

	 	Counterparts.
	 	 	26	 
	 
	 	 	 	 	 	 
	Section 32.

	 	Descriptive Headings.
	 	 	27	 
	 
	 	 	 	 	 	 
	Section 33.

	 	Effective Date of Agreement.
	 	 	27	 
	 
	 	 	 	 	 	 
	Index of Defined Terms	 	 	29	 
	 
	 	 	 	 	 	 
	Exhibit A -
Form of Right Certificate	 	 	A-1	 
	 
	 	 	 	 	 	 
	Exhibit B -
Summary of Rights to Purchase Common Shares	 	 	B-1	 







ii









 





THIRD AMENDED AND RESTATED

RIGHTS AGREEMENT




          This THIRD AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of February 26, 2007 (this
“Agreement”), is made and entered into by and between Jo-Ann Stores, Inc., an Ohio corporation (the
“Company”), and National City Bank, National Association, as Rights Agent (the “Rights Agent”).
This Agreement amends and restates the Second Amended and Restated Rights Agreement, dated as of
November 4, 2003, between the Company and the Rights Agent.




          One right (a “Right”) is currently outstanding with respect to each Common Share (as
hereinafter defined), and the Board of Directors of the Company has authorized the issuance of one
Right in respect of each Common Share issued after the date of this Agreement and the earlier of
the Triggering Date or the Expiration Date (as such terms are hereinafter defined), including in
each case Common Shares that are treasury shares and subsequently become outstanding. Each Right
represents the right to purchase one Common Share.




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




          Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the
meanings indicated:




          (a) “Acquiring Person” means any Person (as such term is hereinafter defined) that, together
with all Affiliates and Associates (as such terms are hereinafter defined) of the Person, is the
Beneficial Owner (as such term is hereinafter defined) of a number of Common Shares that equals or
exceeds 15% of the number of Common Shares then outstanding, but will not include the Company, any
subsidiary of the Company, any employee benefit plan or employee stock ownership plan of the
Company or of any subsidiary of the Company or any person organized, appointed or established by
the Company or any subsidiary of the Company for or pursuant to the terms of any such plan.




          Notwithstanding the foregoing, no Person will become an “Acquiring Person” as the result of an
acquisition of Common Shares by the Company that, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by the Person to 15% or more of the
Common Shares then outstanding; except that, if a Person becomes the Beneficial
Owner of 15% or more of the Common Shares then outstanding by reason of share purchases by the
Company and, after such share purchases by the Company, becomes the Beneficial Owner of any
additional Common Shares (other than as a result of a stock split or reclassification or a dividend
payable by the Company in Common Shares, in each case affecting the holders of Common Shares on a
pro rata basis), then the Person will be deemed to be an “Acquiring Person”. In addition, if the
Board of Directors determines in good faith that a Person that would otherwise be an “Acquiring
Person” has become the Beneficial Owner of 15% or more of the Common Shares inadvertently, and the Person divests as promptly as
practicable a sufficient number of Common Shares so that the Person would no longer be an “Acquiring

1









 








Person”, then the Person will not be deemed to be an “Acquiring Person” for any purposes of this Agreement.




          (b) “Affiliate” and “Associate” have the meanings given to them in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
as in effect on the date hereof.



          (c) “Associated Acquiring Person” means (i) any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives Rights pursuant to either (A) a transfer (whether or
not for consideration) from the Acquiring Person to any Person who holds an equity interest in such
Acquiring Person or with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer that the Board of Directors has
determined is part of a plan, arrangement or understanding that has, as a primary purpose or
effect, the avoidance of Section 7(e).



          (d) A Person will be deemed to be the “Beneficial Owner” of and will be deemed to
“beneficially own” any securities:




          (i) that the Person, or any of the Person’s Affiliates or Associates, beneficially
owns, directly or indirectly;




          (ii) that the Person or any of the Person’s Affiliates or Associates, directly or
indirectly, has the right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or understanding (whether
or not in writing), or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; except that, a Person will not be deemed
to be the “Beneficial Owner” of or to “beneficially own” (1) securities tendered pursuant to
a tender offer made by the Person or any of the Person’s Affiliates or Associates until such
tendered securities are accepted for purchase, or (2) securities issuable upon exercise of
these Rights;




          (iii) that the Person or any of the Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of, pursuant to any agreement, arrangement or
understanding (whether or not in writing); except that, a Person will not be
deemed to be the Beneficial Owner of or to “beneficially own” any security under this
subparagraph (iii) if the agreement, arrangement or understanding to vote such security (A)
arises solely from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and regulations
under the Exchange Act and (B) is not then reportable by the Person on Schedule 13D under
the Exchange Act (or any comparable or successor report); or




          (iv) that are beneficially owned, directly or indirectly, by any other Person with
which the Person or any of the Person’s Affiliates or Associates has any



2









 







agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described in subparagraph (iii) of
this paragraph (c)) or disposing of any securities of the Company.



          Notwithstanding the foregoing, (x) a Person will not be deemed to be the Beneficial Owner of,
or to “beneficially own,” any security if beneficial ownership arises solely as a result of the
Person’s status as a “clearing agency,” as defined in Section 3(a)(23) of the Exchange Act, (y) a
Person engaged in business as an underwriter of securities will not be deemed to be the Beneficial
Owner of, or to “beneficially own,” any securities acquired through the Person’s participation in
good faith in an underwriting syndicate pursuant to an agreement to which the Company is a party
until expiration of 40 calendar days after the date on which the securities are acquired, and (z)
for purposes of determining the amount of Common Shares beneficially owned by any of the Family
Members, (A) the Common Shares beneficially owned by any one or more of the Family Members will not
be deemed to be beneficially owned by any other Family member, whether individually or as part of a
group, and (B) the Common Shares beneficially owned by any one or more of the Family Members that,
after the date of this Agreement, are transferred (whether the transfer is voluntarily or by
operation of law and whether the transfer is of a direct or indirect interest in the shares) to any
other Family Member will not be deemed to be beneficially owned by the Family Member receiving the
transfer.



          (e) “Board of Directors” means the Board of Directors of the Company as constituted from time
to time.



          (f) “Business Day” means any day other than a Saturday, Sunday or a day on which banking
institutions in the State of Ohio are authorized or obligated by law or executive order to close.



          (g) “Close of business” on any given date means 5:00 P.M., Cleveland time, on such date;
except that, if such date is not a Business Day, it will mean 5:00 P.M., Cleveland
time, on the next succeeding Business Day.



          (h) “Common Shares” means the Common Shares, without par value, of the Company.



          (i) “Current market price” is defined in Section 11(d).



          (j) “Exchange Act” is defined in Section 10.



          (k) “Exercise Price” means the exercise price per share set forth in Section 11(a)(ii).



          (l) “Expiration Date” is defined in Section 7.



          (m) “Family Members” mean Betty Rosskamm, Alma Zimmerman, Steve Reich, Margrit Reich, their
descendants, their spouses, and the spouses of their descendants, the



3









 




executors, administrators, and custodians of any of the foregoing, and any trust for the benefit of any of the foregoing.




          (n) “Issuance” includes the issuance of authorized but unissued shares and the transfer of
treasury shares. In the event the Common Shares are subdivided into a greater number of shares,
the excess of the number of shares into which the Common Shares are subdivided over the number of
shares prior to the subdivision will be deemed to be “issued.”




          (o) “NASDAQ” is defined in Section 11(d).




          (p) “Person” means any individual, firm, corporation or other entity.




          (q) “Purchase Price” means the purchase price per share set forth in Section 7(b).




          (r) “Qualified Offer” means an all-cash tender offer for all outstanding Common Shares to be
made in the manner prescribed by Section 14(d) of the Exchange Act and the rules and regulations
promulgated thereunder that meets all of the following requirements:





          (i) the same per share price will be offered for any and all Common Shares;




          (ii) on or prior to the date such offer is commenced within the meaning of Rule
14d-2(a) promulgated under the Exchange Act, the Person making the offer:




          (A) has on hand cash or cash equivalents for the full amount necessary to
consummate such offer and has irrevocably committed in writing to the Company to
utilize such cash or cash equivalents for purposes of such offer if consummated and
to set apart and maintain available such cash or cash equivalents for such purposes
until the offer is consummated or withdrawn; or




          (B) has financing committed in the full amount necessary to consummate such
offer and has: (1) entered into, and provided to the Company certified copies of,
definitive financing agreements (including exhibits and related documents) for funds
for such offer that, when added to the amount of cash and cash equivalents
available, committed in writing, set apart and maintained in the same manner as
described in clause (A) above, are in an amount not less than the full amount
necessary to consummate such offer, which agreements are with one or more
responsible financial institutions or other entities having the necessary financial
capacity and ability to provide such funds and are subject only to customary terms
and conditions (which will in no event include conditions requiring access by such
financial institutions or other entities to non-public information to be provided by
the Company, conditions based on the accuracy of any information concerning the
Company, or conditions requiring the Company to make any representations, warranties or covenants in connection with such
financing); and (2) provided to the Company copies all written materials prepared



4









 







by such Person for financial institutions in connection with entering into such
financing agreements; for purposes of clause (A) above and this clause (B) “the full
amount necessary to consummate such offer” means an amount sufficient to pay for all
Common Shares outstanding on a fully diluted basis the consideration pursuant to the
offer and the second-step transaction required by clause (iv) below and all related
expenses;




          (iii) such offer will remain open for at least 10 Business Days after the special
meeting of the Company’s shareholders referred to in Section 22(b);




          (iv) prior to or on the date that such offer is commenced within the meaning of Rule
14d-2(a) promulgated under the Exchange Act, such Person makes an irrevocable written
commitment to the Company and to its shareholders, (x) to consummate a transaction or
transactions promptly upon the completion of such offer (and in no event later than five
Business Days thereafter), whereby all Common Shares not purchased in such offer will be
acquired at the same cash price per share paid in such offer, and (y) that such Person will
not make any amendment to the original offer that reduces the per share price offered,
changes the form of consideration offered, reduces the number of Common Shares being sought,
or is in any other respect materially adverse to the Company’s shareholders;




          (v) such offer will include a non-waivable and non-amendable condition that such offer
will not be consummated unless the offering Person will own, after consummating such offer,
at least a majority of the Common Shares then outstanding;




          (vi) except for the requirements set forth above, such offer is subject only to usual
and customary terms and conditions for regulatory approvals, redemption of the Rights or
amendment of this Agreement to facilitate the consummation of such offer, the approval by
the Board of Directors of the acquisition of Common Shares pursuant to such offer for
purposes of Chapter 1704 of the Ohio revised Code, and not to any financing, funding or
similar condition or any condition relating to completion of or satisfaction with any due
diligence or similar investigation; and




          (vii) the Company has not received written advice, from counsel with nationally
recognized expertise in the relevant area of law, that there is a substantial probability
that the transaction will not be consummated by reason of regulatory or legal obstacles.



          (s) “Qualified Offer Date” is defined in Section 22(b)(i).




          (t) “Redemption Price” is defined in Section 22(a).




          (u) “Right” is defined in the recitals to this Agreement.




          (v) “SEC” means the Securities and Exchange Commission.




5









 









          (w) “Securities Act” is defined in Section 9(c).




          (x) “Shares Acquisition Date” means the first date of public announcement by the Company or an
Acquiring Person (by press release, filing made with the SEC or otherwise) that an Acquiring Person
has become such.




          (y) “Subsidiary” means any corporation or other entity of which a majority of the voting power
of the voting equity securities or other equity interests is owned, directly or indirectly, by the
Company.




          (z) “Triggering Date” means the close of business on the tenth calendar day after the Shares
Acquisition Date, except that, if such date is not a Business Day, the “Triggering Date” will be
the close of business on the first Business Day following the tenth calendar day after the Shares
Acquisition Date.




          Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as
agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents
as it may deem necessary or desirable. Any actions that may be taken by the Rights Agent pursuant
to the terms of this Agreement may be taken by any such Co-Rights Agent. To the extent that any
Co-Rights Agent takes any action pursuant to this Agreement, such Co-Rights Agent will be entitled
to all of the rights and protections of, and subject to all of the applicable duties and
obligations imposed upon, the Rights Agent pursuant to the terms of this Agreement.




          Section 3. Issue of Right Certificates.




          (a) Until the Triggering Date, (i) the Rights will be evidenced (subject to the provisions of
Section 3(b)) by the certificates for the Common Shares registered in the names of the holders of
the Common Shares (which certificates for the Common Shares will also be deemed to be Right
Certificates) and not by separate Right Certificates, and (ii) the right to receive Right
Certificates will be transferable only in connection with the transfer of the Common Shares. As
soon as practicable after the Triggering Date has occurred, the Company will prepare and execute,
and the Rights Agent will countersign and send, by first-class, insured, postage prepaid mail, at
the expense of the Company, to each record holder of the Common Shares as of the close of business
on the Triggering Date, at the address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit A hereto, evidencing one Right for each Common
Share held of record as of the close of business on the Triggering Date. As of the close of
business on the Triggering Date, the Rights will be evidenced solely by such Right Certificates.




          (b) Rights will be issued in respect of all Common Shares issued (including but not limited to
Common Shares that are treasury shares and subsequently become outstanding) or surrendered for
transfer or exchange after the date of this Agreement but prior to the earlier of
the Triggering Date or the Expiration Date. Certificates representing such Common Shares will
have impressed on, printed on, written on or otherwise affixed to them the following legend:



6









 








This certificate also evidences and entitles the holder hereof to certain Rights as
set forth in a rights agreement between Jo-Ann Stores, Inc., and a rights agent, as
such rights agreement may be amended from time to time, a copy of which is on file
at the principal executive offices of Jo-Ann Stores, Inc. Under certain
circumstances, as set forth in the rights agreement, such Rights will be evidenced
by separate certificates and will no longer be evidenced by this certificate.
Jo-Ann Stores, Inc., will mail to the holder of this certificate a copy of the
rights agreement (as in effect on the date of mailing) without charge promptly after
receipt of a written request therefor. Under certain circumstances, Rights that are
or were beneficially owned by Acquiring Persons or their Affiliates or Associates
(as such terms are defined in the rights agreement) and any subsequent holder of
such Rights may become null and void.



          Until the Triggering Date, the Rights associated with the Common Shares represented by such
certificates will be evidenced by such certificates alone, and the surrender for transfer of any of
such certificates will also constitute the surrender for transfer of the Rights associated with the
Common Shares represented by such certificate.




          Section 4. Form of Right Certificates.




          (a) The Right Certificates (and the forms of election to purchase shares and of assignment to
be printed on the reverse thereof) will be substantially the same as Exhibit A hereto and may have
such marks of identification or designation and such legends, summaries or endorsements printed
thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law, with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may
from time to time be listed or of any association on which the Rights may from time to time be
authorized for quotation, or to conform to usage. Subject to the provisions of Section 21, the
Right Certificates, whenever issued, will entitle the holders thereof to purchase such number of
Common Shares (or, following a Triggering Date, Common Shares, other securities, cash or other
assets, as the case may be) as will be set forth therein at the Purchase Price (or, upon the
occurrence of a Triggering Date, at the Exercise Price), but the number of such shares, the
Purchase Price and the Exercise Price will be subject to adjustment as provided herein.




          (b) Notwithstanding any other provision of this Agreement, any Right Certificate issued
pursuant to Section 3 or Section 21 that represents Rights beneficially owned by an Acquiring
Person or an Associated Acquiring Person, any Right Certificate issued at any time to any nominee
of an Acquiring Person or an Associated Acquiring Person, and any Right Certificate issued pursuant
to Section 6 or Section 11 upon transfer, exchange, replacement or adjustment of any Right
Certificate referred to in this sentence, will contain the following legend:





The Rights represented by this Right Certificate are or were beneficially owned by a
Person who was or became an Acquiring Person or an Associated Acquiring Person (as
such terms are defined in the rights agreement between Jo-Ann Stores,



7









 






Inc., and a rights agent, as amended to date). Accordingly, this Right Certificate and the
Rights represented hereby may become null and void in the circumstances specified in
Section 7(e) of the rights agreement.



          Section 5. Countersignature and Registration. The Right Certificates will be executed on behalf
of the Company by its Chairman of the Board, President or any Vice President, either manually or by
facsimile signature, and will be attested by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. The Right Certificates will be countersigned
manually or by facsimile by the Rights Agent and will not be valid for any purpose unless so
countersigned. In case any officer of the Company who has signed any of the Right Certificates
ceases to hold such office of the Company before countersignature by the Rights Agent and issuance
and delivery by the Company, such Right Certificates may nevertheless be countersigned by the
Rights Agent, issued and delivered with the same force and effect as though the person who signed
such Right Certificates had not ceased to hold such office of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the actual date of the
execution of such Right Certificate, is a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement the Person did not hold
such office.




          Following the Triggering Date, the Rights Agent will keep or cause to be kept, at one of its
offices in Cleveland, Ohio, books for registration and transfer of the Right Certificates. Such
books will show the names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and the date of each of
the Right Certificates.




          Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates.




          (a) Subject to the provisions of Section 4(b), Section 7(e) and Section 13, at any time after
the close of business on the Triggering Date, and at or prior to the close of business on the
Expiration Date, any Right Certificate or Certificates may be transferred, split up, combined or
exchanged for another Right Certificate or Right Certificates, entitling the registered holder to
purchase a like number of Common Shares (or, following a Triggering Date, a like number or amount
of Common Shares, other securities, cash or other assets, as the case may be) as the Right
Certificate or Right Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate or Right Certificates will make such request in writing delivered to
the Rights Agent, and will surrender the Right Certificate or Right Certificates to be transferred,
split up, combined or exchanged at the principal office of the Rights Agent in Cleveland, Ohio for
such purpose. Neither the Rights Agent nor the Company will be obligated to take any action with
respect to the transfer of any such surrendered Right Certificate until the registered holder has
completed and signed the certificate contained in the form of assignment on the reverse side of
such Right Certificate and has provided such
additional evidence of the identity of the Beneficial Owner or former Beneficial Owner, or
Affiliates or Associates thereof, as the Company may reasonably request. Thereupon the Rights
Agent will, subject to Section 4(b), Section 7(e) and Section 13, countersign and deliver to the



8









 








person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.




          (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to
them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of the
loss, theft or destruction of a Right Certificate, of indemnity or security reasonably satisfactory
to them and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental
thereto, and, in case of the mutilation of a Right Certificate, upon surrender to the Rights Agent
and cancellation of the mutilated Right Certificate, the Company will make and deliver a new Right
Certificate of like tenor to the Rights Agent for delivery to the registered owner in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.




          Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights; Null and Void
Rights.




          (a) Subject to Section 7(e), the registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time
after the Triggering Date upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at its principal office in
Cleveland, Ohio, together with payment of the aggregate Purchase Price with respect to the total
number of Common Shares (or the aggregate Exercise Price with respect to the total number of Common
Shares or other securities, cash or other assets, as the case may be) as to which such surrendered
Rights are then exercised, at or prior to the close of business on October 31, 2010 (the
“Expiration Date”).




          (b) Each Right will, as of the date of this Agreement, represent the right to purchase one
Common Share, subject to adjustment as provided in Section 11. The Purchase Price for each Common
Share pursuant to the exercise of a Right will, as of the date of this Agreement, be $52.17,
subject to further adjustment from time to time as provided in Section 11, and will be payable in
lawful money of the United States of America in accordance with Section 7(c).




          (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of
election to purchase and the certificate duly executed, accompanied by payment of the Purchase
Price for the Common Shares (or the Exercise Price for the Common Shares, other securities, cash or
assets, as the case may be) to be purchased and an amount equal to any applicable transfer tax in
cash, or by certified check or bank draft payable to the order of the Company, the Rights Agent
will, subject to Section 19(k), promptly (i) requisition from any transfer agent of the Common
Shares certificates for the total number of Common Shares to be purchased, and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requisitions, (ii) if the Company
has elected to deposit the total number of Common Shares issuable upon exercise of the Rights with
a depositary agent, requisition from the depositary
agent depositary receipts representing such number of Common Shares as are to be purchased (in
which case certificates for the Common Shares represented by such receipts will be deposited by

9









 







the transfer agent with the depositary agent), and the Company will direct the depositary agent to
comply with all such requisitions, (iii) when applicable, requisition from the Company the amount
of cash to be paid in lieu of issuance of fractional shares in accordance with Section 13, (iv)
promptly after receipt of such certificates or depositary receipts, cause the same to be delivered
to or upon the order of the registered holder of such Right Certificate, registered in such name or
names as may be designated by such holder, and (v) when applicable, after receipt promptly deliver
such cash to or upon the order of the registered holder of such Right Certificate. In the event
that the Company is obligated to issue securities, pay cash or distribute assets pursuant to
Section 11(a)(iii) or Section 13, the Company will make all arrangements necessary so that such
securities, cash, and assets are available for issuance, payment, or distribution by the Rights
Agent, as and when appropriate.




          (d) In case the registered holder of any Right Certificate exercises less than all the Rights
evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised will be issued by the Rights Agent to the registered holder of such Right Certificate
or to his duly authorized assigns, subject to the provisions of Section 13.




          (e) Notwithstanding anything in this Agreement to the contrary, any Rights that are or were at
any time beneficially owned by an Acquiring Person or an Associated Acquiring Person, will become
null and void upon the occurrence of a Triggering Date and no holder of such Rights will have any
right with respect to such Rights under any provision of this Agreement from and after the
occurrence of the Triggering Date. The Company will use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) are complied with, but will have no liability to
any holder of Right Certificates or other Person as a result of its failure properly to make any
determinations with respect to an Acquiring Person, an Associated Acquiring Person or their
transferees or nominees hereunder.




          (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor
the Company will be obligated to undertake any action with respect to a registered holder upon the
occurrence of any purported exercise as set forth in this Section 7 unless such registered holder
has (i) completed and signed the certificate contained in the form of election to purchase set
forth on the reverse side of the Right Certificate surrendered for such exercise and (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company may reasonably request.




          Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates
surrendered for the purpose of exercise, transfer, split up, combination or exchange will, if
surrendered to the Company or to any of its agents, be delivered to the Rights Agent for
cancellation or in cancelled form or, if surrendered to the Rights Agent, will be cancelled by it,
and no Right Certificates will be issued in lieu thereof except as expressly permitted by the
provisions of this Agreement. The Company will deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent will cancel and retire, any Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent will deliver all cancelled Right Certificates to the Company or will, at the written
request of the


10









 








Company, destroy such cancelled Right Certificates and, in such case, will deliver a
certificate of destruction thereof to the Company.




          Section 9. Reservation and Availability of Common Shares.




          (a) The Company will cause to be reserved and kept available out of its authorized and
unissued Common Shares or any authorized and issued Common Shares held in its treasury, the number
of Common Shares that will be sufficient to permit the exercise in full of all outstanding Rights.




          (b) The Company will, as soon as practicable following the Triggering Date, cause all Common
Shares (or other securities, as the case may be) reserved for issuance upon exercise of the Rights
to be, upon official notice of issuance, listed on the stock exchange or market on which the Common
Shares are then listed for trading.




          (c) The Company will, as soon as practicable after the Triggering Date, (i) prepare and file a
registration statement under the Securities Act of 1933 (the “Securities Act”) with respect to the
Rights and the securities purchasable upon exercise of the Rights on an appropriate form, (ii) use
its reasonable best efforts to cause such registration statement to become effective as soon as
practicable after such filing, and (iii) use its reasonable best efforts to cause such registration
statement to remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the date of the expiration of the Rights. The Company will also take such
actions as may be appropriate under the blue sky laws of the various states in connection with the
issuance of the Rights and the securities purchasable upon exercise of the Rights. The Company may
temporarily suspend, for a period of time not to exceed ninety (90) days, the exercisability of the
Rights in order to prepare and file such registration statement. Upon any such suspension, the
Company will issue a public announcement and notice to the Rights Agent stating that the
exercisability of the Rights has been temporarily suspended, and the Company will issue a public
announcement and notice to the Rights Agent at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights will not be exercisable
in any jurisdiction in which any requisite registration or qualification will not have been
obtained.




          (d) The Company will take all such action as may be necessary to ensure that all Common Shares
(or other securities, as the case may be) delivered upon exercise of Rights will, at the time of
delivery of the certificates therefor (subject to payment of the Purchase Price or the Exercise
Price, as the case may be), be duly and validly authorized and issued, fully paid and
nonassessable, freely tradeable, free and clear of any liens, encumbrances or other adverse claims
and not subject to any call or first refusal right.




          (e) The Company will pay when due and payable all federal and state transfer taxes and charges
that may be payable in respect of the issuance or delivery of the Right Certificates or of any
Common Shares (or other securities, as the case may be) upon the exercise of Rights. The Company
will not, however, be required to (a) pay any transfer tax that may be payable in respect of any
transfer involved in the transfer or delivery of Right Certificates or the issuance or delivery of
certificates for the Common Shares (or other securities, as the case may

11









 







be) in a name other than that of the registered holder of the Right Certificate evidencing the
Rights surrendered for exercise or (b) issue or deliver any certificates for a number of Common
Shares (or other securities, as the case may be) upon the exercise of any Rights until any such tax
has been paid (any such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company’s satisfaction that no such tax is due.




          Section 10. Common Share Certificate Date. Each person in whose name any certificate for Common
Shares (or other securities, as the case may be) is issued upon the exercise of Rights will for all
purposes be deemed to have become the holder of record of such Common Shares (or other securities,
as the case may be) represented thereby on, and such certificate will be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price
(or the Exercise Price, as the case may be) and any applicable transfer taxes was made;
except that, if the date of such surrender and payment is a date upon which the
Common Share (or other security, as the case may be) transfer books of the Company are closed, the
Person will be deemed to have become the record holder thereof on, and such certificate will be
dated, the next succeeding Business Day on which the Common Shares (or other securities, as the
case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate will not be entitled to any rights of a shareholder of
the Company with respect to shares for which the Rights are exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and will not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.




          Section 11. Adjustment of Purchase Price, Exercise Price, Number and Type of Shares or Number of
Rights. The Purchase Price and the Exercise Price, the number of Common Shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time to time as provided
in this Section 11.




          (a)





          (i) In the event the Company at any time after the date of this Agreement (A) declares
a dividend on the Common Shares payable in Common Shares, (B) subdivides the outstanding
Common Shares, (C) combines the outstanding Common Shares into a smaller number of shares,
or (D) issues any shares of its capital stock in a reclassification of the Common Shares
(including any such reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as otherwise provided in
this Section 11(a) and Section 7(e), the Purchase Price and the Exercise Price in effect at
the time of the record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of Common Shares or shares of
capital stock, as the case may be, issuable on such date, will be proportionately adjusted
so that the holder of any Right exercised after such time will be entitled to receive the
aggregate number and kind of Common Shares or shares of capital stock, as the case may be,
which, if such Right had been exercised immediately prior to such date and at a time when the Common Share
transfer books of the Company were open, such holder would have owned upon such exercise and
been entitled to receive by virtue of such dividend, subdivision, combination



12









 







or reclassification. If an event occurs that would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i)
will be in addition to, and will be made prior to any adjustment required pursuant to
Section 11(a)(ii).




          (ii) At the Triggering Date, each holder of a Right (except as provided in Section
7(e)) will thereafter have the right to receive, upon exercise of the Right in accordance
with the terms of this Agreement, one Common Share for an Exercise Price of $.43 per share;
the number of such Common Shares and the Exercise Price will be subject to adjustment as
provided in this Section 11.




          (iii) In the event that there are not enough Common Shares authorized but unissued or
held as treasury shares to permit the exercise in full of the Rights in accordance with
paragraph (ii) above, the Company will take all such actions as may be necessary to
authorize a sufficient number of additional Common Shares to permit the exercise in full of
the Rights and will refrain from paying dividends or making any other distributions on the
Common Shares until such additional Common Shares have been authorized and made available to
the holders of the Rights for issuance upon exercise of their Rights.



          (b) In case the Company fixes a record date for the issuance of rights or warrants to all
holders of Common Shares entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Common Shares at a price per Common Share (or having a
conversion price per share, if a security convertible into Common Shares) less than the current
market price (as defined in Section 11(d)) per Common Share on such record date, the Purchase Price
and the Exercise Price to be in effect after such record date will be determined by multiplying the
Purchase Price and the Exercise Price in effect immediately prior to such record date by a
fraction, of which the numerator is the number of Common Shares outstanding on such record date
plus the number of Common Shares which the aggregate offering price of the total number of Common
Shares so to be offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price and of which the
denominator is the number of Common Shares outstanding on such record date plus the number of
additional Common Shares to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such subscription price is paid in
a consideration part or all of which is in a form other than cash, the value of such consideration
will be as determined in good faith by the Board of Directors, whose determination will be
described in a statement filed with the Rights Agent. Common Shares owned by or held for the
account of the Company will not be deemed outstanding for the purpose of any such computation.
Such adjustment will be made successively whenever such a record date is fixed; and in the event
that such rights or warrants are not so issued, the Purchase Price and the Exercise Price will be
adjusted to be the Purchase Price and the Exercise Price that would then be in effect if such
record date had not been fixed.




          (c) In case the Company fixes a record date for the making of a distribution to all holders of
Common Shares (including any such distribution made in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation) of

13









 








evidences of indebtedness or assets (other than a regular periodic cash dividend or a dividend payable in Common Shares, but
including any dividend payable in stock other than Common Shares) or subscription rights or
warrants (excluding those referred to in Section 11(b)), the Purchase Price and the Exercise Price
to be in effect after such record date will be determined by multiplying the Purchase Price or the
Exercise Price, as the case may be, in effect immediately prior to such record date by a fraction,
of which the numerator is the current market price (as defined in Section 11(d)) per Common Share
on such record date, less the fair market value (as determined in good faith by the Board of
Directors, whose determination will be described in a statement filed with the Rights Agent) of the
portion of the assets or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to one Common Share and of which the denominator is the current
market price of one Common Share. Such adjustments will be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made, the Purchase Price
and the Exercise Price will be adjusted to be the Purchase Price and the Exercise Price that would
then be in effect if such record date had not been fixed.




          (d) For the purpose of any computation hereunder, the “current market price” or “value” per
share of the Common Shares on any date of determination will be the average of the daily closing
prices per share of such Common Shares for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; except that, in the event that
the “current market price” or “value” per share of the Common Shares is determined during the
period following the announcement by the issuer of such Common Shares of (A) a dividend or
distribution on such Common Shares payable in such Common Shares or securities convertible into
such Common Shares or (B) any subdivision, combination or reclassification of such Common Shares
and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or
distribution or the record date for such subdivision, combination or reclassification, then, and in
each such case, the “current market price” or “value” will be appropriately adjusted to take into
account ex-dividend trading. The closing price for each day will be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York Stock Exchange (the
“NYSE”) or, if the Common Shares are not listed or admitted to trading on the NYSE, as reported in
the NASDAQ Stock Market (“NASDAQ”) or, if the Common Shares are not listed or admitted to trading
on the NYSE or NASDAQ, as reported in the principal consolidated transaction reporting system on
which the Common Shares are listed or admitted to trading or, if the Common Shares are not listed
or admitted to trading on the NYSE or NASDAQ or reported by any consolidated transaction reporting
system, the average of the high bid and low asked prices in the over-the-counter market as reported
by the National Association of Securities Dealers, Inc. or such other organization then reporting
transactions in the over-the-counter market or, if on any such date the Common Shares are not
listed or admitted to trading on the NYSE or NASDAQ or reported by any consolidated transaction
reporting system or other organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Shares selected by the Board of Directors. The
term “Trading Day” will mean a day on which the principal national securities exchange or market on
which Common Shares are listed or admitted

14









 








to trading is open for the transaction of business or, if the Common Shares are not listed or admitted to trading on any national
securities exchange or market, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State
of Ohio are not authorized or obligated by law or executive order to close. If the Common Shares
are not publicly held or not so listed or traded, “current market price” or “value” per share will
mean the value per share as determined in good faith by an independent investment banking firm
selected by the Board of Directors, whose determination will be described in a statement filed with
the Rights Agent and will be conclusive for all purposes.




          (e) No adjustment in the Purchase Price or the Exercise Price will be required unless such
adjustment would require an increase or decrease of at least 1% in such price; provided,
however, that any adjustments that by reason of this Section 11(e) are not required to be
made will be carried forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 will be made to the nearest cent or to the nearest ten-thousandth of a Common
Share, as the case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 will be made no later than the earlier of (i) three years
from the date of the transaction that mandates such adjustment or (ii) the date of the expiration
of the right to exercise any Rights.




          (f) If as a result of an adjustment made pursuant to Section 11(a), the holder of any Right
exercised after such adjustment becomes entitled to receive upon exercise of such Right any shares
of capital stock of the Company other than Common Shares, thereafter the number of, and the
Purchase Price and the Exercise Price for, such other shares will be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Shares contained in Section 11(a) through (m)) inclusive, and the provisions
of Section 7, Section 9, Section 10 and Section 13 with respect to the Common Shares will apply on
like terms to any such other shares.




          (g) All Rights originally issued by the Company subsequent to any adjustment made to the
Purchase Price or the Exercise Price hereunder will evidence the right to purchase, at the adjusted
Purchase Price or the adjusted Exercise Price, as the case may be, the number of Common Shares (or
other securities, as the case may be) purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.




          (h) Unless the Company has exercised its election as provided in Section 11(i), upon each
adjustment of the Purchase Price or the Exercise Price as a result of the calculations made in
Section 11(b) and Section 11(c), each Right outstanding immediately prior to the making of such
adjustment will thereafter evidence the right to purchase, at the adjusted Purchase Price or the
adjusted Exercise Price, as the case may be, that number of Common Shares (calculated to the
nearest ten-thousandth) obtained by (i) multiplying (x) the number of Common Shares covered by a
Right immediately prior to this adjustment by (y) the Purchase Price or the Exercise Price, as the
case may be, in effect immediately prior to such adjustment and (ii) dividing the product so
obtained by the Purchase Price or the Exercise Price, as the case may be, in effect immediately
after such adjustment.





15










 





          (i) The Company may elect on or after the date of any adjustment of the Purchase Price
or the Exercise Price to adjust the number of Rights, in substitution for any adjustment in the
number of Common Shares purchasable upon the exercise of a Right. Each of the Rights outstanding
after such adjustment of the number of Rights will be exercisable for the number of Common Shares
for which a Right was exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights will become that number of Rights (calculated to
the nearest ten-thousandth), obtained by dividing the Purchase Price or the Exercise Price, as the
case may be, in effect immediately prior to such adjustment by the Purchase Price or the Exercise
Price, as the case may be, in effect immediately after such adjustment. The Company will make a
public announcement of its election to adjust the number of Rights, indicating the record date for
the adjustment to be made. This record date may be the date on which the Purchase Price or the
Exercise Price, as the case may be, is adjusted or any day thereafter but, if Right Certificates
have been issued, will be at least 10 days later than the date of the public announcement. If
Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company will, as promptly as practicable, cause to be distributed to holders of
Right Certificates on such record date Right Certificates evidencing, subject to Section 13, the
additional Rights to which such holders will be entitled as a result of such adjustment or, at the
option of the Company, will cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof if required by the Company, new Right Certificates evidencing all the Rights
to which such holders will be entitled after such adjustment. Right Certificates so to be
distributed will be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price or the adjusted Exercise Price) and
will be registered in the names of the holders of record of Right Certificates on the record date
specified in the public announcement.




          (j) Notwithstanding any adjustment or change in the Purchase Price, the Exercise Price or the
number of Common Shares issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the Purchase Price, the Exercise Price
and the number of Common Shares that were expressed in the initial Right Certificates.




          (k) Before taking any action that would cause an adjustment reducing the Purchase Price or the
Exercise Price below the stated capital, if any, of a Common Share issuable upon exercise of the
Rights, the Company will take any corporate action that may be necessary in order that the Company
may validly and legally issue fully paid and nonassessable Common Shares at such adjusted Purchase
Price and or at such adjusted Exercise Price, as the case may be.




          (l) In any case in which this Section 11 requires that an adjustment in the Purchase Price or
the Exercise Price be made effective as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event the issuing to the holder of any Right exercised
after such record date the number of Common Shares issuable upon such exercise over and above the
number of Common Shares issuable upon such exercise on the basis

16









 








of the Purchase Price or the Exercise Price in effect prior to such adjustment; provided, however,
that the Company will deliver to such holder a due bill or other appropriate instrument
evidencing such holder’s right to receive such additional Common Shares upon the occurrence of the
event requiring such adjustment.




          (m) Anything in this Section 11 to the contrary notwithstanding, the Company will be entitled
to make such reduction in the Purchase Price or the Exercise Price, in addition to those
adjustments expressly required by this Section 11, as and to the extent that it in its sole
discretion determines to be advisable in order that any consolidation or subdivision of Common
Shares, issuance wholly for cash of any Common Shares at less than the current market price,
issuance wholly for cash of securities that by their terms are convertible into or exchangeable for
Common Shares, stock dividends or issuance of rights, options or warrants referred to in this
Section 11 hereafter made by the Company to holders of its Common Shares will not be taxable to
such holders.




          Section 12.Certificates of Adjusted Purchase Price, Exercise Price or Number of Shares. Whenever
an adjustment is made as provided in Section 11(i), the Company will (a) promptly prepare a
certificate setting forth such adjustment, and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Common
Shares a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Right
Certificate (or, if prior to the Triggering Date, to each holder of a certificate representing
Common Shares) in accordance with Section 24. The Rights Agent will be fully protected in relying
on any such certificate and on any adjustment therein contained, will not be obligated or
responsible for calculating any adjustment and will not be deemed to have knowledge of such
adjustment unless and until it has received such certificate.




          Section 13. Fractional Rights and Fractional Shares.




          (a) The Company will not be required to issue fractions of Rights or to distribute Right
Certificates that evidence fractional Rights. In lieu of such fractional Rights, the Company will
pay to the registered holders of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 13(a), the current market value of a
whole Right will be the closing price of the Rights for the Trading Day immediately prior to the
date on which such fractional Rights would have been otherwise issuable. The closing price for
each day will be the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange (the “NYSE”) or, if the Rights are not listed or
admitted to trading on the NYSE, as reported in NASDAQ or, if the Rights are not listed or admitted
to trading on the NYSE or NASDAQ, as reported in the principal consolidated transaction reporting
system on which the Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on the NYSE or NASDAQ or reported by any consolidated transaction reporting
system, the average of the high bid and low asked prices in the over-the-counter market as reported
by the National Association of Securities Dealers, Inc. or such other organization then reporting
transactions in the over-the-counter market or, if on any such date the

17









 









Rights are not listed or admitted to trading on the NYSE or NASDAQ or reported by any
consolidated transaction reporting system or other organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the Rights selected by
the Board of Directors.




          (b) The Company will not be required to issue fractions of Common Shares upon exercise of the
Rights or to distribute certificates that evidence fractional shares. In lieu of fractional Common
Shares, the Company may pay to the registered holders of Right Certificates at the time such Right
Certificates are exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one Common Share. For purposes of this Section 13(b), the current market
value of one Common Share will be the closing price of a Common Share (as determined pursuant to
Section 11(d)) for the Trading Day immediately prior to the date of such exercise.




          (c) The holder of a Right by the acceptance of the Right expressly waives his right to receive
any fractional Rights or any fractional shares upon exercise of a Right.




          Section 14. Rights of Action. All rights of action in respect of this Agreement are vested in the
respective registered holders of the Right Certificates (and, prior to the Triggering Date, the
registered holders of the Common Shares); and any registered holder of any Right Certificate (or,
prior to the Triggering Date, of any Common Share), without the consent of the Rights Agent or of
the holder of any other Right Certificate (or, prior to the Triggering Date, of the Common Shares),
may, in the holder’s own behalf and for the holder’s own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect
of, the holder’s right to exercise the Rights evidenced by such Right Certificate. Without
limiting the foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of
this Agreement and will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of any Person subject
to this Agreement.




          Section 15. Agreement of Right Holders. Every holder of a Right by accepting such Right consents
and agrees with the Company and the Rights Agent and with every other holder of a Right that:




          (a) prior to the Triggering Date, the Rights will be transferable only in connection with the
transfer of the Common Shares;




          (b) after the Triggering Date, the Right Certificates are transferable only on the registry
books of the Rights Agent if surrendered at the principal office of the Rights Agent in Cleveland,
Ohio, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate
forms and certificates fully executed; and




          (c) subject to Section 6, Section 7(e) and Section 7(f), the Company and the Rights Agent may
deem and treat the Person in whose name the Right Certificate (or, prior to the Triggering Date,
the associated Common Share certificate) is registered as the absolute owner

18









 








thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right
Certificates or the associated Common Share certificate made by anyone other than the Company or
the Rights Agent) for all purposes, and neither the Company nor the Rights Agent will be affected
by any notice to the contrary.




          Section 16. Right Certificate Holder Not Deemed a Shareholder. No holder, as such, of a Right
Certificate will be entitled to vote, receive dividends or be deemed for any purpose to be the
holder of the number of Common Shares that may at any time be issuable on the exercise of the
Rights represented thereby, nor will anything contained herein or in any Right Certificate give to
any holder, as such, of a Right Certificate any of the rights of a shareholder of the Company or
any right to vote for the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in Section 23), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right
Certificate have been exercised in accordance with the provisions of this Agreement.




          Section 17. Concerning the Rights Agent.




          (a) The Company will pay to the Rights Agent reasonable compensation for all services rendered
by it hereunder and, from time to time on demand of the Rights Agent, to reimburse it for or pay
its reasonable expenses and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability
or expense incurred without gross negligence, bad faith or willful misconduct on the part of the
Rights Agent as a result of anything done or omitted to be done by the Rights Agent in connection
with the acceptance and administration of this Agreement, including without limitation the costs
and expenses of defending against any claim of liability in connection therewith. The costs and
expenses of enforcing this right of indemnification will also be paid by the Company. The
indemnification provided for hereunder will survive the expiration of the Rights and the
termination of this Agreement and the resignation or removal of the Rights Agent.




          (b) The Rights Agent may conclusively rely upon and will be protected and will incur no
liability for or in respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Right Certificate or certificate for Common
Shares or other securities, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other document believed by
it in good faith to be genuine and to be signed, executed and, where necessary, verified or
acknowledged by the proper person or persons.




          (c) Notwithstanding anything in this Agreement to the contrary, in no event will the Rights
Agent be liable for special, indirect or consequential loss or damage of any kind
(including but not limited to lost profits), even if the Rights Agent has been advised of the
likelihood of such loss or damage and regardless of the form of the action.




19









 








          Section 18. Merger or Consolidation or Change of Name of Rights Agent.




          (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger or consolidation to
which the Rights Agent or any successor Rights Agent will be a party, or any corporation,
succeeding to the shareholder services business of the Rights Agent or any successor Rights Agent,
will be the successor to the Rights Agent under this Agreement without the execution or filing of
any document or any further act on the part of any of the parties hereto, provided that such
corporation is for appointment as a successor Rights Agent under the provisions of Section 20. In
case at the time such successor Rights Agent succeeds to the agency created by this Agreement any
of the Right Certificates has been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of the predecessor so countersigned; in case at that time any of the
Right Certificates have not been countersigned, any successor Rights Agent may countersign such
Right Certificates either in the name of the predecessor Rights Agent or in the name of the
successor Rights Agent; and in all such cases, such Right Certificates will have the full force
provided in the Right Certificates and in this Agreement.




          (b) In case at any time the name of the Rights Agent is changed and at such time any of the
Right Certificates has been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so countersigned; in case at
that time any of the Right Certificates have not been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed name; and in all
such cases, such Right Certificates will have the full force provided in the Right Certificates and
in this Agreement.




          Section 19. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, and no implied duties or
obligations will be read into this Agreement against the Rights Agent, by all of which the Company
and the holders of Right Certificates, by their acceptance thereof, will be bound:




          (a) Before the Rights Agent acts or refrains from acting, the Rights Agent may consult with
legal counsel (who may be legal counsel for the Company), and the opinion of such counsel will be
full and complete authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion.




          (b) Whenever in the performance of its duties under this Agreement the Rights Agent deems it
necessary or desirable that any fact or matter be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or matter (unless other evidence in respect
thereof is specifically prescribed in this Agreement) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company and
delivered to the Rights Agent; and such certificate will be full authorization to the Rights
Agent for any action taken or omitted in good faith by it under the provisions of this Agreement in
reliance upon such certificate.


20









 







           (c) The Rights Agent will be liable hereunder only for its own gross negligence, bad faith or
willful misconduct.




          (d) The Rights Agent will not be liable for or by reason of any of the statements of fact or
recitals contained in this Agreement or in the Right Certificates (except its countersignature
thereof) or be required to verify such statements or recitals, but all such statements and recitals
are and will be deemed to have been made by the Company only.




          (e) The Rights Agent will not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Right Certificate (except its
countersignature thereof and as provided in Section 17); nor will it be responsible for any breach
by the Company of any covenant or condition contained in this Agreement or in any Right
Certificate; nor will it be responsible for any adjustment required under the provisions of Section
11 or the manner, method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice of any such adjustment); nor will it by any act
hereunder be deemed to make any representation or warranty as to the authorization or reservation
of any Common Shares to be issued pursuant to this Agreement or any Right Certificate or as to
whether any Common Shares will, when issued, be validly authorized and issued, fully paid and
nonassessable.




          (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be
performed, executed, acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.




          (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to
the performance of its duties hereunder from any one of the Chairman of the Board, the President,
any Vice President, the Treasurer or the Secretary of the Company, and to apply to such officers
for advice or instructions in connection with its duties, and it will not be liable for any action
taken or suffered to be taken by it in good faith in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions.




          (h) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent
may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not Rights Agent under
this Agreement. Nothing herein will preclude the Rights Agent from acting in any other capacity
for the Company or for any other Person.




          (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it
or perform any duty hereunder either itself or by or through its attorneys or
agents, and the Rights Agent will not be answerable or accountable for any act, default,
neglect or misconduct of any such attorney or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct, provided reasonable care was exercised in the
selection

21









 








and continued employment thereof. The Rights Agent will not be under any duty or
responsibility to ensure compliance with any applicable securities laws in connection with the
issuance, transfer or exchange of Rights Certificates.




          (j) No provision of this Agreement will require the Rights Agent to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of its duties hereunder
or in the exercise of its rights if there will be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not reasonably assured
to it.




          (k) The Rights Agent will not be required to take notice or be deemed to have notice of any
fact, event or determination (including, without limitation, any dates or events defined in this
Agreement or the designation of any Person as an Acquiring Person, Associated Acquiring Person,
Affiliate or Associate) under this Agreement unless and until the Rights Agent is specifically
notified in writing by the Company of such fact, event or determination.




          (l) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or
transfer, the certificate attached to the form of assignment or form of election to purchase, as
the case may be, has either not been completed or indicates an affirmative response to clause 1 or
2 thereof, the Rights Agent will not take any further action with respect to such requested
exercise or transfer without first consulting with the Company.




          Section 20. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and
be discharged from its duties under this Agreement upon 30 days notice in writing mailed by
registered or certified mail to the Company and to each transfer agent of the Common Shares; if the
resignation occurs after the Triggering Date, notice in writing will, at the expense of the
Company, also be sent by first class mail to the holders of the Right Certificates. The Rights
Agent or any successor Rights Agent that the Company may appoint may, prior to the Triggering Date,
be removed by the Company and be discharged from its duties under this Agreement upon 30 days
notice in writing mailed by registered or certified mail to the Rights Agent and to each transfer
agent of the Common Shares. If the Rights Agent resigns or is removed by the Company or otherwise
becomes incapable of acting, the Company will appoint a successor to the Rights Agent. If the
Company fails to make such appointment within a period of 30 days after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the
holder of a Right Certificate (who will, with such notice, submit his Right Certificate for
inspection by the Company) or after it has given notice of such removal, then the registered holder
of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a
successor Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a
court, will be a corporation or other legal entity organized and doing business under the law of
the United States or of any other state of the United States, in good standing, that is authorized
under such laws to exercise corporate trust powers and is subject to supervision or examination by
federal or state authority or that has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50 million. After
appointment, the successor Rights Agent will be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent will deliver and transfer to the successor Rights Agent




22









 







any property at the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective date of any such
appointment the Company will file notice thereof in writing with the predecessor Rights Agent and
each transfer agent of the Common Shares. Failure to give any notice provided for in this Section
20 or any defect therein, however, will not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.




          Section 21. Issuance of New Right Certificates. Notwithstanding any of the provisions of this
Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect
any adjustment or change in the Purchase Price or the Exercise Price per share and the number, kind
or class of shares or other securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.




          Section 22. Redemption.




          (a) The Board of Directors may, at its option, at any time prior to the earlier of the
Triggering Date or the Expiration Date, redeem all but not less than all of the then outstanding
Rights at a redemption price of $0.005 per Right, appropriately further adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date hereof (the “Redemption
Price”).




          (b)





     (i) In the event that the Company receives a Qualified Offer (the date on which such
offer was received being referred to as the “Qualified Offer Date”) and the Board of
Directors has not within 120 days of the Qualified Offer Date redeemed the Rights in
accordance with Section 22(a) or amended this Agreement to permit the Qualified Offer or
another offer that the Board of Directors has determined to be a superior offer to be
consummated, then the Board of Directors will call a special meeting of shareholders for the
purpose of voting on a resolution authorizing the redemption of all but not less than all of
the then outstanding Rights at the Redemption Price or an amendment of this Agreement that
would permit the Qualified Offer or such superior offer to be consummated. The special
meeting will be held on a date selected by the Board of Directors, which date will not be
more than 165 days (subject to extension to satisfy any then outstanding regulatory or
information delivery requirements) after the Qualified Offer Date.




     (ii) If, at the special meeting, the resolution to authorize the redemption of the
Rights or amend this Agreement to permit the Qualified Offer to be
consummated receives the affirmative vote of the holders of at least a majority of the
Common Shares outstanding and entitled to vote as of the record date of the special meeting,
then all of the Rights will be redeemed by such shareholder action at the Redemption Price
or such amendment to this Agreement will be executed, as applicable, in each case to be
effective immediately prior to the consummation of the Qualified Offer



23









 








(provided that the
Qualified Offer is consummated prior to 90 days after the date of the special meeting).




          (c) Immediately upon the action of the Board of Directors ordering the redemption of the
Rights pursuant to paragraph (a) of this Section 22, or upon the effectiveness of the redemption of
the Rights pursuant to paragraph (b) of this Section 22, and without any further action and without
any notice, the right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights will be to receive the Redemption Price. Within ten calendar days after the
action of the Board of Directors or shareholders, as applicable, ordering the redemption of the
Rights, the Company will give notice of such redemption to the holders of the then outstanding
Rights by mailing such notice to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Triggering Date, on the registry books of the
transfer agent for the Common Shares. Any notice that is mailed in the manner herein provided will
be deemed given, whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made. Neither the
Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any of
the Rights at any time in any manner other than that specifically set forth in this Section 22 or
in connection with the repurchase of Common Shares prior to the Triggering Date.



          Section 23. Notice of Certain Events. In case the Company proposes at any time following the
Triggering Date to (a) pay any dividend payable in stock of any class to the holders of Common
Shares or make any other distribution to the holders of Common Shares (other than dividends payable
in Common Shares and regular cash dividends), (b) offer to the holders of Common Shares rights or
warrants to subscribe for or to purchase any additional Common Shares or shares of stock of any
class or any other securities, rights or options, (c) effect any reclassification of its Common
Shares, (d) effect any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in
one or more transactions, of more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to, any other Person, or (e) effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company will give to the Rights Agent and
to each holder of a Right, in accordance with Section 24, a notice of such proposed action, which
will specify the record date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up is to take place and the date of participation therein by
the holders of the Common Shares, if any such date is to be fixed, and such notice will be so
given, in the case of any action described in clause (a) or (b) above, at least twenty days prior
to the record date for determining holders of the Common Shares for purposes of such action and, in
the case of any such other action, at least twenty days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the Common Shares,
whichever will be the earlier.




          The Company will as soon as practicable after the Triggering Date give to the Rights Agent and
to each holder of a Right, in accordance with Section 24, a notice of the

24









 







Triggering Date, which will specify the event and the consequences of the event to holders of Rights under Section
11(a)(ii).




          Section 24. Notices. Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Right Certificate to or on the Company will be sufficiently
given or made if personally delivered or sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Rights Agent) as follows:



Jo-Ann Stores, Inc.

5555 Darrow Road

Hudson, Ohio 44236

Attention: President



Subject to the provisions of Section 20, any notice or demand authorized by this Agreement to be
given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent
will be sufficiently given or made if personally delivered or sent by registered or certified mail
and will be deemed given upon receipt, addressed (until another address is filed in writing with
the Company) as follows:



National City Bank

1900 East 9th Street

Cleveland, Ohio 44114

Attention: Corporate Trust Administration




          Notices or demands authorized by this Agreement to be given or made by the Company or the
Rights Agent to or on the holder of any Right Certificate will be sufficiently given or made if
personally delivered or sent by first-class mail, postage prepaid, addressed to such holder at the
address of such holder as shown on the registry books of the Company.




          Section 25. Supplements and Amendments. The Company may from time to time supplement or amend
this Agreement without the approval of any holders of Right Certificates in order to (i) cure any
ambiguity, (ii) correct or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or (iii) prior to the Triggering Date, change or
supplement the provisions hereunder that the Company may deem necessary or desirable and not
adverse to the interests of the holders of Common Shares. Upon the delivery of a certificate from
an appropriate officer of the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 25, the Rights Agent will execute such supplement or
amendment unless the Rights Agent determines in good faith that such supplement or
amendment would adversely affect its interests under this Agreement. Prior to the Triggering
Date, the interests of the holders of Rights will be deemed coincident with the interests of the
holders of Common Shares. Notwithstanding anything in this Agreement to the contrary, no
supplement or amendment that changes the rights and duties of the Rights Agent under this agreement
will be effective against the Rights Agent without the execution of such supplement or amendment by
the Rights Agent.




25









 








          Section 26. Successors. All the covenants and provisions of this Agreement by or for the benefit
of the Company or the Rights Agent will bind and inure to the benefit of their respective
successors and assigns hereunder.




          Section 27. Determination and Actions by the Board of Directors, etc. For all purposes of this
Agreement, any calculation of the number of Common Shares outstanding at any particular time,
including for purposes of determining the particular percentage of such outstanding Common Shares
of which any Person is the Beneficial Owner, will be made in accordance with the provisions of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors
will have the exclusive power and authority to administer this Agreement and to exercise all rights
and powers specifically granted to the Board, or the Company, or as may be necessary or advisable
in the administration of this Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or
advisable for the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend or supplement this Agreement). All such actions, calculations,
interpretations and determinations (including, for the purpose of clause (ii) below, all omissions
with respect to the foregoing) that are done or made by the Board in good faith, will (i) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the Right Certificates and
all other parties, and (ii) not subject the Board to any liability to any holder of any Right
Certificate.




          Section 28. Benefits of this Agreement. Nothing in this Agreement will be construed to give to
any person or corporation other than the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Triggering Date, the registered holders of the Common
Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement will
be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders
of the Right Certificates (and, prior to the Triggering Date, the registered holders of the Common
Shares).




          Section 29. Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this Agreement will remain in
full force and effect and will in no way be affected, impaired or
invalidated.




          Section 30. Governing Law. This Agreement and each Right Certificate will be deemed to be a
contract made under the laws of the State of Ohio and for all purposes will be governed by and
construed in accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.




          Section 31. Counterparts. This Agreement may be executed in any number of counterparts and each
of such counterparts will for all purposes be deemed to be an original, and all such counterparts
will together constitute but one and the same instrument.




26









 








          Section 32. Descriptive Headings. Descriptive headings of the Sections of this Agreement are
inserted for convenience only and will not control or affect the meaning or construction of any of
the provisions hereof.




          Section 33. Effective Date of Agreement. This Agreement will become effective upon the date of
this Agreement.




[signature page follows]




27









 





          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
attested, all as of the day and year first above written.




	 	 	 	 	 	 	 	 	 	 	 	 
	JO-ANN STORES, INC.	 	 	Attest:	 	 
	 
	By:

	 	/s/ Darrell Webb
	 	 	By:
	 	/s/ David B. Goldston
	 	 
	 

	 	 
	 	 	 	 	 	 	 
	 

	 	Name:

	Darrell Webb 	 	 	 	 	Name:
 	David B. Goldston	 	 
	 
	 	Title: 	Chairman, President and CEO	 	 	 	 	Title: 	Senior Vice President, General
Counsel and Secretary  	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	NATIONAL CITY BANK, 

NATIONAL ASSOCIATION	 	 	Attest:	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Sharon R. Boughter
	 	 	By:	 	 	 
	 

	 
	 	 	 	 	 	 	 
	 

	 	Name: 
	 Sharon R. Boughter	 	 	 	 	Name:	 	 	 
	 

	 	Title: 
	 Vice President	 	 	 	 	Title:	 	 	 






28









 






INDEX OF DEFINED TERMS




	 	 	 	 	 
	 	 	Page	 
	Acquiring Person
	 	 	1	 
	Affiliate
	 	 	2	 
	Agreement
	 	 	1	 
	Associate
	 	 	2	 
	Associated Acquiring Person
	 	 	2	 
	Beneficial Owner
	 	 	2	 
	beneficially own
	 	 	2	 
	Board of Directors
	 	 	3	 
	Business Day
	 	 	3	 
	Close of business
	 	 	3	 
	Common Shares
	 	 	3	 
	Company
	 	 	1	 
	current market price
	 	 	14	 
	Exchange Act
	 	 	2	 
	Exercise Price
	 	 	3	 
	Expiration Date
	 	 	9	 
	Family Members
	 	 	3	 
	Issuance
	 	 	3	 
	NASDAQ
	 	 	14	 
	NYSE
	 	 	14	 
	Person
	 	 	4	 
	Purchase Price
	 	 	4	 
	Qualified Offer
	 	 	4	 
	Qualified Offer Date
	 	 	6	 
	Redemption Price
	 	 	6, 23	 
	Right
	 	 	1, 6	 
	Rights Agent
	 	 	1	 
	SEC
	 	 	6	 
	Securities Act
	 	 	11	 
	Shares Acquisition Date
	 	 	6	 
	Subsidiary
	 	 	6	 
	Trading Day
	 	 	15	 
	Triggering Date
	 	 	6	 







29










 





Exhibit A




[FORM OF RIGHT CERTIFICATE]




			
	Certificate No. R -                    
	 	                     Rights







NOT EXERCISABLE AFTER OCTOBER 31, 2010 OR EARLIER IF NOTICE OF REDEMPTION IS GIVEN.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.005 PER
RIGHT ON THE TERMS SET FORTH IN THE AMENDED AND RESTATED RIGHTS AGREEMENT. [THE
RIGHTS REPRESENTED BY THIS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON
WHO WAS OR BECAME AN ACQUIRING PERSON OR AN ASSOCIATED ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHT CERTIFICATE AND
THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(E) OF THE RIGHTS AGREEMENT.]*



RIGHT CERTIFICATE




          This certifies that                     , or registered assigns, is the registered owner of the
number of Rights set forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of a rights agreement, as amended to date (the “Rights Agreement”),
between Jo-Ann Stores, Inc., an Ohio corporation (the “Company”), and                     , as
Rights Agent (the “Rights Agent”), to purchase from the Company at any time after the Triggering
Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M., Cleveland time, on
October 31, 2010, at the principal office of the Rights Agent, or its successors as Rights Agent,
in                     ,                     , one Common Share of the Company (the “Common Share”), at a purchase
price of $52.17 per share (the “Purchase Price”), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly executed. The number of Rights evidenced by
this Right Certificate, the number of Common Shares that may be purchased upon exercise thereof and
the Purchase Price per share set forth above are the numbers and Purchase Price as of January
[___], 2007, based on the Common Shares of the Company as constituted at such date.




          Upon the occurrence of a Triggering Date (as such term is defined in the Rights Agreement),
each Right will entitle the holder to receive, upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly executed, one Common Share for an Exercise
Price of $.43 per share (the “Exercise Price”).




          If the Rights evidenced by this Right Certificate are or at any time were beneficially owned
by an Acquiring Person or an Associated Acquiring Person (as such terms are






 




			
	*	 	The portion of the legend in brackets will be
inserted only if applicable.




A-1









 









defined in the Rights Agreement), such Rights will become null and void and no holder hereof
will have any right with respect to such Rights from and after the occurrence of such
Triggering Date.




          As provided in the Rights Agreement, the Purchase Price, the Exercise Price and number and
kind of Common Shares or other securities that may be purchased upon the exercise of the Rights
evidenced by this Right Certificate are subject to modification and adjustment upon the happening
of certain events.




          This Right Certificate is subject to all of the terms, provisions and conditions of the Rights
Agreement; reference is made to the Rights Agreement for a full description of the rights,
limitations of rights, obligations, duties and immunities of the Rights Agent, the Company and the
holders of the Right Certificates. Copies of the Rights Agreement are on file at the principal
office of the Rights Agent in                     ,                     . In addition, the Company will mail to the holder
of this certificate a copy of the Rights Agreement (as in effect on the date of mailing) without
charge promptly after receipt of a written request therefor.




          This Right Certificate, with or without other Right Certificates, upon surrender at the
principal office of the Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Common Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered entitled such holder to purchase. If this Right Certificate is exercised
in part, the holder will be entitled to receive upon surrender hereof another Right Certificate or
Right Certificates for the number of whole Rights not exercised.




          Subject to the provisions of the Rights Agreement, the Rights evidenced by this Right
Certificate may be redeemed by the Company at its option at a redemption price of $0.005 per Right.




          The Company will not issue any fractional Common Shares upon the exercise of any Right or
Rights evidenced hereby, but in lieu thereof may make a cash payment, as provided in the Rights
Agreement.




          No holder of this Right Certificate will be entitled to vote or receive dividends or be deemed
for any purpose the holder of the Common Shares or of any other securities of the Company that may
at any time be issuable on the exercise hereof, nor will anything contained in the Rights Agreement
or herein be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Right Certificate have been exercised as provided in
the Rights Agreement.




          This Right Certificate will not be valid or obligatory for any purpose until it has been
countersigned by the Rights Agent.




A-2









 








          WITNESS the signature (which may be by facsimile) of the proper officers of the Company.
Dated as of                     , 20___.




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	JO-ANN STORES, INC.	 	 	 	Attest:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	 	 	 	 	 	 	Name:	 	 	 	 
	 

	 	Title:
	 	 

	 	 	 	 	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 	 	 	 	 	 	 

	 	 






	 	 	 	 	 
	 	Countersigned:

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



A-3









 






	 	 	 	 	 



[FORM OF REVERSE SIDE OF RIGHT CERTIFICATE]




Form of Assignment




(To be executed by the registered holder if the

holder desires to transfer the Right Certificate)




        FOR VALUE RECEIVED                                                                                  hereby sells, assigns and transfers unto




(Please print name and address of transferee)



this Right Certificate, together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint                                                                                  as attorney, to transfer the Right
Certificate on the books of Jo-Ann Stores, Inc., with full power of substitution.



Dated:                     , 20___




Signature



Signature Guaranteed:




Certificate




          The undersigned hereby certifies by checking the appropriate boxes that:




          (1) this
Right Certificate o  is o is not being sold, assigned and transferred by or on
behalf of a Person who is or was an Acquiring Person or an Associated Acquiring Person (as such
terms are defined in the Rights Agreement);




          (2) after due inquiry and to the best knowledge of the undersigned, the undersigned [ ] did [
] did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or
subsequently became an Acquiring Person or an Associated Acquiring Person.



Dated:                     , 20___




Signature




Notice




          The signature to the foregoing Assignment and Certificate must correspond to the name as
written upon the face of this Right Certificate in every particular, without alteration,
enlargement or change.




A-4









 








Form of Election to Purchase Common Shares




(To be executed if the holder desires to

exercise the Right Certificate in accordance with

Section 11(a)(ii) of the Rights Agreement)



To Jo-Ann Stores, Inc.:




          The undersigned hereby irrevocably elects to exercise                                          Rights represented by
this Right Certificate to purchase the Common Shares issuable upon the exercise of such Rights and
requests that certificates for such shares be issued in the name of:




(Please print name and address)



Please insert social security

or other identifying number:                                         



If such number of Rights are not all the Rights evidenced by this Right Certificate, a new Right
Certificate for the balance remaining of such Rights will be registered in the name of and
delivered to:




(Please print name and address)



Please insert social security

or other identifying number:                                         



Dated:                     , 20___




Signature
(Signature must conform in all respects to name of

the holder as specified on the face of this Right

Certificate)



Signature Guaranteed:




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Certificate




          The undersigned hereby certifies by checking the appropriate boxes that:




          (1) the Rights evidenced by this Right Certificate o are o exercised by or
on behalf of a Person who is or was an Acquiring Person or an Associated Acquiring Person (as such
terms are defined in the Rights Agreement);




          (2) after
due inquiry and to the best knowledge of the undersigned, it o did o  did not
acquire the Rights evidenced by this Right Certificate from any Person who is, was or subsequently
became an Acquiring Person or an Associated Acquiring Person.



Dated:                     , 20___




Signature




Notice





     The signature to the foregoing Election to Purchase and Certificate must correspond to the
name as written upon the face of this Right Certificate in every particular, without alteration or
enlargement or any change whatsoever.



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Exhibit B




SUMMARY OF RIGHTS TO PURCHASE

COMMON SHARES




     The Board of Directors of Jo-Ann Stores, Inc. (the “Company”) has authorized the issuance of
one Right for each outstanding Common Share, without par value, of the Company (the “ Common
Shares”). As of February 26, 2007, each Right entitles the registered holder to purchase from the
Company one Common Share at a price of $52.17 (the “Purchase Price”), subject to adjustment.
Following a Triggering Date (as hereinafter defined) and under the conditions described below, each
Right entitles the registered holder (other than an Acquiring Person (as hereinafter defined) or
Associated Acquiring Person) to acquire one Common Share for an exercise price of $.43 per share
(the “Exercise Price”). The description and terms of the Rights are set forth in a rights
agreement (the “Rights Agreement”) between the Company and a rights agent (the “Rights Agent”).



     Until the tenth day after there is a public announcement that a person or group of affiliated
or associated persons (an “Acquiring Person”) has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the Common Shares then outstanding (the “Triggering Date”),
the Rights will be evidenced by the certificate for such Common Share.



     The Rights Agreement provides that, until the Triggering Date, the Rights will be transferred
with and only with the associated Common Shares. Until the Triggering Date (or the earlier
redemption or expiration of the Rights), the surrender for transfer of any certificate for Common
Shares will also constitute the transfer of the Rights associated with the Common Shares
represented by the certificates. As soon as practicable following the Triggering Date, separate
certificates evidencing the Rights (“Right Certificates”) will be mailed to holders of record of
the Common Shares as of the close of business on the Triggering Date, and thereafter such separate
Right Certificates alone will evidence the Rights.



     The Rights are not exercisable until the Triggering Date. The Rights will expire at the close
of business on October 31, 2010 unless earlier redeemed by the Company as described below.



     Upon the occurrence of a Triggering Date (as defined in the Rights Agreement), each holder of
a Right, other than Rights that were or are beneficially owned by an Acquiring Person or an
Associated Acquiring Person (which will thereafter be void), will have the right to receive, upon
exercise of the Right and payment of the Exercise Price, one Common Share of the Company.



     The Purchase Price and the Exercise Price, and the number of Common Shares or other securities
issuable upon exercise of the Rights, are subject to adjustment from time to time to prevent
dilution.



     With certain exceptions, no adjustment in the Purchase Price or the Exercise Price will be
required until cumulative adjustments require an adjustment of at least 1% in the Purchase Price or
the Exercise Price. No fractional shares will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Common Shares on the last trading date prior to
the date of exercise.



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     Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder
of the Company, including, without limitation, the right to vote or to receive dividends.



     At any time prior to the Triggering Date, the Board of Directors of the Company may redeem the
Rights in whole, but not in part, at a price of $0.005 per Right (the “Redemption Price”).
Immediately upon the action of the Board of Directors of the Company electing to redeem the Rights,
the Company will make announcement thereof, and the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.



     If the Company receives a Qualified Offer and the Board of Directors of the Company has not
within 120 days of the date the Company received such Qualified Offer (the “Qualified Offer Date”)
redeemed the Rights or amended the Rights Agreement to permit the Qualified Offer or another offer
that the Board of Directors has determined to be a superior offer to be consummated, then the Board
of Directors will call a special meeting of shareholders for the purpose of voting on a resolution
authorizing the redemption of all but not less than all of the then outstanding Rights at the
Redemption Price or an amendment of this Agreement that would permit the Qualified Offer or such
superior offer to be consummated. The special meeting would be held on a date selected by the
Board of Directors, which date must not be more than 165 days (subject to extension to satisfy any
then outstanding regulatory or information delivery requirements) after the Qualified Offer Date.



     The provisions of the Rights Agreement may be amended by the Board of Directors in order to
cure any ambiguity, to correct any defect or inconsistency or, prior to the Triggering Date, to
make changes deemed to be not adverse to the interests of the holders of the Rights.



     A copy of the Rights Agreement has been, and any amendments thereto will be, filed with the
Securities and Exchange Commission as an exhibit to the Company’s registration of the Rights on
Form 8-A. A copy of the Rights Agreement is available from the Company free of charge to any
holder of Common Shares of the Company. This summary description of the Rights does not purport to
be complete and is qualified in its entirety by reference to the Rights Agreement, as it may be
amended from time to time.




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