**Exhibit 10.27****AGREEMENT**     THIS AGREEMENT (“Agreement”) is made as of the 19th day of February, 2008, betweenJO-ANN STORES, INC., an Ohio corporation (the “Company”), and Travis Smith (“Executive”).     The Company is entering into this Agreement (in substitution for and in lieu of the employmentagreement entered into by the parties dated July 31, 2006; “Prior Agreement”) in recognition of theimportance of Executive’s services to the continuity of management of the Company and based uponits determination that it will be in the best interests of the Company to encourage Executive’scontinued attention and dedication to Executive’s duties as a general matter and in the potentiallydisruptive circumstances of a possible Change of Control of the Company. (As used in thisAgreement, the term “Change of Control” and certain other capitalized terms have the meaningsascribed to them in Section 17 at the end of this Agreement.)     The Company and Executive agree, effective as of the date first set forth above (the“Effective Date”), as follows:***1. Severance Benefits upon Certain Separations from Service Occurring Before a Change of Control***.If, before the occurrence of a Change of Control, Executive has a Separation from Service with theCompany by the Company without Cause, or by Executive for Good Reason, Executive shall be entitledto the following as Severance Benefits:     (a) The Company shall pay Executive an amount equal to Executive’s Base Salary foreighteen (18) months payable in consecutive bi-weekly installments at the same times and inthe same amounts as if Executive had not incurred a Separation from Service and hadcontinued to earn Executive’s Base Salary over that eighteen (18) month period. Each suchinstallment shall be a “Payment” for purposes of this Section 1(a). The Payments shall bepaid over the following payment periods:     (i) First Payment Period. The First Payment Period shall begin on thefirst bi-weekly payroll date following the Separation from Service and shall end onthe last bi-weekly payroll date of the sixth (6th) calendar monthfollowing the calendar month in which the Separation from Service occurs. TheCompany shall pay a Payment to Executive on each bi-weekly payroll date during theFirst Payment Period; provided, however, in no event shall the aggregate amount paidto Executive during the First Payment Period exceed two (2) times the lesser of: (A)the Executive’s annualized compensation based upon the annual rate of pay paid toExecutive for services to the Company for the calendar year preceding the calendaryear in which the Separation from Service occurs (adjusted for any increase duringthat year that was expected to continue indefinitely but for the Separation fromService), or (B) the maximum amount that may be taken into account under Section401(a)(17) of the Internal Revenue Code for the calendar year in which theSeparation from Service occurs.
 

 
     In the event any amount that would have been paid during the First PaymentPeriod cannot be paid because it would exceed the limitation provided in thepreceding paragraph, such excess amount shall be paid in a lump sum on the firstbi-weekly payroll date of the Second Payment Period (in addition to any amount thatwould be paid on such bi-weekly payroll date in the Second Payment Period asprovided in Section 1(a)(ii) below).     (ii) Second Payment Period. The Second Payment Period shall commenceon the first bi-weekly payroll date following the end of the First Payment Periodand shall end on the last bi-weekly payroll date preceding the date that is eighteen(18) months following the Executive’s Separation from Service. The Company shallpay a Payment to Executive on each bi-weekly payroll date in the Second PaymentPeriod.     (b) The Company shall continue to provide Executive with group term life insurance foreighteen (18) months following the Termination Date, except that the Company may stopproviding group term life insurance earlier if and when Executive accepts full timeemployment with a subsequent employer and that employer provides Executive with group termlife insurance coverage. The group term life insurance benefits to be provided by theCompany pursuant to this paragraph shall be provided to Executive at the same cost toExecutive, and at the same coverage level, as is applicable to continuing executives incomparable positions from time to time during the period the benefits are continued.     (c) The initial 50,000 stock options granted to Executive in connection with hisinitial employment will become fully exercisable as of the date the Executive’s employmentwith the Company is terminated (to the extent that such options remain outstanding as of thetermination date), and all restrictions and conditions applicable to the initial 40,000restricted shares granted to Executive in connection with his initial employment will bedeemed to have been satisfied as of the date of the Executive’s termination. With respectto all subsequent equity awards, the provisions of the granting instruments and relevantCompany plans shall be applicable.     (d) The Executive shall be entitled to continue his medical and dental insurance inaccordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”),provided the Executive timely elects such coverage and satisfies all other eligibilityrequirements under COBRA. If the Executive elects COBRA coverage, the Executive shall paythe full COBRA premium at his own expense.     (e) On the first bi-weekly payroll date during the Second Payment Period, the Companyshall pay Executive the sum of Forty-Six Thousand Three Hundred Sixty-Seven Dollars($46,367) in addition to any other amounts due at that time to Executive pursuant to theother provisions of this Agreement.     (f) If the Separation from Service occurs during a fiscal year in which a bonus wasearned under any Company sponsored bonus plan, the Executive will be entitled to a pro-rataportion of that fiscal year’s bonus based on the attainment of the performance
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metrics. This pro-rata bonus will be paid at its normal time at the end of theperformance period.***2. Change of Control Severance Benefits upon Certain Separations from Service Occurring After aChange of Control***. If, after the occurrence of a Change of Control, Executive has a Separationfrom Service with the Company by the Company without Cause, or by Executive for Good Reason,Executive shall be entitled to the following as Change of Control Severance Benefits:     (a) The Company shall make a lump sum cash payment to Executive, not later than ten(10) business days after the Separation from Service, in an amount equal to three (3) timesthe sum of (i) Executive’s Base Salary plus (ii) the greater of (A) Executive’s average cashbonus earned over the three (3) full fiscal years of the Company ended before the Separationfrom Service, or (B) Executive’s target annual bonus established for the bonus plan year inwhich the Separation from Service occurs. If Executive has been employed by the Company forfewer than three (3) but at least one (1) full fiscal year of the Company ended before theSeparation from Service, the average of the bonuses earned in the two (2) full fiscal yearsof the Company ended before the Separation from Service, or the amount of the bonus earnedin the one full fiscal year of the Company ended before the Separation from Service, as thecase may be, shall be substituted for the average referred to in (A) above.     (b) If the Separation from Service occurs after the end of a bonus year under anyCompany sponsored bonus plan and before the bonus with respect to that bonus year has beenpaid, the Company shall pay to Executive, not later than ten (10) business days after theSeparation from Service, an amount equal to the bonus for that bonus year to which Executivewould have been entitled had the bonus plan for that bonus year remained in effect withoutany change and had Executive remained in the employ of the Company through the date on whichbonuses for that bonus year were paid.     (c) The Company shall make a lump sum cash payment to Executive, not later than ten(10) business days after the Separation from Service, in an amount equal to the greater of(i) Executive’s unpaid targeted annual bonus, established for the bonus year in which theSeparation from Service occurs, multiplied by a fraction, the numerator of which is thenumber of days Executive was employed by the Company in the bonus year through theSeparation from Service, and the denominator of which is 365, or (ii) the bonus amountspecifically guaranteed to Executive for that bonus year under any other agreement betweenthe Company and Executive.     (d) The Company shall continue to provide Executive with group term life insurance forthree (3) years following the Termination Date, except that the Company may stop providinggroup term life insurance earlier if and when Executive accepts full time employment with asubsequent employer and that employer provides Executive with group term life insurancecoverage. The group term life insurance benefits to be provided by the Company pursuant tothis paragraph shall be provided to Executive at the same cost to Executive, and at the samecoverage level, as is applicable to continuing executives in comparable positions from timeto time during the period the benefits are continued.
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     (e) All stock options granted to Executive then outstanding will become fullyexercisable as of the date of the Change of Control, and all restrictions and conditionsapplicable to restricted stock granted to Executive will be deemed to have been satisfied asof the date of the Change of Control.     (f) The Executive shall be entitled to continue his medical and dental insurance inaccordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”),provided the Executive timely elects such coverage and satisfies all other eligibilityrequirements under COBRA. If the Executive elects COBRA coverage, the Executive shall paythe full COBRA premium at his own expense.     (g) On the first bi-weekly payroll date during the Second Payment Period, the Company shall payExecutive the sum of Ninety Two Thousand Seven Hundred and Thirty Five Dollars ($92,735) inaddition to any other amounts due at that time to Executive pursuant to other provisions of thisAgreement.***3. Earned but Unpaid Base Salary and Accrued Paid Time Off Pay Payable Upon Any Separationfrom Service; Treatment of Long-Term Incentive Awards.*** Upon Executive’s Separation from Servicefor any reason and at any time, the Company shall pay to Executive (or, where appropriate, toExecutive’s Beneficiary), not later than ten (10) days after the Separation from Service, (a) allearned but unpaid Base Salary through the Separation from Service, and (b) an amount equal to theaggregate dollar value of all paid time off earned but not taken by Executive (“Accrued Paid TimeOff Pay”) before the Separation from Service. In addition, upon such Separation from Service, alloutstanding long-term incentive awards shall be subject to the treatment provided under theapplicable long-term incentive plan of the Company except as explicitly provided otherwise in thisAgreement.***4. Separation from Service Due to Retirement, Disability, or Death***. If Executive has a Separationfrom Service due to Retirement, Disability, or death while this Agreement remains in effect(whether before or after the occurrence of a Change of Control), neither Executive nor Executive’sBeneficiaries will be entitled to Severance Benefits or Change of Control Severance Benefits undereither of Sections 1 or 2 but Executive or Executive’s Beneficiaries, as appropriate, will beentitled to the payments provided for in Section 3 and to such benefits as may be provided underthe terms of the Company’s disability, retirement, survivor’s benefits, insurance, and otherapplicable plans and programs of the Company then in effect.***5. Separation from Service for Cause or by Executive other than for Good Reason***. If Executive hasa Separation from Service by the Company for Cause or by Executive other than for Good Reason whilethis Agreement remains in effect (whether before or after the occurrence of a Change of Control)and Section 6 does not apply, neither Executive nor Executive’s Beneficiaries will be entitled toSeverance Benefits or Change of Control Severance Benefits under either of Sections 1 or 2 butExecutive or Executive’s Beneficiaries, as appropriate, will be entitled to the payments providedfor in Section 3 and the Company shall pay to Executive such other amounts to which Executive isentitled under any compensation plans of the Company, at the time such payments are due. Except asprovided in this Section 5, the Company shall have no further obligations to Executive under thisAgreement.***6. Special Provision Applicable only if Executive has a Separation from Service both in Advance ofand in Contemplation of a Change of Control***. If Executive has a Separation
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 from Service by the Company (a) in contemplation of and not more than six (6) full calendar monthsbefore the occurrence of a Change of Control, and (b) under circumstances such that if theSeparation from Service had occurred immediately after that Change of Control Executive would havebeen entitled to Change of Control Severance Benefits under Section 2 above, then the Company shallpay and provide to Executive all of the amounts and benefits specified in Section 2, reduced bysuch amounts and such benefits, if any, that the Company has otherwise paid and provided toExecutive pursuant to Section 1 above. The Company shall make any cash payment required pursuantto this Section 6 within ten (10) days of the occurrence of the Change of Control.***7. Change of Control Ignored if Employment Continues for More than Two Years Thereafter***. IfExecutive’s employment continues for more than two (2) years following the occurrence of any Changeof Control, that particular Change of Control will be deemed never to have occurred for purposes ofthis Agreement.***8. Term of Agreement***     This Agreement shall be effective as of the Effective Date (without interruption from thePrior Agreement) and shall continue in effect hereafter until a Separation from Service occurspursuant to one of Sections 1, 2, 4, or 5, with due consideration of Sections 3, 6 and 7 hereof.The parties may, by mutual agreement, at any time and from time time modify or terminate the termof this Agreement under this Section 8.***9. Excise Tax***.     If there is any conflict between the provisions of this Section 9 and any other provision ofthis Agreement regarding payments to be made or benefits to be provided to Executive under thisAgreement following a Change of Control, the provisions of this Section 9 shall govern.     ***9.1. Acknowledgement***. The Company and Executive acknowledge that, following a Change of Control,one or more payments or distributions to be made by the Company to or for the benefit of Executive(whether paid or payable or distributed or distributable pursuant to the terms of this Agreement,under some other plan, agreement, or arrangement, or otherwise, and including, without limitation,any income recognized by Executive upon exercise of an option granted by the Company to acquireCommon Shares issued by the Company) (a “Payment”) may be determined to be an Excess ParachutePayment that is not deductible by the Company for federal income tax purposes and with respect towhich Executive will be subject to an excise tax because of Sections 280G and 4999, respectively,of the Code (hereinafter referred to respectively as “Section 280G” and “Section 4999”).     ***9.2. Procedure***. If Executive’s employment is terminated after a Change of Control occurs, theAccounting Firm, which, subject to any inconsistent position asserted by the Internal RevenueService, shall make all determinations required to be made under this Section 9, shall determine(a) the maximum amount of Parachute Payments that Executive may receive without becoming subject tothe excise tax imposed by Section 4999 and without the Company suffering a loss of deduction underSection 280G (this maximum amount being the “280G Limit”) and (b) whether, if all Payments weremade without regard to this Section 9, any Payment would be an Excess Parachute Payment. TheAccounting Firm shall communicate its determination, together
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with detailed supporting calculations, to the Company and to Executive within 30 days after theTermination Date or such earlier time as is requested by the Company. The Company and Executiveshall cooperate with each other and the Accounting Firm and shall provide necessary information sothat the Accounting Firm may make all such determinations. The Company shall pay all of the feesof the Accounting Firm for services performed by the Accounting Firm as contemplated in thisSection 9.     ***9.3. Reduction or Gross Up if Payments Would Constitute Excess Parachute Payments***. If any Paymentwould, if made without regard to this Section 9, constitute an Excess Parachute Payment, either (a)the payments to be made to Executive under this Agreement without regard to this Section 9 shall bereduced as provided in Section 9.4, or (b) the Company shall make all of the payments to be made toExecutive under all of the provisions of this Agreement other than this Section 9 and, in addition,the Company shall make the Gross Up Payments specified in Section 9.5.     ***9.4. Reduction in Payments if Aggregate Parachute Payments Would Otherwise not Exceed 110% of 280GLimit***. If the aggregate value of all Parachute Payments does not exceed 110% of the 280G Limit,the payments to be made to Executive under this Agreement shall be reduced, but not below zero, bysuch amount so that the aggregate value of the Parachute Payments actually made to Executive willbe One Dollar ($1.00) less than the 280G Limit.     ***9.5. Gross Up Payment if Aggregate Parachute Payments Exceed 110% of 280G Limit***. If the aggregatevalue of all Parachute Payments exceeds 110% of the 280G Limit and Executive is therefore subjectto the excise tax under Section 4999 on Excess Parachute Payments received (the “Excise Tax”), theCompany shall, in addition to making all other Payments to Executive, make additional payments(“Gross Up Payments”) to Executive, from time to time and at the same time as Parachute Paymentsare made to Executive, in such lump sum amount or amounts as are sufficient, from time to time, toplace Executive in the same net after tax position that Executive would have been in if (a)Executive had to bear (without any Gross Up Payment under this Section 9.5) the Excise Tax withrespect to 10% of all Parachute Payments received by Executive, (b) the Excise Tax did nototherwise apply to any Payments, and (c) Executive had not incurred any interest charges orpenalties with respect to the imposition of any portion of the Excise Tax; provided, however, thatsuch Gross Up Payments shall be paid on or before the last day of the calendar year following thecalendar year in which the Executive remits the Excise Tax. For purposes of this Section 9, allpayments received by Executive from the Company (whether under this Agreement or otherwise andincluding all Gross Up Payments received by Executive) shall be deemed to be subject to Federal andstate tax at the highest marginal tax rates applicable to Executive in the year in which the GrossUp Payment is made.     ***9.6. Imposition of Excise Tax Following Reduction of Payments Prescribed by Section 9.4***. If,notwithstanding a reduction of payments to Executive under this Agreement as contemplated bySection 9.4, it is ultimately determined by a court or pursuant to a final determination by theInternal Revenue Service that any payment received by Executive is an Excess Parachute Payment andExecutive is therefore obligated to pay Excise Tax with respect to any Payments, the Company shallmake Gross Up Payments to Executive from time to time, in such lump sum amount or amounts as aresufficient, from time to time, to place Executive in the same net after tax position that Executivewould have been in if no such Payments constituted
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Excess Parachute Payments subject to the Excise Tax, the reduction of Parachute Payments prescribedby Section 9.4 had been made exactly as intended (i.e., to the extent but only to the extentnecessary to avoid the Excise Tax), and Executive had not incurred any interest charges orpenalties with respect to the imposition of any Excise Tax.     ***9.7. Imposition of Additional Excise Tax Following Payment of Gross Up Prescribed by Section 9.5***.If the Internal Revenue Service determines that any Payment gives rise, directly or indirectly, toliability on the part of Executive for the Excise Tax (and/or any penalties and/or interest withrespect to any Excise Tax) in excess of the amount, if any, previously determined by the AccountingFirm, the Company shall make further additional cash payments to Executive not later than the duedate of any payment indicated by the Internal Revenue Service with respect to these matters, insuch amounts as are necessary to put Executive in the same position, after payment of all federaland state taxes (whether income taxes, Excise Taxes, or other taxes) and any and all penalties andinterest with respect to any such taxes, as Executive would have been in if the Accounting Firm hadanticipated the later determination by the Internal Revenue Service and the Company had madeappropriate Gross Up Payments to the extent contemplated by Section 9.5 in the first instance.     ***9.8. Potential Contest by the Company of Internal Revenue Service Determination***. If the Companydesires to contest any determination by the Internal Revenue Service with respect to the amount ofExcise Tax, Executive shall, upon receipt from the Company of an unconditional written undertakingto indemnify and hold Executive harmless (on an after tax basis) from any and all adverseconsequences that might arise from the contesting of that determination, cooperate with the Companyin that contest at the Company’s sole expense. Nothing in this Section 9.8 shall require Executiveto incur any expense other than expenses with respect to which the Company has paid to Executivesufficient sums so that after the payment of the expense by Executive and taking into account thepayment by the Company with respect to that expense and any and all taxes that may be imposed uponExecutive as a result of Executive’s receipt of that payment, the net effect is no cost toExecutive. Nothing in this Section 9.8 shall require Executive to extend the statute of limitationswith respect to any item or issue in Executive’s tax returns other than, exclusively, the ExciseTax. If, as the result of the contest of any assertion by the Internal Revenue Service withrespect to Excise Tax, Executive receives a refund of Excise Tax previously paid and/or anyinterest with respect thereto, Executive shall promptly pay to the Company such amount as willleave Executive, net of the repayment and all tax effects, in the same position, after all taxesand interest, that he would have been in if the refunded Excise Tax had never been paid.
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***10. Outplacement Assistance***. Following a Separation from Service in which Severance Benefits orChange of Control Severance Benefits are payable hereunder, the Company shall provide Executivewith outplacement services obtained by the Company at its cost and commensurate with theoutplacement services typically provided by the Company to Executives who left the employ of theCompany before the Effective Date of this Agreement, until Executive obtains subsequent employmentor self-employment; provided, however, that such outplacement shall not continue beyond the lastday of the second calendar year following the calendar year in which the Executive’s TerminationDate or “Separation from Service” occurs.***11. The Company’s Payment Obligation***.     ***11.1. Payment Obligations Absolute***. The Company’s obligation to make the payments and provide thebenefits provided for herein shall be absolute and unconditional, and shall not be affected by anycircumstances, including, without limitation, any offset, counterclaim, recoupment, defense, orother right which the Company may have against Executive or anyone else. All amounts payable bythe Company hereunder shall be paid without notice or demand. Each and every payment madehereunder by the Company shall be final, and the Company shall not seek to recover all or any partof such payment from Executive or from whomsoever may be entitled thereto, for any reasonswhatsoever.     ***11.2. No Mitigation***. Executive shall not be obligated to seek other employment in mitigation ofthe amounts payable or benefits to be provided under any provision of this Agreement, and theobtaining of any such other employment shall in no event effect any reduction of the Company’sobligations to make the payments or provide any benefits as required under this Agreement, exceptto the limited extent provided above in cases where a subsequent employer provides group term lifeinsurance coverage.     ***11.3. Source of Payments and Benefits***. All payments under this Agreement shall be made solely fromthe general assets of the Company (or from a grantor trust, if any, established by the Company forpurposes of making payments under this Agreement and other similar agreements), and Executive shallhave the rights of an unsecured general creditor of the Company with respect thereto.***12. Legal Remedies.***     ***12.1. Payment of Legal Fees***. Unless prohibited by law, the Company shall pay all legal fees, costsof arbitration and/or litigation, prejudgment interest, and other expenses incurred in good faithby Executive as a result of the Company’s refusal to provide the Severance Benefits or Change ofControl Severance Benefits to which Executive deems Executive to be entitled under this Agreement,as a result of the Company’s contesting the validity, enforceability, or interpretation of thisAgreement, or as a result of any conflict between the parties pertaining to this Agreement,provided, however, that the Company shall be reimbursed by Executive for all such fees and expensesif, but only if, it is ultimately determined by a court of competent jurisdiction or by thearbitrators, as the case may be, that Executive had no reasonable grounds for the positionpropounded by Executive in the arbitration and/or litigation (which determination need not be madesimply because Executive fails to succeed in the arbitration and/or litigation).
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     ***12.2. Arbitration***. Subject to the following sentences, any dispute or controversy arising under orin connection with this Agreement shall be settled by mandatory arbitration (in lieu oflitigation), conducted before a panel of three (3) arbitrators sitting in a location selected byExecutive within fifty (50) miles from Hudson, Ohio, in accordance with the rules of the AmericanArbitration Association then in effect. Any dispute which arises with respect to Executive’salleged violation of the prohibition on competition or any other restriction contained in Section14 of this Agreement shall be settled by judicial proceedings (in any court of competentjurisdiction with respect to such dispute or claim). Except as provided above for claims ordisputes under Section 14, judgment may be entered on the award of the arbitrator in any courthaving proper jurisdiction.***13. Withholding***. The Company shall be entitled to withhold from any amounts payable under thisAgreement all taxes as legally shall be required (including, without limitation, any United Statesfederal income, FICA and Medicare taxes, and any other state, city, or local taxes).***14. Noncompetition***.     ***14.1. Prohibition on Competition***. Without the prior written consent of the Company, during theterm of this Agreement, and, if Severance Benefits are paid hereunder, thereafter during theeighteen (18) month period beginning on the Termination Date or if Change of Control SeveranceBenefits are paid hereunder, thereafter through the second (2nd) anniversary of theTermination Date, Executive shall not, as an employee, an officer, or as a director, engagedirectly or indirectly in any business or enterprise that engages to any significant extent withinthe United Sates of America in the sale at retail or direct marketing to consumers of fabric andcraft components. Notwithstanding the foregoing, Executive may purchase and hold for investmentless than two percent (2%) of the shares of any corporation whose shares are regularly traded on anational securities exchange or in the over-the-counter market.     ***14.2. Disclosure of Information***. Executive acknowledges that Executive has and has had access toand knowledge of certain confidential and proprietary information of the Company, which isessential to the performance of Executive’s duties as an employee of the Company. Executive willnot, during or after the term of Executive’s employment by the Company, in whole or in part,disclose such information to any person, firm, corporation, association, or other entity for anyreason or purpose whatsoever, nor shall Executive make use of any such information for his ownpurposes.     ***14.3. Covenants Regarding Other Employees***. During the term of this Agreement and thereafter duringany period during which Executive is subject to the restriction set forth in Section 14.1,Executive shall not attempt to induce any employee of the Company to terminate his or heremployment with the Company or accept employment with any competitor of the Company and Executiveshall not interfere in any similar manner with the business of the Company.***15. Successors and Assignment***.     ***15.1. Successors to the Company***. The Company will require any successor (whether direct orindirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of thebusiness and/or assets of the Company to expressly assume and agree to perform the
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Company’s obligations under this Agreement in the same manner and to the same extent that theCompany would be required to perform them if no such succession had taken place. Failure of theCompany to obtain such assumption and agreement prior to the effective date of any such successionshall be a breach of this Agreement and shall entitle Executive to notify the Company that, unlessthe failure is remedied within thirty (30) days after delivery of the notice from Executive,Executive’s employment will terminate as of the thirty-first (31st) day after the delivery of thenotice. If any such notice is given and the failure is not so remedied, Executive will be entitledto receive the same payments and benefits from the Company, and on the same schedule, as if theCompany had undergone a Change of Control on the date of the succession and Executive had thereuponterminated his employment for Good Reason.     ***15.2. Assignment by Executive***. This Agreement shall inure to the benefit of and be enforceable byExecutive and each of Executive’s personal or legal representatives, executors, administrators,successors, heirs, distributes, devisees, and legatees. If Executive dies while any amount wouldstill be payable to Executive hereunder had Executive continued to live, all such amounts, unlessotherwise provided herein, shall be paid in accordance with the terms of this Agreement, toExecutive’s Beneficiary. If Executive has not named a Beneficiary, then such amounts shall be paidto Executive’s devisee, legatee, or other designee, or if there is no such designee, to Executive’sestate.***16. Miscellaneous***.     ***16.1. Employment Status***. Except as may be provided under any other agreement between Executive andthe Company, the employment of Executive by the Company is “at will,” and, prior to the effectivedate of a Change of Control, may be terminated by either Executive or the Company at any time,subject to applicable law.     ***16.2. Entire Agreement***. This Agreement sets forth the entire agreement between the parties withrespect to severance benefits to be provided upon any termination of Executive’s employment andsupersedes any and all prior employment, retention, and/or change of control agreements betweenExecutive and the Company, including, without limitation, the Prior Agreement.     ***16.3. Beneficiaries***. Executive may designate one or more persons or entities as the primary and/orcontingent Beneficiaries of any Severance Benefits or Change of Control Severance Benefits owing toExecutive under this Agreement. Such designation must be in the form of a signed writingacceptable to the Committee. Executive may make or change such designation at any time.     ***16.4. Severability***. In the event any provision of this Agreement shall be held illegal or invalidfor any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement,and the Agreement shall be construed and enforced as if the illegal or invalid provision had notbeen included.     ***16.5. Modification***. No provision of this Agreement may be modified, waived, or discharged unlesssuch modification, waiver, or discharge is agreed to in writing and signed by Executive and by anauthorized representative of the Company, or by the respective parties’ legal representatives andsuccessors.
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     ***16.6. Applicable Law***. To the extent not preempted by the laws of the United States, the laws ofthe state of Ohio, applicable to contracts made and to be performed wholly within that state, shallbe the controlling law in all matters relating to this Agreement.***17. Definitions***. Whenever used in this Agreement, the following capitalized terms shall have themeanings set forth below:     ***17.1. “Accounting Firm”***means the independent auditors of the Company for the Fiscal Year precedingthe year in which the Change of Control occurred and such firm’s successor or successors; provided,however, if such firm is unable or unwilling to serve and perform in the capacity contemplated bythis Agreement, the Company shall select another national accounting firm of recognized standing toserve and perform in that capacity under this Agreement, except that such other accounting firmshall not be the then independent auditors for the Company or any of its affiliates (as defined inRule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended).     ***17.2. “280G Limit”***has the meaning assigned to it in Section 9.2.     ***17.3. “Base Salary”***means an amount equal to Executive’s base annual salary at the highest ratepayable at any time before the date of a Separation from Service. For this purpose, Base Salaryshall not include bonuses, long-term incentive compensation, or any remuneration other than baseannual salary.     ***17.4. “Beneficial Owner”***shall have the meaning ascribed to such term in Rule 13d-3 of the GeneralRules and Regulations under the Exchange Act.     ***17.5. “Beneficiary”***means the persons or entities designated or deemed designated by Executivepursuant to Section 15.2 herein.     ***17.6. “Board”***means the Board of Directors of the Company.     ***17.7. “Cause”***shall mean the occurrence of any one or more of the following:          (a) The willful and continued failure by Executive to substantially perform his normalduties (other than any such failure resulting from Executive Disability), after a writtendemand for substantial performance is delivered to Executive that specifically identifiesthe manner in which the Committee believes that Executive has not substantially performedhis duties, and Executive has failed to remedy the situation within thirty (30) businessdays of receiving such notice;          (b) Executive’s conviction for committing an act of fraud, embezzlement, theft, orother criminal act constituting a felony; or          (c) The willful engaging by Executive in gross negligence materially and demonstrablyinjurious to the Company. However, no act, or failure to act on Executive’s part shall beconsidered “willful” unless done, or omitted to be done, by Executive not in good faith andwithout reasonable belief that his action or omission was not in or not opposed to the bestinterest of the Company.
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     ***17.8 Change of Control***. A “Change of Control” for purposes of Section 2(e) shall be deemed tohave occurred if at any time or from time to time while this Agreement is in effect:          (a) Any person (other than the Company, any of its Subsidiaries, any member of eitherof the Founding Families, any employee benefit plan or employee stock ownership plan of theCompany, or any person organized, appointed, or established by the Company for or pursuantto the terms of any such plan), alone or together with any of its affiliates, becomes thebeneficial owner of fifteen percent (15%) or more (but less than fifty percent (50%)) of theVoting Shares then outstanding;          (b) Any person (other than the Company, any of its Subsidiaries, any employee benefitplan or employee stock ownership plan of the Company, or any person organized, appointed, orestablished by the Company for or pursuant to the terms of any such plan), alone or togetherwith any of its affiliates, becomes the beneficial owner of fifty percent (50%) or more ofthe Voting Shares then outstanding;          (c) Any person commences or publicly announces an intention to commence a tender offeror exchange offer the consummation of which would result in the person becoming thebeneficial owner of fifteen percent (15%) or more of the Voting Shares then outstanding;          (d) At any time during any period of twenty-four (24) consecutive months, individualswho were directors at the beginning of the 24-month period no longer constitute a majorityof the members of the Board of the Company, unless the election, or the nomination forelection by the Company’s shareholders, of each director who was not a director at thebeginning of the period is approved by at least a majority of the directors who (i) are inoffice at the time of the election or nomination, and (ii) were directors at the beginningof the period;          (e) A record date is established for determining shareholders entitled to vote upon (i)a merger or consolidation of the Company with another corporation in which those persons whoare shareholders of the Company immediately before the merger or consolidation are toreceive or retain less than sixty percent (60%) of the stock of the surviving or continuingcorporation, (ii) a sale or other disposition of all or substantially all of the assets ofthe Company, or (iii) the dissolution of the Company;          (f) (i) The Company is merged or consolidated with another corporation and thosepersons who were shareholders of the Company immediately before the merger or consolidationreceive or retain less than sixty percent (60%) of the stock of the surviving or continuingcorporation, (ii) there occurs a sale or other disposition of all or substantially all ofthe assets of the Company, or (iii) the Company is dissolved; or          (g) Any person who proposes to make a “control share acquisition” of the Company,within the meaning of Section 1701.01(Z) of the Ohio General Corporation Law, submits or isrequired to submit an acquiring person statement to the Company.Notwithstanding anything herein to the contrary, if an event described in clause (b), clause (d),or clause (f) above occurs, the occurrence of that event will constitute an irrevocable Change of
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 Control. Furthermore, notwithstanding anything herein to the contrary, if an event described inclause (c) occurs, and the Board either approves such offer or takes no action with respect to suchoffer, then the occurrence of that event will constitute an irrevocable Change of Control. On theother hand, notwithstanding anything herein to the contrary, if an event described in clause (a),clause (e), or clause (g) above occurs, or if an event described in clause (c) occurs and the Boarddoes not either approve such offer or take no action with respect to such offer as described in thepreceding sentence, and a majority of those members of the Board who were Directors prior to suchevent determine, within the 90-day period beginning on the date such event occurs, that the eventshould not be treated as a Change of Control, then, from and after the date that determination ismade, that event will be treated as not having occurred. If no such determination is made, aChange of Control resulting from any of the events described in the immediately preceding sentencewill constitute an irrevocable Change of Control on the 91st day after the occurrence of the event.     A “Change of Control” for all other purposes of the Agreement shall be deemed to have occurredif at any time or from time to time while this Agreement is in effect:          (i) any one person, or more than one person acting as a group, acquiresownership of stock of the Company that, together with stock held by such person orgroup, constitutes more than fifty percent (50%) of the total fair market value ortotal voting power of the stock of the Company;          (ii) a majority of members of the Company’s board of directors is replacedduring any twelve (12)-month period by directors whose appointment or election isnot endorsed by a majority of the members of the Company’s board of directors beforethe date of the appointment or election; or          (iii) any one person, or more than one person acting as a group, acquires (orhas acquired during a twelve (12)-month period ending on the date of the most recentacquisition by such person or persons) assets from the Company that have a totalgross fair market value equal to or more than fifty percent (50%) of the total grossfair market value of all of the assets of the Company immediately before suchacquisition or acquisitions.     ***17.9. “Change of Control Severance Benefits”***means those payments and benefits that may becomepayable pursuant to Section 2 above.     ***17.10. “Code”***means the United States Internal Revenue Code of 1986, as amended.     ***17.11. “Committee”***means the Compensation Committee of the Board, or any other committee appointedby the Board to perform the functions of the Compensation Committee.     ***17.12. “Company”***means Jo-Ann Stores, Inc., an Ohio corporation, and its successors.     ***17.13. “Disability”***means permanent and total disability, within the meaning of Code Section22(e)(3), as determined by the Committee in the exercise of good faith and reasonable judgment,upon receipt of and in reliance on sufficient competent medical advice from one (1) or moreindividuals, selected by the Committee, who are qualified to give professional medical
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advice, provided, however, that Executive must be entitled to disability benefits under the Companysponsored disability plans or programs.     ***17.14. “Employer”***means the Company and each corporation or other entity with whom the Companywould be considered a single employer under Code Sections 414(b) and 414(c), except that inapplying Code Sections 1563(a)(1), (2) and (3) for purposes of determining a controlled group ofcorporations under Code Section 414(b), the language “at least 50 percent” shall be used instead of“at least 80 percent” in each place it appears in Code Sections 1563(a)(1), (2) and (3), and inapplying Treas. Regs. Sec. 1.414(c)-2 for purposes of determining a controlled group of trades orbusinesses under Code Section 414(c), the language “at least 50 percent” shall be used instead of“at least 80 percent” in each place it appears in Treas. Regs. Sec. 1.414(c)-2.     ***17.15. “Excess Parachute Payment”***has the meaning assigned to that term in Q/A-3 (note thatalthough initial capital letters are used on this term in this Agreement, the Q/As do not useinitial caps for this term).     ***17.16. “Exchange Act”***means the United States Securities Exchange Act of 1934, as amended.     ***17.17. “Excise Tax”***has the meaning assigned to that term in Section 9.5.     ***17.18. “Founding Families”***means the families consisting of Betty and Martin Rosskamm and Alma andJustine Zimmerman and their respective issue.     ***17.19. “Good Reason”***(after a Change of Control) means, without Executive’s express writtenconsent, the occurrence, after the occurrence of a Change of Control, of any one or more of thefollowing:     (a) Any material reduction in Executive’s base compensation and short-term andlong-term incentive compensation opportunities (to the extent such short-term and long-termincentive compensation opportunities are a regular and substantial part of Executive’s basecompensation) below the amount in effect immediately before the Change of Control or, ifhigher, the amount in effect before any reduction in Executive’s base compensation andshort-term and long-term incentive compensation opportunities made in contemplation of theChange of Control.     (b) Any material reduction in Executive’s duties, responsibilities, or position withrespect to the Company from the duties, responsibilities, or position as in effectimmediately before the Change of Control or as in effect immediately before any reduction inany such item made in contemplation of the Change of Control.     (c) Any shift of Executive’s principal place of employment with the Company to alocation that is more than fifty (50) miles (by straight line measurement) from the site ofthe Company’s headquarters in Hudson, Ohio at the relevant time.Executive shall have a Separation from Service for Good Reason (after a Change of Control) only if:(i) Executive provides written notice to the Company within ninety (90) days after the
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 initial occurrence of an above event describing in detail the event and stating that Executive’semployment will terminate upon a specified date in such notice (the “Good Reason TerminationDate”), which date is not earlier than thirty (30) days after the date such notice is provided tothe Company (the “Notice Delivery Date”) and not later than ninety (90) days after the NoticeDelivery Date, and (ii) the Company does not remedy the event prior to the Good Reason TerminationDate.     ***17.20. “Good Reason”***(before a Change of Control) means, without Executive’s express writtenconsent, a material reduction in Executive’s Base Salary other than a reduction that is in the sameproportion as the reduction of the base salaries of every other executive officer of the Company inconnection with an across-the-board reduction of executive base salaries. Executive shall have avoluntary Separation from Service for Good Reason (before a Change of Control) only if: (a)Executive provides written notice to the Company within ninety (90) days after the initialoccurrence of an above event describing in detail the event and stating that Executive’s employmentwill terminate upon a specified date in such notice (the “Good Reason Termination Date”), whichdate is not earlier than thirty (30) days after the date such notice is provided to the Company(the “Notice Delivery Date”) and not later than ninety (90) days after the Notice Delivery Date,and (b) the Company does not remedy the event prior to the Good Reason Termination Date.     ***17.21. “Gross Up Payment”***has the meaning assigned to that term in Section 9.5 above.     ***17.22. “Payment”***has the meaning assigned to that term in Section 9.1 above (except as otherwiseprovided in Section 1(a)).     ***17.23. “Parachute Payment”***has the meaning assigned to that term in Q/A-2 but without reference tosubsection (4) of Q/A-2 (with the effect that a payment otherwise meeting the definition of“Parachute Payment” will be referred to as a Parachute Payment even if the total of all suchParachute Payments is less than three times Executive’s base amount (as defined in Q/A-34) (notethat although initial capital letters are used on this term in this Agreement, the Q/As do not useinitial caps for this term).     ***17.24. “Person”***shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Actand used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d).     ***17.25. “Q/As”***means the entire series of Questions and Answers set forth in Section 1.280G-1 of theTreasury Regulations issued under Section 280G of the Code (which Section of regulations ispresented in Question and Answer format); references to particular Question and Answers will be,for example, to “Q/A-1.”     ***17.26. “Retirement”***means a voluntary Separation from Service by the Executive other than for GoodReason after Executive has either (a) attained age fifty-five (55) and has completed at least ten(10) full years of continuous service with the Company, or (b) has attained age sixty-five (65)(without regard to length of service).
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     ***17.27. “Separation from Service”***means Executive has a termination of employment with the Employer.Whether a termination of employment has occurred shall be determined based on whether the factsand circumstances indicate the Executive and Employer reasonably anticipate that no furtherservices will be performed by the Executive for Employer; provided, however, that Executive shallbe deemed to have a termination of employment if the level of services he would perform forEmployer after a certain date permanently decreases to no more than twenty percent (20%) of theaverage level of bona fide services performed for Employer (whether as an employee or independentcontractor) over the immediately preceding thirty-six (36)-month period (or the full period ofservices to Employer if Executive has been providing services to Employer for less than thirty-six(36) months). For this purpose, Executive is not treated as having a Separation from Service whilehe is on a military leave, sick leave, or other bona fide leave of absence, if the period of suchleave does not exceed six (6) months, or if longer, so long as Executive has a right toreemployment with Employer under an applicable statute or by contract.     ***17.28. “Severance Benefits”***means those payments and benefits that may become payable before theoccurrence of a Change of Control pursuant to Section 1 above.     ***17.29. “Termination Date”***means the date on which any Separation of Service of the Executivebecomes effective.     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first writtenabove.      JO-ANN STORES, INC.