exv10w6



 





Exhibit 10.6




JO-ANN STORES, INC.

(formerly Fabri-Centers of America, Inc.)

1998 INCENTIVE COMPENSATION PLAN AS AMENDED




As amended by the Compensation Committee of the Board of Directors

November 13, 2007




1. Purpose




          The purpose of this Plan is enable the Company to attract and retain qualified employees and
outside Directors, to provide incentives, and to reward performance. To achieve this purpose, this
Plan provides the authority to grant Awards payable in Shares, in cash, or in a combination of
Shares and cash.




2. Definitions




          (a) “Affiliate and Associate” - These terms have the meanings given to them in Rule 12b-2
under the Exchange Act.




          (b) “Award” - A grant of Stock Appreciation Rights, Stock Awards, Stock Options, Stock
Purchase Rights, Incentive Compensation Awards, or other incentives under this Plan.




          (c) “Board of Directors” - The Board of Directors of the Company.




          (d) “Change in Control” - A “Change of Control” will be deemed to occur if at any time after
the date of the adoption of this Plan:





          (i) Any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan or employee share ownership plan of the Company or 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), alone or together with any of its Affiliates or Associates, becomes the
Beneficial Owner of securities of the Company having 20% or more of the voting power
of the Company. For purposes of this Section 2(d)(i), the terms “Beneficial Owner”
and “Person” have the meanings given to them in the Rights Agreement, dated October
22, 1990, between the Company and Harris Bank and Trust, as Rights Agent, as amended
or restated from time to time (the “Rights Agreement”), or in any rights agreement
or similar agreement that replaces or supersedes the Rights Agreement.




          (ii) At any time during a period of 24 consecutive months, individuals who were
Directors at the beginning of the period no longer constitute a majority of the
members of the Board of Directors unless the election, or the nomination



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for election by the Company’s shareholders, of each Director who was not a
Director at the beginning of the period is approved by at least a majority of the
Directors who are in office at the time of the election or nomination and were
Directors at the beginning of the period.




          (iii) The Company is merged, consolidated, or reorganized into or with another
Person and, as a result of the merger, consolidation, or reorganization, securities
having less than a majority of the voting power of such Person in the election of
Directors outstanding immediately after the merger, consolidation, or reorganization
are held by the holders of securities of the Company entitled to vote generally in
the election of directors outstanding immediately prior to the merger,
consolidation, or reorganization.



          (e) “Class A Shares” - Class A Common Shares, without par value, of the Company or any equity
security or securities of the Company that are issued in substitution or exchange therefor in a
recapitalization of the Company.




          (f) “Class B Shares” - Class B Common Shares, without par value, of the Company or any equity
security or securities of the Company that are issued in substitution or exchange therefor in a
recapitalization of the Company.




          (g) “Code” - The Internal Revenue Code of 1986, or any law that supersedes or replaces it, as
amended from time to time.




          (h) “Committee” - The Compensation Committee of the Board of Directors, or any other
committee of the Board of Directors that the Board of Directors authorizes to administer this Plan.




          (i) “Company” – Jo-Ann Stores, Inc. (formerly Fabri-Centers of America, Inc.), an Ohio
corporation.




          (j) “Covered Employees” - An officer of the Company whose compensation is subject to the
$1,000,000 limit on deductibility under Section 162(m) of the Code, or any provision that
supersedes or replaces Section 162(m) of the Code, as amended from time to time.




          (k) “Director” - A director of the Company.




          (l) “Exchange Act” - Securities Exchange Act of 1934, and any law that supersedes or replaces
it, as amended from time to time.




          (m) “Fair Market Value” of Shares — The value of Shares determined by the Committee, or
pursuant to rules established by the Committee, on a basis consistent with regulations under the
Code.




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          (n) “Incentive Compensation Award” - This term has the meaning given to it in Section
6(a)(iv).




          (o) “Incentive Stock Option” - A Stock Option that meets the requirements of Section 422 of
the Code, or any provision that supersedes or replaces Section 422 of the Code, as amended from
time to time.




          (p) “Participant” - Any person to whom an Award has been granted under this Plan.




          (q) “Performance Criteria” - This term has the meaning given to it in Section 7(b).




          (r) “Performance Goal” - This term has the meaning given to it in Section 7(a).




          (s) “Restricted Stock” - An Award of Shares that are subject to restrictions or risk of
forfeiture.




          (t) “Rule 16b-3” - Rule 16b-3 under the Exchange Act, or any rule that supersedes or replaces
it, as amended from time to time.




          (u) “Shares” - Class A Shares or Class B Shares, as the case may be.




          (v) “Stock Appreciation Right” - This term has the meaning given to it in Section 6(a)(i).




          (w) “Stock Award” - This term has the meaning given to it in Section 6(a)(ii).




          (x) “Stock Equivalent Unit” - An Award that is valued by reference to the Fair Market Value of
Shares.




          (y) “Stock Option” - This term has the meaning given to it in Section 6(a)(iii).




          (z) “Stock Purchase Right” - A right to participate in a stock purchase program, including but
not limited to a stock purchase program that meets the requirements of Section 423 of the Code.




          (aa) “Subsidiary” - A corporation, limited liability company, business trust, partnership,
joint venture, or other organization of which securities having a majority of the voting power are
owned, directly or indirectly, by the Company.




3. Eligibility




          All outside Directors and employees of the Company or any of its Subsidiaries will be eligible
to receive Awards.




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4. Administration




          (a) Committee. Subject to Sections 4(b) and 4(c), this Plan will be administered by the
Committee. The Committee will, subject to the terms of this Plan, have the authority to:
(i) select the eligible Directors and employees who will receive Awards, (ii) determine the number
and types of Awards to be granted, (iii) determine the terms, conditions, vesting periods, and
restrictions applicable to the Awards, (iv) establish Performance Goals for performance-based
Awards, (v) prescribe the forms of any notices, agreements, or other instruments relating to the
Awards, (vi) grant the Awards, (vii) adopt, alter, and repeal rules governing this Plan,
(viii) interpret the terms and provisions of this Plan and any Awards granted under this Plan, and
(ix) otherwise supervise the administration of this Plan. All decisions by the Committee will be
made with the approval of not less than a majority of its members.




          (b) Awards Subject to Section 16(b) of the Exchange Act. Notwithstanding the provisions of
Section 4(a), if any member of the Committee does not qualify as a “Non-Employee Director” within
the meaning of Rule 16b-3, the “Committee” will, for purposes of making any Award that (i) constitutes a “purchase” of securities within
the meaning of Section 16(b) of the Exchange Act by an individual who is subject to potential
liability under Section 16(b) of the Exchange Act and (ii) does not otherwise qualify for an
exemption under Rule 16b-3, be deemed to consist only of those members of the Committee who qualify
as such Non-Employee Directors.




          (c) Awards Subject to Section 162(m) of the Code. Notwithstanding the provisions of Section
4(b), if any member of the Committee does not qualify as an “outside director” within the meaning
of Section 162(m) of the Code, the “Committee” will, for purposes of making any performance-based
Awards to Covered Employees, be deemed to consist only of those members who qualify as such outside
directors.




          (d) Delegation. The Committee may delegate any of its authority to any other Person or
Persons that it deems appropriate, provided the delegation does not (i) cause this Plan, or any
Awards granted under this Plan, to fail to qualify for the exemption provided by Rule 16b-3 or (ii)
result in a reduction in the amount of compensation associated with any Award that is deductible
for federal income tax purposes under Section 162(m) of the Code.




          (e) Decisions Final. All decisions by the Committee, and by any other person or persons to
whom the Committee has delegated authority, will be final and binding on all persons.




5. Shares Available under Plan; Limitations on Incentive




          (a) Maximum Aggregate Number of Shares. Subject to Sections 5(c) and 5(d), the total number
of Shares (whether Class A Shares, Class B Shares, or a combination of Class A Shares and Class B
Shares) subject to Awards (other than Stock Purchase Rights meeting the requirements of Section 423
of the Code) granted in any fiscal year of the Company may not exceed the sum of (i) four percent
(4%) of the number of Shares (including both Class A Shares



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and Class B Shares) outstanding at the beginning of the fiscal year and (ii) for each of the
two prior fiscal years, the excess of four percent (4%) of the number of Shares outstanding at the
beginning of each such fiscal year over the number of Shares subject to Awards actually granted in
each such fiscal year. With respect to Stock Purchase Rights meeting the requirements of Section
423 of the Code granted during any fiscal year, the total number of shares subject to Stock
Purchase Rights granted in any fiscal year may not exceed 1,000,000. The maximum number of Shares
that may be issued or delivered upon exercise of Incentive Stock Options granted under this Plan is
1,000,000. Shares issued or delivered under this Plan may consist of authorized and unissued
shares, treasury shares, or shares to be purchased by the Company, as determined by the Committee.




          (b) Maximum Number of Shares and Amount of Incentive Compensation Award for Each Participant.
Subject to Sections 5(c) and 5(d), the number of Shares subject to Awards granted to any
Participant, and the amount of any Incentive Compensation Award payable in cash to any Participant,
may not exceed:





          (i) With respect to Stock Options (other than Incentive Stock Options), 500,000
Shares in any fiscal year of the Company. If the exercise price of any Stock Option
granted to the Participant in that fiscal year is less than the Fair Market Value of
the Shares subject to the Stock Option at the date of grant, then, with respect to
all Stock Options granted to the Participant in that fiscal year, the aggregate
amount of the excess of (A) the Fair Market Value of the Shares subject to the Stock
Options at the dates of grant over (B) the respective exercise prices may not exceed
$1,000,000.




          (ii) With respect to Stock Appreciation Rights, 100,000 Shares in any fiscal
year of the Company.




          (iii) With respect to Incentive Stock Options, the aggregate Fair Market Value
(determined as of the time the Incentive Stock Option is granted) of the Shares with
respect to which Incentive Stock Options may be exercisable for the first time by
any Participant in any calendar year may not exceed $100,000 or such other maximum
amount as may be permitted by the Code.




          (iv) With respect to Restricted Stock, in any fiscal year of the Company, the
number of Shares granted may not exceed 100,000 on the date of hire and 50,000
otherwise in any fiscal year of the Company.




          (v) With respect to Stock Awards other than Stock Options and Restricted Stock,
100,000 Shares in any fiscal year of the Company.




          (vi) With respect to Incentive Compensation Awards payable in cash, the lesser
of $1,000,000 or 150% of annual base salary in respect to any fiscal year of the
Company.



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          (c) Charging of Shares. Shares subject to an Award that is forfeited, terminated, canceled,
or surrendered without having been exercised (other than (i) Shares subject to a Stock Option that
is canceled upon the exercise of a related Stock Appreciation Right and (ii) Shares subject to an
Award that is surrendered in payment of the exercise price of a Stock Option or a Stock Purchase
Right or in payment of taxes associated with an Award) will again be available for grant under this
Plan, without reducing the number of Shares that may be subject to Awards or that are available for
the grant of Awards in any fiscal year. The assumption of awards granted by an organization
acquired by the Company, or the grant of Awards under this Plan in substitution for any such
awards, will not reduce the number of Shares available for the grant of Awards under this Plan.
Stock Equivalent Units that represent deferred compensation, and Shares issued in payment of
deferred compensation, will not reduce the number of Shares that may be subject to Awards or that
are available for the grant of Awards under the Plan or to any Participant in any fiscal year,
except to the extent of matching or other related grants by the Company or any discount in the
price used to convert the deferred compensation into Stock Equivalent Units or Shares.




          (d) Adjustment. In the event of any change in the Shares by reason of a merger,
consolidation, reorganization, recapitalization, or similar transaction, or in the event of a stock
dividend, stock split, distribution to shareholders (other than normal cash dividends), or rights
offering or similar sale of Shares for less than their Fair Market Value at the time of sale, the
Committee will adjust the number and class of shares that may be issued under this Plan, the number
and class of shares that may be issued to any Participant in any fiscal year, the number and class
of shares subject to outstanding Awards, the exercise price applicable to outstanding Awards, and
any value determinations applicable to outstanding Awards.




6. Awards




          (a) Types of Awards. Awards may include, but are not limited to, the following:





          (i) Stock Appreciation Right - A right to receive a payment, in cash or Shares,
equal to the excess of (A) the Fair Market Value of a specified number of Shares on
the date the right is exercised over (B) the Fair Market Value of the Shares on the
date the right is granted, all as determined by the Committee. The right may be
conditioned upon the occurrence of certain events, such as a Change in Control of
the Company, or may be unconditional, as determined by the Committee.




          (ii) Stock Award - An Award that is made in Shares, Restricted Stock, or Stock
Equivalent Units.




          (iii) Stock Option - A right to purchase a specified number of Shares, during a
specified period, and at a specified exercise price, all as determined by the
Committee. A Stock Option may be an Incentive Stock Option or a Stock



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Option that does not qualify as an Incentive Stock Option. In addition to the
terms, conditions, vesting periods, and restrictions established by the Committee,
Incentive Stock Options must comply with the requirements of Section 422 of the
Code. The exercise price of Incentive Stock Options granted to any Participants,
and the exercise price of any Stock Options granted to Covered Employees, may not be
less than the Fair Market Value of the Shares subject to the Stock Option on the
date of grant.




          (iv) Incentive Compensation Award - An Award that, in the discretion of the
Committee, is payable either in Shares or in cash and is contingent upon the
achievement of Performance Goals established by the Committee.




          (v) Stock Purchase Right - A right to participate in a stock purchase program,
including but not limited to a stock purchase program that meets the requirements of
Section 423 of the Code.




          Among other requirements, Section 423 currently provides that (A) only employees of the
Company, or of any direct or indirect subsidiary of the Company designated by the Committee,
may receive Stock Purchase Rights that qualify under Section 423 (“Section 423 Rights”), (B)
Section 423 Rights may not be granted to any Participant who, immediately after the Section
423 Rights are granted, owns stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of shares of the Company, (C) Section 423
Rights must be granted to all employees of the Company, and of any direct or indirect
subsidiary of the Company designated by the Compensation Committee, except that there may be
excluded (1) employees who have been employed less than two years, (2) employees whose
customary employment is 20 hours or less per week, (3) employees whose customary employment
is for not more than five months in any calendar year, and (4) highly compensated employees
(within the meaning of Section 414(q) of the Code), (D) all employees granted Section 423
Rights must have the same rights and privileges, except that the number of Shares that may
be purchased by any employee upon exercise of Section 423 Rights may bear a uniform
relationship to the total compensation, or the basic or regular rate of compensation, of the
employee, (E) the exercise price of Section 423 Rights may not be less than the lesser of
(1) eighty five percent (85%) of the Fair Market Value of the Shares at the time Section 423
Rights are granted, or (2) eighty five percent (85%) of the Fair Market Value of the Shares
at the time the Section 423 Rights are exercised; (F) Section 423 Rights cannot be exercised
after the expiration of 27 months from the date the Section 423 Rights are granted, and (G)
no employee may be granted Section 423 Rights, under this Plan and any other plans of the
Company and its subsidiaries, that permit the purchase of Shares with a Fair Market Value of
more than $25,000 (determined at the time the Section 423 Rights are granted) in any
calendar year.




          (b) Grant of Awards. More than one Award may be granted to the same Participant.
Awards may be granted singly or in combination or tandem with other



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Awards. The Company may assume awards granted by an organization acquired by the
Company or may grant Awards in replacement of, or in substitution for, any such awards.



7. Performance-Based Awards under Section 162(m) of the Code




          (a) Selection of Participants and Establishment of Performance Goals. The Committee will
determine the period of time during which any Award that is performance-based for purposes of
Section 162(m) of the Code may be earned. The Committee will also establish, not later than 90
days after the commencement of the award period (or such earlier or later date as may be the
applicable deadline for the Award to be performance-based for purposes of Section 162(m) of the
Code), one or more performance objectives (“Performance Goals”) to be met by the Company, or by one
or more of its Subsidiaries or other business units, as a condition to the payment of the Award.
The Performance Goals may, in the discretion of the Committee, include a range of performance
objectives (such as minimum, middle, and maximum objectives) the achievement of which will entitle
Participants to receive different amounts of compensation.




          (b) Performance Criteria. The Performance Goals will be based on one or more of the following
criteria (“Performance Criteria”): sales, earnings, earnings per Share, return on equity,
completion of acquisitions or other projects, and market price per Share. These Performance
Criteria may be measured before or after taxes, interest, depreciation, amortization, discontinued
operations, affect of accounting changes, acquisition expenses, restructuring expenses,
non-operating items, or usual charges, as determined by the Committee at the time the Performance
Goals are established.




8. Deferral of Payment




          The Committee may, in its discretion, permit Participants to defer the payment of some or all
of the Shares or cash subject to their Awards, as well as other compensation or fees, in accordance
with procedures established by the Committee to assure that the recognition of taxable income is
deferred under the Code. Deferred amounts may, to the extent permitted by the Committee, be
credited as cash or Stock Equivalent Units and paid in cash or in Shares. The Committee may also,
in its discretion, establish rules and procedures for the crediting of interest on deferred cash
and dividend equivalents on Stock Equivalent Units. The Committee may also, in its discretion,
provide for matching or other grants in connection with such deferrals.




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9. Payment of Exercise Price




          (a) Manner of Payment. The exercise price of a Stock Option (other than an Incentive Stock
Option), a Stock Purchase Right, and any other Stock Award for which the Committee has established
an exercise price may be paid in cash, by the transfer of Shares, by the surrender of all or part
of an Award (including the Award being exercised), or by a combination of these methods, as and to
the extent permitted by the Committee. The exercise price of an Incentive Stock Option may be paid
in cash, by the transfer of Shares, or by a combination of these methods, as and to the extent
permitted by the Committee at the time of grant, but may not be paid by the surrender of all or
part of an Award. The Committee may prescribe any other method of paying the exercise price that
it determines to be consistent with applicable law and the purpose of this Plan, including loans by
the Company.




          (b) Use of Restricted Stock. In the event shares of Restricted Stock are used to pay the
exercise price of a Stock Option or a Stock Purchase Right, a number of the Shares issued upon the
exercise of the Stock Option or Stock Purchase Right equal to the number of shares of Restricted
Stock used to pay the exercise price will be subject to the same restrictions as the Restricted
Stock.




10. Taxes Associated with Award




          Prior to the payment of an Award, the Company may withhold, or require a Participant to remit
to the Company, an amount sufficient to pay any federal, state, and local taxes associated with the
Award. The Committee may, in its discretion and subject to such rules as the Committee may adopt,
permit a Participant to pay any or all taxes associated with the Award (other than an Incentive
Stock Option) in cash, by the transfer of Shares, by the surrender of all or part of an Award
(including the Award being exercised), or by a combination of these methods. The Committee may
permit a Participant to pay any or all taxes associated with an Incentive Stock Option in cash, by
the transfer of Shares, or by a combination of these methods, but not by the surrender of all or
part of an Award.




11. Termination of Employment




          If the employment of a Participant terminates for any reason, all unexercised, deferred, and
unpaid Awards may be exercisable or paid only in accordance with rules established by the
Committee.




12. Termination of Awards under Certain Conditions




          The Committee may cancel any unexpired, unpaid, or deferred Award at any time if the
Participant is not in compliance with all applicable provisions of this Plan or with the terms or
conditions of the Award or if the Participant, without the prior written consent of the Company,
engages in any of the following activities:




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          (i) Renders services to an organization, or engages in a business, that is, in
the judgment of the Committee, in competition with the Company.




          (ii) Discloses to anyone outside of the Company, or uses for any purpose other
than the Company’s business, any confidential information or material relating to
the Company, whether acquired by the Participant during or after employment with the
Company.



          The Committee may, in its discretion and as a condition to the exercise of an Award, require a
Participant to acknowledge in writing that he or she is in compliance with all applicable
provisions of this Plan and with the terms and conditions of the Award and has not engaged in any
activities referred to in clauses (i) and (ii) above.




13. Change in Control; Acquisition of the Company




          (a) Change in Control. In the event of a Change in Control of the Company, unless otherwise
determined by the Committee, (i) all Stock Appreciation Rights, Stock Options, and Stock Purchase
Rights then outstanding will become fully exercisable as of the date of the Change in Control,
(ii) all restrictions and conditions applicable to Restricted Stock and other Stock Awards will be
deemed to have been satisfied as of the date of the Change in Control, and (iii) all Incentive
Compensation Awards will be deemed to have been fully earned as of the date of the Change in
Control; provided, however, that solely with respect to stock equivalent units, a Change in Control
shall be deemed to have occurred in the event of one of the following events after December 31,
2004:





     (A) any one person, or more than one person acting as a group, acquires ownership
of stock of the Company that, together with stock held by such person or group,
constitutes more than 50% of the total fair market value or total voting power of the
stock of the Company;




     (B) a majority of members of the Company’s board of directors is replaced during
any 12-month period by directors whose appointment or election is not endorsed by a
majority of the members of the Company’s board of directors before the date of the
appointment or election; or




     (C) any one person, or more than one person acting as a group, acquires (or has
acquired during a 12-month period ending on the date of the most recent acquisition by
such person or persons) assets from the Company that have a total gross fair market
value equal to or more than 50% of the total gross fair market value of all of the
assets of the Company immediately before such acquisition or acquisitions.



          (b) Acquisition of the Company. With respect to Stock Options and any other Awards that
entitled Participants to receive Shares, in the event of an acquisition of the Company in which the
holders of Shares receive other securities or cash in exchange for their Shares, the



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Committee may, in its discretion, arrange for (1) the grant by the acquiror of substitute
Stock Options or Awards that entitle Participants to receive, in lieu of the Shares they otherwise
would be entitled to receive, of the securities or cash for which the Shares would have been
exchanged in the acquisition or (2) the cancellation of the Stock Options and other Awards in
consideration of the securities or cash for which the Shares would have been exchanged in the
acquisition, net of any exercise price.




14. Amendment or Suspension of this Plan; Amendment of Outstanding Awards




          (a) Amendment or Suspension of this Plan. The Board of Directors may amend or suspend this
Plan at any time. Shareholder approval for any such amendment will be required only to the extent
necessary to preserve the deductibility of compensation associated with any Award for federal
income tax purposes under Section 162(m) of the Code.




          (b) Amendment of Outstanding Awards. The Committee may, in its discretion, amend the terms of
any Award, prospectively or retroactively, but no such amendment may, except as provided in Section
13(b), impair the rights of any Participant without his or her consent. The Committee may, in
whole or in part, waive any restrictions or conditions applicable to, or accelerate the vesting of,
any Award.




15. Nonassignability




          Unless otherwise determined by the Committee, (i) no Award granted under this Plan may be
transferred or assigned by the Participant to whom it is granted other than by will, pursuant to
the laws of descent and distribution, or (except in the case of an Incentive Stock Option) pursuant
to a qualified domestic relations order and (ii) an Award granted under this Plan may be exercised,
during the Participant’s lifetime, only by the Participant or by the Participant’s guardian or
legal representative.




16. Governing Law




          The interpretation, validity, and enforcement of this Plan will, to the extent not otherwise
governed by the Code or the securities laws of the United States, be governed by the law of the
State of Ohio.




17. Rights of Employees




          Nothing in this Plan will confer upon any Participant the right to continued employment
by the Company or limit in any way the Company’s right to terminate any Participant’s employment at
will.




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18. Effective and Termination Dates




          (a) Effective Date. This Plan will become effective on the date it is approved by the holders
of a majority of the Shares then outstanding.




          (b) Termination Date. This Plan will continue in effect until June 3, 2008.





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