EX-10.1






Exhibit 10.1




AGREEMENT




THIS AGREEMENT (“Agreement”) is made as of the 4th day of March, 2005, between JO-ANN STORES,
INC., an Ohio corporation (the “Company”), and DAVID HOLMBERG (“Executive”).



The Company is entering into this Agreement in recognition of the importance of Executive’s
services to the continuity of management of the Company and based upon its determination that it
will be in the best interests of the Company to encourage Executive’s continued attention and
dedication to Executive’s duties as a general matter and in the potentially disruptive
circumstances of a possible Change of Control of the Company. (As used in this Agreement, the term
“Change of Control” and certain other capitalized terms have the meanings ascribed to them in
Section 17 at the end of this Agreement.)



The Company and Executive agree, effective as of the 29th day of December, 2004 (the
“Effective Date”), as follows:



1. Severance Benefits upon Certain Terminations Occurring Before a Change of Control. If, before
the occurrence of a Change of Control, Executive’s employment with the Company is terminated (a) by
the Company without Cause, or (b) by Executive for Good Reason, Executive shall be entitled to the
following as Severance Benefits:



(a) The Company shall pay Executive an amount equal to one and one half (1-1/2) times
Executive’s Base Salary payable in consecutive bi-weekly installments over the eighteen (18) months
following the Termination Date at the same times and in the same amounts as if Executive had
remained in the employ of the Company and had continued to earn Executive’s Base Salary over that
eighteen (18) month period.



(b) The Company shall continue to provide Executive with the welfare benefits of medical
insurance, dental insurance, and group term life insurance through the end of the eighteenth
(18th) full calendar month following the Termination Date, except that




	 	(i)	 	the Company may stop providing medical insurance and dental
insurance coverage earlier if and when Executive accepts full time employment
with a subsequent employer that generally makes medical insurance available to
its executives and Executive is eligible for that coverage with the subsequent
employer, and






	 	(ii)	 	the Company may stop providing group term life insurance
earlier if and when Executive accepts full time employment with a subsequent
employer and that employer provides Executive with group term life insurance
coverage.





The benefits to be provided by the Company pursuant to this paragraph shall be provided to
Executive at the same cost to Executive, and at the same coverage level, as is applicable to
continuing executives in comparable positions from time to time during the period the benefits are
continued.



2. Change of Control Severance Benefits upon Certain Terminations Occurring After a Change of
Control. If, after the occurrence of a Change of Control, Executive’s employment with the Company
is terminated (a) by the Company without Cause, or (b) 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 Termination Date, in an amount equal to two (2) times the sum of (i)
Executive’s Base Salary plus (ii) the greater of (A) Executive’s average annual bonus earned over
the three (3) full fiscal years of the Company ended before the Termination Date, or (B)
Executive’s target annual bonus established for the bonus plan year in which the Termination Date
occurs. If Executive has been employed by the Company for fewer than three (3) but at least one
(1) full fiscal year of the Company ended before the Termination Date, the average of the bonuses
earned in the two (2) full fiscal years of the Company ended before the Termination Date, or the
amount of the bonus earned in the one full fiscal year of the Company ended before the Termination
Date, as the case may be, shall be substituted for the average referred to in (A) above.



(b) If the Termination Date occurs after the end of a bonus year under any Company sponsored
bonus plan and before the bonus with respect to that bonus year has been paid, the Company shall
pay to Executive, not later than ten (10) business days after the Termination Date, an amount equal
to the bonus for that bonus year to which Executive would have been entitled had the bonus plan for
that bonus year remained in effect without any change and had Executive remained in the employ of
the Company through the date on which bonuses 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 Termination Date, in an amount equal to the greater of (i) Executive’s
unpaid targeted annual bonus, established for the bonus year in which the Termination Date occurs,
multiplied by a fraction, the numerator of which is the number of days Executive was employed by
the Company in the bonus year through the Termination Date, and the denominator of which is 365, or
(ii) the bonus amount specifically guaranteed to Executive for that bonus year under any other
agreement between the Company and Executive.



(d) The Company shall continue to provide Executive with the welfare benefits of medical
insurance, dental insurance, group term life insurance, and split-dollar life insurance through the
second (2nd) anniversary of the Termination Date, except that




	 	(i)	 	the Company may stop providing medical insurance and dental
insurance coverage earlier if Executive accepts full time employment with a
subsequent employer that generally makes medical insurance available to its
executives and Executive is eligible for that coverage with the subsequent
employer, and






	 	(ii)	 	the Company may stop providing group term life insurance
earlier if Executive accepts full time employment with a subsequent employer
and that employer provides Executive with group term life insurance coverage.





The benefits to be provided by the Company pursuant to this paragraph shall be provided to
Executive at the same cost to Executive, and at the same coverage level, as in effect as of the
Termination Date.



(e) In lieu of any retirement benefits provided under Articles II or III of the Fabri-Centers
of America, Inc. Supplemental Retirement Benefit Agreement (the “SERP”), the Company shall pay to
Executive, not later than ten (10) business days after the Termination Date, a lump sum benefit
equal to (A) times (B), where (A) is equal to the Maximum Supplemental Retirement Benefit defined
in Section 1.8 of the SERP, and (B) is a fraction (not to exceed 1.0), the numerator of which is
the number of completed months of service Executive had with the Company as of the Termination Date
and the denominator of which is the number of months of service Executive would have had with the
Company had Executive continued to work for the Company through Executive’s 65th birthday.



3. Earned but Unpaid Base Salary and Accrued Paid Time Off Pay Payable Upon Any Termination of
Employment; Treatment of Long-Term Incentive Awards. Upon any termination of Executive’s
employment for any reason and at any time, the Company shall pay to Executive (or, where
appropriate, to Executive’s Beneficiary), not later than ten (10) days after the Termination Date,
(a) all earned but unpaid Base Salary through the Termination Date, and (b) an amount equal to the
aggregate dollar value of all paid time off earned but not taken by Executive (“Accrued Paid Time
Off Pay”) before the Termination Date. In addition, upon any termination of Executive’s
employment, all outstanding long-term incentive awards shall be subject to the treatment provided
under the applicable long-term incentive plan of the Company.



4. Termination Due to Retirement, Disability, or Death. If Executive’s employment is terminated
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’s Beneficiaries will
be entitled to Severance Benefits or Change of Control Severance Benefits under either of Sections
1 or 2 but Executive or Executive’s Beneficiaries, as appropriate, will be entitled to the payments
provided for in Section 3 and to such benefits as may be provided under the terms of the Company’s
disability, retirement, survivor’s benefits, insurance, and other applicable plans and programs of
the Company then in effect.



5. Termination for Cause or by Executive other than for Good Reason. If Executive’s employment is
terminated either by the Company for Cause or by Executive other than for Good Reason while this
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 to
Severance Benefits or Change of Control Severance Benefits under either of Sections 1 or 2 but
Executive or Executive’s Beneficiaries, as appropriate, will be entitled to the payments provided
for in Section 3 and the Company shall pay to Executive such other amounts to which Executive is
entitled under any compensation plans of the Company, at the time such payments are due. Except as
provided in this Section 5, the Company shall have no further obligations to Executive under this
Agreement.



6. Special Provision Applicable only if Executive is Terminated both in Advance of and in
Contemplation of a Change of Control. If Executive is terminated by the Company (a) in
contemplation of and not more than six (6) full calendar months before the occurrence of a Change
of Control, and (b) under circumstances such that if the termination had occurred immediately after
that Change of Control Executive would have been entitled to Change of Control Severance Benefits
under Section 2 above, then the Company shall pay and provide to Executive all of the amounts and
benefits specified in Section 2, reduced by such amounts and such benefits, if any, that the
Company has otherwise paid and provided to Executive pursuant to Section 1 above. The Company
shall make any cash payment required pursuant to 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. If
Executive’s employment continues for more than two (2) years following the occurrence of any Change
of Control, that particular Change of Control will deemed never to have occurred for purposes of
this Agreement.



8. Term of Agreement, Right to Severance Benefits upon Determination by Company Not to Renew.



8.1. Term. This Agreement shall be effective as of the Effective Date and shall thereafter apply
to any termination of Executive’s employment occurring on or before July 31, 2005. Unless this
Agreement is earlier terminated pursuant to its terms, on July 31, 2005 and on July 31st of each
succeeding year thereafter (a “Renewal Date”), the term of this Agreement shall be automatically
extended for an additional year unless either party has given notice to the other, at least one (1)
year in advance of that Renewal Date, that the Agreement shall not apply to any termination of
Executive’s employment occurring after that Renewal Date.



8.2. Right to Severance Benefits. If the Company gives Executive notice that this Agreement shall
not apply to any termination of Executive’s employment occurring after a particular Renewal Date,
Executive shall have the right to terminate Executive’s employment at any time during the first
three (3) months of the final year during which this Agreement is thereafter scheduled to be
effective (e.g., if the Company gives notice that the Agreement is not to apply to any termination
after July 31, 2006, at any time during the months of August, September and October 2005) and
Executive shall thereupon be entitled to receive Severance Benefits to the same extent as if all of
the conditions to Executive’s right to receive Severance Benefits under Section 2 had been
satisfied.



9. Excise Tax.



9.1. Excise Tax. Notwithstanding any other provision of this Agreement (but subject to the
following sentence), if any portion of the severance benefits or any other payment under this
Agreement, or under any other agreement with or plan of the Company (in the aggregate “Total
Payments”) would constitute an “excess parachute payment,” then the payments to be made to
Executive under this Agreement shall be reduced, but not below zero, to such amount that the value
of the aggregate Total Payments that Executive is entitled to receive shall be One Dollar ($1.00)
less than the maximum amount which Executive may receive without becoming subject to the tax
imposed by Code Section 4999 and without the Company suffering a loss of deduction under Code
Section 280G(a). However, the payments shall be reduced as described above only if the reduction
results in Executive receiving greater total severance benefits (on an after-tax basis, including
excise taxes) than if such severance benefits were not reduced. For purposes of this Agreement,
the terms “excess parachute payment” and “parachute payments” shall have the meanings assigned to
them in Section 280G of the Code, and such “parachute payments” shall be valued as provided
therein.




9.2. Procedure for Establishing Limitation on Termination Payment.



(a) Within sixty (60) days following delivery of notice by the Company to Executive of its
belief that there is a payment or benefit due to Executive which will result in an “excess
parachute payment”, Executive and the Company, at the Company’s expense, shall obtain the opinion
of such legal counsel, which need not be unqualified, as Executive may choose, which sets forth:
(i) the amount of Executive’s “annualized includible compensation for the base period” (as defined
in Code Section 280G(d)(1)); (ii) the present value of the Total Payments; and (iii) the amount and
present value of any “excess parachute payment.” The opinion of such legal counsel shall be
supported by the opinion of a certified public accounting firm and shall be binding upon the
Company and Executive.



(b) If the opinion of legal counsel indicates that there would be an “excess parachute
payment,” the severance benefits hereunder shall be reduced or eliminated as specified by Executive
in writing delivered to the Company within thirty (30) days of Executive’s receipt of such opinion,
or, if Executive fails to so notify the Company, then as the Company shall reasonably determine, so
that under the basis of calculations set forth in such opinion, there will be no “excess parachute
payment.”



(c) The calculations, notices, and opinion provided for herein shall be based upon the
conclusive presumption that: (i) the compensation and benefits provided for herein; and (ii) any
other compensation earned prior to the effective date of termination by Executive pursuant to the
Company’s compensation programs (if such payments would have been made in the future in any event,
even though the timing of such payment is triggered by the Change of Control), are reasonable.



9.3. Subsequent Imposition of Excise Tax. If, notwithstanding compliance with the provisions
herein, it is ultimately determined by a court or pursuant to a final determination by the Internal
Revenue Service that any portion of the Total Payments is considered to be a “parachute payment,”
subject to excise tax under Section 4999 of the Code, which was not contemplated to be a “parachute
payment” at the time of payment (so as to accurately determine whether a limitation should have
been applied to the Total Payments to maximize the net benefit to Executive), Executive shall be
entitled to receive a lump sum cash payment sufficient to place Executive in the same net after-tax
position, computed by using the “Special Tax Rate” as such term is defined below, that Executive
would have been in had such payment not been subject to such excise tax, and had Executive not
incurred any interest charges or penalties with respect to the imposition of such excise tax. For
purposes of this Agreement, the “Special Tax Rate” shall be the highest effective Federal and state
marginal tax rates applicable to Executive in the year in which the payment contemplated under this
Agreement is made.



10. Outplacement Assistance. Following a termination of employment in which Severance Benefits or
Change of Control Severance Benefits are payable hereunder the Company shall provide Executive with
outplacement services obtained by the Company at its cost and commensurate with the outplacement
services typically provided by the Company to Executives who left the employ of the Company before
the Effective Date of this Agreement until Executive obtains subsequent employment or self
employment.



11. The Company’s Payment Obligation.



11.1. Payment Obligations Absolute. The Company’s obligation to make the payments and provide the
benefits provided for herein shall be absolute and unconditional, and shall not be affected by any
circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or
other right which the Company may have against Executive or anyone else. All amounts payable by
the Company hereunder shall be paid without notice or demand. Each and every payment made
hereunder by the Company shall be final, and the Company shall not seek to recover all or any part
of such payment from Executive or from whomsoever may be entitled thereto, for any reasons
whatsoever.



11.2. No Mitigation. Executive shall not be obligated to seek other employment in mitigation of
the amounts payable or benefits to be provided under any provision of this Agreement, and the
obtaining of any such other employment shall in no event effect any reduction of the Company’s
obligations to make the payments or provide any benefits as required under this Agreement, except
to the limited extent provided above in cases where a subsequent employer provides medical
insurance and/or group term life insurance coverage.



11.3. Source of Payments and Benefits. All payments under this Agreement shall be made solely from
the general assets of the Company (or from a grantor trust, if any, established by the Company for
purposes of making payments under this Agreement and other similar agreements), and Executive shall
have 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, costs
of arbitration and/or litigation, prejudgment interest, and other expenses incurred in good faith
by Executive as a result of the Company’s refusal to provide the Severance Benefits or Change of
Control 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 this
Agreement, 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 expenses
if, but only if, it is ultimately determined by a court of competent jurisdiction or by the
arbitrators, as the case may be, that Executive had no reasonable grounds for the position
propounded by Executive in the arbitration and/or litigation (which determination need not be made
simply because Executive fails to succeed in the arbitration and/or litigation).



12.2. Arbitration. Subject to the following sentences, any dispute or controversy arising under or
in connection with this Agreement shall be settled by mandatory arbitration (in lieu of
litigation), conducted before a panel of three (3) arbitrators sitting in a location selected by
Executive within fifty (50) miles from Hudson, Ohio, in accordance with the rules of the American
Arbitration Association then in effect. Any dispute which arises with respect to Executive’s
alleged violation of the prohibition on competition or any other restriction contained in Section
14 of this Agreement shall be settled by judicial proceedings (in any court of competent
jurisdiction with respect to such dispute or claim). Except as provided above for claims or
disputes under Section 14, judgment may be entered on the award of the arbitrator in any court
having proper jurisdiction.



13. Withholding. The Company shall be entitled to withhold from any amounts payable under this
Agreement all taxes as legally shall be required (including, without limitation, any United States
federal 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 the
term of this Agreement, and, if Severance Benefits are paid hereunder, thereafter during the
eighteen (18) month period beginning on the Termination Date or if Change of Control Severance
Benefits are paid hereunder, thereafter through the second (2nd) anniversary of the
Termination Date, Executive shall not, as an employee, an officer, or as a director, engage
directly or indirectly in any business or enterprise that engages to any significant extent within
the United Sates of America in the sale at retail or direct marketing to consumers of fabric and
craft components. Notwithstanding the foregoing, Executive may purchase and hold for investment
less than two percent (2%) of the shares of any corporation whose shares are regularly traded on a
national securities exchange or in the over-the-counter market.



14.2. Disclosure of Information. Executive acknowledges that Executive has and has had access to
and knowledge of certain confidential and proprietary information of the Company, which is
essential to the performance of Executive’ s duties as an employee of the Company. Executive will
not, 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 any
reason or purpose whatsoever, nor shall Executive make use of any such information for their own
purposes.



14.3. Covenants Regarding Other Employees. During the term of this Agreement and thereafter during
any period during which Executive is subject to the restriction set forth in Section 14.1,
Executive shall not to attempt to induce any employee of the Company to terminate his or her
employment with the Company or accept employment with any competitor of the Company and Executive
shall 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 or
indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform the Company’s
obligations under this Agreement in the same manner and to the same extent that the Company would
be required to perform them if no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effective date of any such succession shall be a
breach of this Agreement and shall entitle Executive to notify the Company that, unless the 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 the
notice. If any such notice is given and the failure is not so remedied, Executive will be entitled
to receive the same payments and benefits from the Company, and on the same schedule, as if the
Company had undergone a Change of Control on the date of the succession and Executive had thereupon
terminated his employment for Good Reason.



15.2. Assignment by Executive. This Agreement shall inure to the benefit of and be enforceable by
Executive and each of Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributes, devisees, and legatees. If Executive dies while any amount would
still be payable to Executive hereunder had Executive continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this Agreement, to
Executive’s Beneficiary. If Executive has not named a Beneficiary, then such amounts shall be paid
to Executive’s devisee, legatee, or other designee, or if there is no such designee, to Executive’s
estate.



16. Miscellaneous.



16.1. Employment Status. Except as may be provided under any other agreement between Executive and
the Company, the employment of Executive by the Company is “at will,” and, prior to the effective
date 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 with
respect to severance benefits to be provided upon any termination of Executive’s employment and
supersedes any and all prior employment, retention, and/or change of control agreements between
Executive and the Company.



16.3. Beneficiaries. Executive may designate one or more persons or entities as the primary and/or
contingent Beneficiaries of any Severance Benefits or Change of Control Severance Benefits owing to
Executive under this Agreement. Such designation must be in the form of a signed writing
acceptable 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 invalid
for 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 not
been included.



16.5. Modification. No provision of this Agreement may be modified, waived, or discharged unless
such modification, waiver, or discharge is agreed to in writing and signed by Executive and by an
authorized representative of the Company, or by the respective parties’ legal representatives and
successors.



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



17. Definitions. Whenever used in this Agreement, the following capitalized terms shall have the
meanings set forth below:



17.1. “Base Salary” means an amount equal to Executive’s base annual salary at the highest rate
payable at any time before the date of a termination. For this purpose, Base Salary shall not
include bonuses, long-term incentive compensation, or any remuneration other than base annual
salary.



17.2. “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act.



17.3. “Beneficiary” means the persons or entities designated or deemed designated by Executive
pursuant to Section 15.2 herein.



17.4. “Board” means the Board of Directors of the Company.



17.5. “Cause” shall mean the occurrence of any one or more of the following:



(a) The willful and continued failure by Executive to substantially perform his or her normal
duties (other than any such failure resulting from Executive’s Disability), after a written demand
for substantial performance is delivered to Executive that specifically identifies the manner in
which the Committee believes that Executive has not substantially performed his or her duties, and
Executive has failed to remedy the situation within thirty (30) business days of receiving such
notice;



(b) Executive’s conviction for committing an act of fraud, embezzlement, theft, or other
criminal act constituting a felony; or



(c) The willful engaging by Executive in gross negligence materially and demonstrably
injurious to the Company. However, no act, or failure to act on Executive’s part, shall be
considered “willful” unless done, or omitted to be done, by Executive not in good faith and without
reasonable belief that his or her action or omission was in or not opposed to the best interest of
the Company.



17.6. Change of Control. A “Change of Control” shall be deemed to have 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 either of the
Founding Families, any employee benefit plan or employee stock ownership plan of the Company, or
any person organized, appointed, or established by the Company for or pursuant to the terms of any
such plan), alone or together with any of its affiliates, becomes the beneficial owner of fifteen
percent (15%) or more (but less than fifty percent (50%)) of the Voting Shares then outstanding;



(b) Any person (other than the Company, any of its Subsidiaries, any employee benefit plan or
employee stock ownership plan of the Company, or any person organized, appointed, or established by
the Company for or pursuant to the terms of any such plan), alone or together with any of its
affiliates, becomes the beneficial owner of fifty percent (50%) or more of the Voting Shares then
outstanding;



(c) Any person commences or publicly announces an intention to commence a tender offer or
exchange offer the consummation of which would result in the person becoming the beneficial 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, individuals who were
directors at the beginning of the 24-month period no longer constitute a majority of the members of
the Board of the Company, unless the election, or the nomination 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 (i) are in office at the time of the election or
nomination, and (ii) were directors at the beginning of 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 who are
shareholders of the Company immediately before the merger or consolidation are to receive or retain
less than sixty percent (60%) of the stock of the surviving or continuing corporation, (ii) a sale
or other disposition of all or substantially all of the assets of the Company, or (iii) the
dissolution of the Company;



(f) (i) the Company is merged or consolidated with another corporation and those persons who
were shareholders of the Company immediately before the merger or consolidation receive or retain
less than sixty percent (60%) of the stock of the surviving or continuing corporation, (ii) there
occurs a sale or other disposition of all or substantially all of the 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 is required 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
Control. Furthermore, notwithstanding anything herein to the contrary, if an event described in
clause (c) occurs, and the Board either approves such offer or takes no action with respect to such
offer, then the occurrence of that event will constitute an irrevocable Change of Control. On the
other 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 Board
does not either approve such offer or take no action with respect to such offer as described in the
preceding sentence, and a majority of those members of the Board who were Directors prior to such
event determine, within the 90-day period beginning on the date such event occurs, that the event
should not be treated as a Change of Control, then, from and after the date that determination is
made, that event will be treated as not having occurred. If no such determination is made, a
Change of Control resulting from any of the events described in the immediately preceding sentence
will constitute an irrevocable Change of Control on the 91st day after the occurrence of the event.



17.7. “Change of Control Severance Benefits” means those payments and benefits that may become
payable pursuant to Section 2 above.



17.8. “Code” means the United States Internal Revenue Code of 1986, as amended.



17.9. “Committee” means the Compensation Committee of the Board, or any other committee appointed
by the Board to perform the functions of the Compensation Committee.



17.10. “Company” means Jo-Ann Stores, Inc., an Ohio corporation, and its successors.



17.11. “Disability” means permanent and total disability, within the meaning of Code Section
22(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 more
individuals, selected by the Committee, who are qualified to give professional medical advice,
provided, however, that Executive must be entitled to disability benefits under the Company
sponsored disability plans or programs.



17.12. “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.



17.13. “Founding Families” means the families consisting of Betty and Martin Rosskamm and Alma and
Justin Zimmerman and their respective issue.



17.14. “Good Reason” (after a Change of Control) means, without Executive’s express written
consent, the occurrence, after the occurrence of a Change of Control, of any one or more of the
following:



(a) Any reduction in Executive’s Base Salary below the amount in effect immediately before the
Change of Control or, if higher, the amount in effect before any reduction in Executive’s Base
Salary made in contemplation of the Change of Control.



(b) Any significant reduction in Executive’s duties, responsibilities, or position with
respect to the Company from the duties, responsibilities, or position as in effect immediately
before the Change of Control or as in effect immediately before any reduction in any such item made
in contemplation of the Change of Control.



(c) Any significant reduction in Executive’s benefits package from the benefit package in
effect immediately before the Change of Control or as in effect immediately before any reduction of
the benefit package made in contemplation of the Change of Control.




(d) Any reduction in Executive’s long-term incentive opportunity with the Company.



(e) Any shift of Executive’s principal place of employment with the Company to a location that
is more than fifty (50) miles (by straight line measurement) from the site of the Company’s
headquarters in Hudson, Ohio at the Effective Time.




(f) Any dissolution or liquidation of the Company.



Executive’s continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason under this Section 17.14 unless the Company
has given Executive written notice of the change and Executive has voluntarily agreed in a writing
that specifically refers to this section of this Agreement to accept the change and to waive any
possible reliance on that change as constituting Good Reason.



17.15. “Good Reason”(before a Change of Control) means, without Executive’s express written
consent, any reduction in Executive’s Base Salary other than a reduction that is in the same
proportion as the reduction of the base salaries of every other executive officer of the Company in
connection with an across-the-board reduction of executive base salaries.



17.16. “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act
and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d).



17.17. “Retirement” means a voluntary termination of Executive’s employment other than for Good
Reason 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).



17.18. “Severance Benefits” means those payments and benefits that may become payable before the
occurrence of a Change of Control pursuant to Section 1 above.



17.19. “Termination Date” means the date on which any termination of Executive’s employment becomes
effective.



IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.




JO-ANN STORES, INC.




By




/s/ Alan Rosskamm




	 	 	 	Alan Rosskamm

President and Chief Executive Officer






“EXECUTIVE”




/s/ David Holmberg




	 	 	 	David Holmberg