Document:

exv10w2

 

Exhibit 10.2

AGREEMENT

     THIS AGREEMENT (“Agreement”) is made as of the 19th day of November, 2007, between
JO-ANN STORES, INC., an Ohio corporation (the “Company”), and Ken Haverkost (“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 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 the
Company by the Company without Cause, or 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 (1.5) times
Executive’s Base Salary payable in consecutive bi-weekly installments over the eighteen (18)
months following the Separation from Service at the same times and in the same amounts as if
Executive had not incurred a Separation from Service and had continued to earn Executive’s
Base Salary over that eighteen (18) month period. Each such installment shall be a
“Payment” for purposes of this Section 1(a). The Payments shall be paid over the following
payment periods:

     (i) First Payment Period. The First Payment Period shall begin on the
first bi-weekly payroll date following the Separation from Service and shall end on
the last bi-weekly payroll date of the sixth (6th) calendar month
following the calendar month in which the Separation from Service occurs. The
Company shall pay a Payment to Executive on each bi-weekly payroll date during the
First Payment Period; provided, however, in no event shall the aggregate amount paid
to 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 to
Executive for services to the Company for the calendar year preceding the calendar
year in which the Separation from Service occurs (adjusted for any increase during
that year that was expected to continue indefinitely but for the Separation from
Service), or (B) the maximum amount that may be taken into account under Section
401(a)(17) of the Internal Revenue Code for the calendar year in which the Separation
from Service occurs.

     In the event any amount that would have been paid during the First Payment
Period cannot be paid because it would exceed the limitation provided in the
preceding paragraph, such excess amount shall be paid in a lump sum on the first
bi-weekly payroll date of the Second Payment Period (in addition to any amount that

 

 

Haverkost, Ken

November 19, 2007

would be paid on such bi-weekly payroll date in the Second Payment Period as
provided in Section 1(a)(ii) below).

     (ii) Second Payment Period. The Second Payment Period shall commence on
the first bi-weekly payroll date following the end of the First Payment Period and
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 shall pay a
Payment to Executive on each bi-weekly payroll date in the Second Payment Period.

     (b) The Company shall continue to provide Executive with medical insurance, dental
insurance, and group term life insurance as follows:

     (i) the Executive shall be entitled to continue his or her medical and dental
insurance in accordance with the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”); provided the Executive timely elects such coverage and satisfies all
other eligibility requirements under COBRA; and

     (ii) the Company shall continue to provide Executive with his group term life
insurance coverage through the end of the eighteenth (18th) full calendar month
following the Termination Date, except that 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.

2. Change of Control Severance Benefits upon Certain Separations from Service Occurring After a
Change of Control. If, after the occurrence of a Change of Control, Executive has a Separation
from 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 two (2) times
the sum of (i) Executive’s Base Salary plus (ii) the greater of (A) Executive’s average cash
bonus earned over the three (3) full fiscal years of the Company ended before the Separation
from Service, or (B) Executive’s target annual bonus established for the bonus plan year in
which the Separation from Service 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
Separation from Service, the average of the bonuses earned in the two (2) full fiscal years
of the Company ended before the Separation from Service, or the amount of the bonus earned
in the one full fiscal year of the Company ended before the Separation from Service, as the
case 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 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
Separation from Service, 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.

2

 

Haverkost, Ken

November 19, 2007

     (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 the
Separation from Service 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
Separation from Service, 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 medical insurance, dental
insurance, and group term life insurance as follows:

     (i) the Executive shall be entitled to continue his or her medical and dental
insurance in accordance with the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”); provided the Executive timely elects such coverage and satisfies all
other eligibility requirements under COBRA; and

     (ii) the Company shall continue to provide Executive with his group term life
insurance coverage for two (2) years following the Termination Date, except that 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.

     (e) All stock options granted to Executive then outstanding will become fully
exercisable as of the date of the Change of Control, and all restrictions and conditions
applicable to restricted stock granted to Executive will be deemed to have been satisfied as
of the date of the Change of Control.

3. Earned but Unpaid Base Salary and Accrued Paid Time Off Pay Payable Upon Any Separation from
Service; Treatment of Long-Term Incentive Awards. Upon Executive’s Separation from Service 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 Separation from Service, (a) all earned but
unpaid Base Salary through the Separation from Service, 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 Separation from Service. In addition, upon such Separation from Service, all
outstanding long-term incentive awards shall be subject to the treatment provided under the
applicable long-term incentive plan of the Company.

4. Separation from Service Due to Retirement, Disability, or Death. If Executive has a Separation
from 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’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. Separation from Service for Cause or by Executive other than for Good Reason. If Executive has
a Separation from Service 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

3

 

Haverkost, Ken

November 19, 2007

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 has a Separation from Service both in Advance of
and in Contemplation of a Change of Control. If Executive has a Separation from Service 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 Separation from
Service 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
automatically renew from year to year, unless otherwise mutually agreed to by the parties. Any
attempt by the Company to unilaterally terminate this Agreement shall be treated as a material
breach of this Agreement entitling Executive to the remedy set forth in Section 8.2 (but to no
other remedy).

     8.2. Right to Severance Benefits. In the event Company, notwithstanding Section 8.1, attempts to
terminate this Agreement without the consent of Executive, Executive may Separate from Service for
Good Reason and, subject to the notice and cure provisions of Section 17.20, 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.

     If there is any conflict between the provisions of this Section 9 and any other provision of
this Agreement regarding payments to be made or benefits to be provided to Executive under this
Agreement 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 acquire
Common Shares issued by the Company) (a “Payment”) may be determined to be an Excess Parachute
Payment that is not deductible by the Company for federal income tax

4

 

Haverkost, Ken

November 19, 2007

purposes and with respect to which 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, the
Accounting Firm, which, subject to any inconsistent position asserted by the Internal Revenue
Service, 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 to
the excise tax imposed by Section 4999 and without the Company suffering a loss of deduction under
Section 280G (this maximum amount being the “280G Limit”) and (b) whether, if all Payments were
made without regard to this Section 9, any Payment would be an Excess Parachute Payment. The
Accounting Firm shall communicate its determination, together with detailed supporting
calculations, to the Company and to Executive within 30 days after the Termination Date or such
earlier time as is requested by the Company. The Company and Executive shall cooperate with each
other and the Accounting Firm and shall provide necessary information so that the Accounting Firm
may make all such determinations. The Company shall pay all of the fees of the Accounting Firm for
services performed by the Accounting Firm as contemplated in this Section 9.

     9.3. Reduction or Gross Up if Payments Would Constitute Excess Parachute Payments. If any Payment
would, 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 be
reduced as provided in Section 9.4, or (b) the Company shall make all of the payments to be made to
Executive 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 280G
Limit. 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, by
such amount so that the aggregate value of the Parachute Payments actually made to Executive will
be 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 aggregate
value of all Parachute Payments exceeds 110% of the 280G Limit and Executive is therefore subject
to the excise tax under Section 4999 on Excess Parachute Payments received (the “Excise Tax”), the
Company 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 Payments
are made to Executive, in such lump sum amount or amounts as are sufficient, from time to time, to
place 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 with
respect to 10% of all Parachute Payments received by Executive, (b) the Excise Tax did not
otherwise apply to any Payments, and (c) Executive had not incurred any interest charges or
penalties with respect to the imposition any portion of the Excise Tax; provided, however, that in
no event shall any such Gross Up Payments be made later than the end of the calendar year following
the calendar year in which the Executive remits the Excise Tax. For purposes of this Section 9,
all payments received by Executive from the Company (whether under this Agreement or otherwise and
including all Gross Up Payments received by Executive) shall be deemed to be subject to Federal and
state tax at the highest marginal tax rates applicable to Executive in the year in which the Gross
Up Payment is made.

5

 

Haverkost, Ken

November 19, 2007

     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 by
Section 9.4, it is ultimately determined by a court or pursuant to a final determination by the
Internal Revenue Service that any payment received by Executive is an Excess Parachute Payment and
Executive is therefore obligated to pay Excise Tax with respect to any Payments, the Company shall
make Gross Up Payments to Executive from time to time, in such lump sum amount or amounts as are
sufficient, from time to time, to place Executive in the same net after tax position that Executive
would have been in if no such Payments constituted Excess Parachute Payments subject to the Excise
Tax, the reduction of Parachute Payments prescribed by Section 9.4 had been made exactly as
intended (i.e., to the extent but only to the extent necessary to avoid the Excise Tax), and
Executive had not incurred any interest charges or penalties 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, to
liability on the part of Executive for the Excise Tax (and/or any penalties and/or interest with
respect to any Excise Tax) in excess of the amount, if any, previously determined by the Accounting
Firm, the Company shall make further additional cash payments to Executive not later than the due
date of any payment indicated by the Internal Revenue Service with respect to these matters, in
such amounts as are necessary to put Executive in the same position, after payment of all federal
and state taxes (whether income taxes, Excise Taxes, or other taxes) and any and all penalties and
interest with respect to any such taxes, as Executive would have been in if the Accounting Firm had
anticipated the later determination by the Internal Revenue Service and the Company had made
appropriate 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 Company
desires to contest any determination by the Internal Revenue Service with respect to the amount of
Excise Tax, Executive shall, upon receipt from the Company of an unconditional written undertaking
to indemnify and hold Executive harmless (on an after tax basis) from any and all adverse
consequences that might arise from the contesting of that determination, cooperate with the Company
in that contest at the Company’s sole expense. Nothing in this Section 9.8 shall require Executive
to incur any expense other than expenses with respect to which the Company has paid to Executive
sufficient sums so that after the payment of the expense by Executive and taking into account the
payment by the Company with respect to that expense and any and all taxes that may be imposed upon
Executive as a result of Executive’s receipt of that payment, the net effect is no cost to
Executive, Nothing in this Section 9.8 shall require Executive to extend the statute of limitations
with respect to any item or issue in Executive’s tax returns other than, exclusively, the Excise
Tax. If, as the result of the contest of any assertion by the Internal Revenue Service with
respect to Excise Tax, Executive receives a refund of Excise Tax previously paid and/or any
interest with respect thereto, Executive shall promptly pay to the Company such amount as will
leave Executive, net of the repayment and all tax effects, in the same position, after all taxes
and interest, that he would have been in if the refunded Excise Tax had never been paid.

10. Outplacement Assistance. Following a Separation from Service 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; provided, however, that such outplacement

6

 

Haverkost, Ken

November 19, 2007

shall not continue beyond the last day of the second calendar year following the calendar year in
which the Executive’s Termination Date 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 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.

7

 

Haverkost, Ken

November 19, 2007

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

8

 

Haverkost, Ken

November 19, 2007

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. “Accounting Firm” means the independent auditors of the Company for the Fiscal Year preceding
the 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 by
this Agreement, the Company shall select another national accounting firm of recognized standing to
serve and perform in that capacity under this Agreement, except that such other accounting firm
shall not be the then independent auditors for the Company or any of its affiliates (as defined in
Rule 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.

9

 

Haverkost, Ken

November 19, 2007

     17.3. “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 Separation from Service. For this purpose, Base Salary
shall not include bonuses, long-term incentive compensation, or any remuneration other than base
annual salary.

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

     17.5. “Beneficiary” means the persons or entities designated or deemed designated by Executive
pursuant 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 normal
duties (other than any such failure resulting from Executive 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 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 action or omission was not in or not opposed to the best
interest of the Company.

     17.8 Section reserved.

     17.9. Change of Control. A “Change of Control” for purposes of Section 2(e) 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

10

 

Haverkost, Ken

November 19, 2007

     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.

     A “Change of Control” for all other purposes of the Agreement shall be deemed to have occurred
if 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, acquires
ownership of stock of the Company that, together with stock held by such person or
group, constitutes more than fifty percent (50%) of the total fair market value or
total voting power of the stock of the Company;

11

 

Haverkost, Ken

November 19, 2007

     (ii) a majority of members of the Company’s board of directors is replaced
during any twelve (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

     (iii) any one person, or more than one person acting as a group, acquires (or
has acquired during a twelve (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 fifty percent (50%) of the total gross
fair market value of all of the assets of the Company immediately before such
acquisition or acquisitions.

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

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

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

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

     17.14. “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.

     17.15. “Employer” means the Company and each corporation or other entity with whom the Company
would be considered a single employer under Code Sections 414(b) and 414(c), except that in
applying Code Sections 1563(a)(1), (2) and (3) for purposes of determining a controlled group of
corporations 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 in
applying Treas. Regs. Sec. 1.414(c)-2 for purposes of determining a controlled group of trades or
businesses 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.

     17.16. “Excess Parachute Payment” has the meaning assigned to that term in Q/A-3 (note that
although initial capital letters are used on this term in this Agreement, the Q/As do not use
initial caps for this term).

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

     17.18. “Excise Tax” has the meaning assigned to that term in Section 9.5.

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

12

 

Haverkost, Ken

November 19, 2007

     17.20. “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 material reduction in Executive’s base compensation and incentive compensation
opportunities (to the extent such incentive compensation opportunities are a regular and
substantial part of Executive’s base compensation) 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 compensation and incentive compensation opportunities made in contemplation
of the Change of Control.

     (b) Any material 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 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 relevant time.

     (d) Any attempt by the Company to unilaterally terminate this Agreement without the
consent of Executive (i.e., a material breach as provided by Section 8.1).

Executive shall have a voluntary 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 initial occurrence of an above event describing in detail the event and stating that
Executive’s employment will terminate upon a specified date in such notice (the “Good Reason
Termination Date”), which date 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 (ii) the Company does not remedy the event prior to the Good Reason
Termination Date.

     17.21. “Good Reason” (before a Change of Control) means, without Executive’s express written
consent, a material 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. Executive shall have a
voluntary 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 initial
material reduction in Base Salary describing in detail such reduction and stating that Executive’s
employment will terminate upon a specified date in such notice (the “Good Reason Termination
Date”), which date 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 reduction prior to the Good Reason
Termination Date.

     17.22. “Gross Up Payment” has the meaning assigned to that term in Section 9.5 above.

     17.23. “Payment” has the meaning assigned to that term in Section 9.1 above (except as otherwise
provided in Section 1(a)).

     17.24. “Parachute Payment” has the meaning assigned to that term in Q/A-2 but without reference to
subsection (4) of Q/A-2 (with the effect that a payment otherwise meeting the

13

 

Haverkost, Ken

November 19, 2007

definition of “Parachute Payment” will be referred to as a Parachute Payment even if the total of
all such Parachute Payments is less than three times Executive’s base amount (as defined in Q/A-34)
(note that although initial capital letters are used on this term in this Agreement, the Q/As do
not use initial caps for this term).

     17.25. “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).

     17.26. “Q/As” means the entire series of Questions and Answers set forth in Section 1.280G-1 of the
Treasury Regulations issued under Section 280G of the Code (which Section of regulations is
presented in Question and Answer format); references to particular Question and Answers will be,
for example, to “Q/A-1.”

     17.27. “Retirement” means a voluntary Separation from Service by the Executive 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).

     17.28. “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 facts
and circumstances indicate the Executive and Employer reasonably anticipate that no further
services will be performed by the Executive for Employer; provided, however, that Executive shall
be deemed to have a termination of employment if the level of services he would perform for
Employer after a certain date permanently decreases to no more than twenty percent (20%) of the
average level of bona fide services performed for Employer (whether as an employee or independent
contractor) over the immediately preceding thirty-six (36)-month period (or the full period of
services 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 while
he is on a military leave, sick leave, or other bona fide leave of absence, if the period of such
leave does not exceed six (6) months, or if longer, so long as Executive has a right to
reemployment with Employer under an applicable statute or by contract.

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

     17.30. “Termination Date” means the date on which any Separation of Service of the Executive
becomes effective.

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

	 	 	 	 	 
	 	JO-ANN STORES, INC.

 	 
	 	By:  	/s/ Darrell D. Webb
 	 
	 	 	President and Chief Executive Officer 	 
	 	 	 	 
	 
	 	EXECUTIVE

 	 
	 	/s/ Ken Haverkost
 	 
	 	 	 
	 	 	 
	 

14exv10w3

 

Exhibit 10.3

JO-ANN STORES, INC.

SUPPLEMENTAL RETIREMENT BENEFIT PLAN

(As Amended and Restated)

(formerly known as the FABRI-CENTERS OF AMERICA, INC.

SUPPLEMENTAL RETIREMENT BENEFIT PLAN)

 

 

JO-ANN STORES, INC.

SUPPLEMENTAL RETIREMENT BENEFIT PLAN

     Jo-Ann Stores, Inc. established this supplemental retirement benefit plan effective April 1,
1979 for the purpose of supplementing the retirement benefits of certain officers and other
management employees who are selected to participate in the Plan in accordance with the terms of
this instrument.

     The terms of this Plan as stated herein shall apply to all amounts deferred under the Plan and
shall be interpreted and applied at all times in accordance with Section 409A of the Internal
Revenue Code of 1986, as amended, and guidance issued thereunder. No amounts shall be subject to
“grandfathering” treatment, even if such amounts were deferred and vested under the Plan before
January 1, 2005.

     The Plan is hereby amended and restated as of January 1, 2005 (except as otherwise
specifically set forth herein):

ARTICLE I.

DEFINITIONS

     For the purpose hereof, the following words and phrases shall have the meanings indicated,
unless a different meaning clearly is required by the context:

     1. “Affiliate” shall mean each corporation or other entity with whom the Company would be
considered a single employer under Code Sections 414(b) and 414(c), except that in applying Code
Sections 1563(a)(1), (2) and (3) for purposes of determining a controlled group of corporations
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 in applying Treas.
Regs. Sec. 1.414(c)-2 for purposes of determining a controlled group of trades or businesses 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.

     2. The “Beneficiary” of a Participant or retired Participant means the person or persons who
shall have been designated by him from time to time in a writing signed by him and delivered to the
Company. In the event the Participant fails to designate a beneficiary or his or her designated
Beneficiary predeceases the Participant, then any benefits hereunder shall be payable to the
following “default” beneficiaries of the Participant (determined at the time of payment) in the
following order of priority: (a) the Participant’s surviving spouse known to the Committee, if any;
(b) the Participant’s living children known to the Committee in equal shares; (c) the Participant’s
living parents known to the Committee in equal shares; (d) the Participant’s surviving siblings
known to the Committee in equal shares; or (e) the beneficiary’s estate for distribution in
accordance with the terms of the beneficiary’s last will and testament or as a court of competent
jurisdiction shall determine.

     3. “Board of Directors” or “Board” shall mean the Board of Directors of the Company or any
committee thereof authorized to act on behalf of the Board.

- 1 -

 

     4. “Cause” means the occurrence of any one of the following:

	 	(a)	 	The willful and continued failure by the Participant to
substantially perform his or her normal duties (other than any such failure
resulting from an injury or illness of the Participant resulting in payments
under the Company’s group disability program), after a written demand for
substantial performance is delivered to the Participant that specifically
identifies the manner in which the Committee believes that the Participant has
not substantially performed his or her duties, and the Participant has failed
to remedy the situation within thirty (30) business days of receiving such
notice;
	 
	 	(b)	 	The Participant’s conviction for committing, plea of nolo
contendere regarding, or an admission to the Company of, an act of fraud,
embezzlement, theft, or other criminal act constituting a felony;
	 
	 	(c)	 	The willful engaging by the Participant in gross negligence
materially and demonstrably injurious to the Company; or
	 
	 	(d)	 	The willful engaging by the Participant, in an act of
disloyalty to the Company.

However, no act or failure on the Participant’s part shall be considered “willful” unless done or
omitted to be done by the Participant not in good faith and without reasonable belief that his or
her action or omission was not in or not opposed to the best interests of the Company.

     5. “Change in Control” of the Company shall be deemed to have occurred if:

	 	(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)	 	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) ownership of stock of the
Company possessing 30% or more of the total voting power of the stock of the
Company;
	 
	 	(c)	 	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
	 
	 	(d)	 	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

- 2 -

 

	 	 	 	that have a total gross fair market value equal to or more than 40% of the
total gross fair market value of all of the assets of the Company
immediately before such acquisition or acquisitions.

     6. “Code” means the Internal Revenue Code of 1986, as amended.

     7. “Committee” means the Compensation Committee of the Company’s Board of Directors, or any
other committee appointed by the Company’s Board of Directors to perform functions of the
Compensation Committee.

     8. “Company” means Jo-Ann Stores, Inc., an Ohio Corporation, its corporate successors, the
surviving corporation resulting from any merger or consolidation of Jo-Stores, Inc. with any other
corporation or corporations.

     9. “Early Retirement” means the Participant’s Separation from Service, other than on account
of Retirement, death, Total Disability or for Cause, after he: (a) has been employed by the Company
for at least twenty (20) years; or (b) has been employed by the Company for at least ten (10) years
and has attained age fifty-five (55).

     10. “Employee” means any salaried employee of the Company whose principal responsibilities are
executive or managerial, who may or may not be an officer of the Company or a member of its Board
of Directors.

     11. “Employer” means the Company and any Affiliate.

     12. “Maximum Supplemental Retirement Benefit Amount” for each Participant shall be the amount
determined by the Board of Directors for such Participant upon his or her selection as a
Participant or such greater amount as the Board of Directors may from time to time determine. The
Company shall maintain a Schedule in connection with this Plan on which shall be set forth the name
of each Participant and, opposite his or her name, his or her Maximum Supplemental Retirement
Benefit Amount.

     13. “Participant” means any Employee who is selected from time to time by the Beard of
Directors of the Company to participate in the Plan,

     14. “Plan” means the supplemental retirement benefit plan as set forth herein, together with
all amendments thereto, which Plan shall be called the “Jo-Ann Stores, Inc. Supplemental Retirement
Benefit Plan”.

     15. “Retirement” means the Participant’s Separation from Service, other than on account of
Early Retirement, death, Total Disability or for Cause, on or after the date he or she attains age
sixty-five (65).

     16. “Separation from Service” means the Participant has a termination of employment with the
Employer. Whether a termination of employment has occurred shall be determined based on whether
the facts and circumstances indicate the Participant and the Employer reasonably anticipate that no
further services will be performed by the Participant for the Employer; provided, however, that a
Participant shall be deemed to have a termination of

- 3 -

 

employment if the level of services he or she would perform for the Employer after a certain
date permanently decreases to no more than twenty percent (20%) of the average level of bona fide
services performed for the Employer (whether as an employee or independent contractor) over the
immediately preceding thirty-six (36)-month period (or the full period of services to the Employer
if the Participant has been providing services to the Employer for less than thirty-six (36)
months). For this purpose, a Participant is not treated as having a Separation from Service while
he or she is on a military leave, sick leave, or other bona fide leave of absence, if the period of
such leave does not exceed six (6) months, or if longer, so long as the Participant has a right to
reemployment with the Employer under an applicable statute or by contract.

     17. “Specified Employee” means any Participant who is an officer of the Company.

     18. “Total Disability” means the Participant is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not less than twelve (12)
months.

ARTICLE II.

SUPPLEMENTAL NORMAL RETIREMENT BENEFITS

     1. Eligibility. A Participant shall be eligible for a supplemental normal retirement
benefit upon his or her Retirement.

     2. Amount of Payment. The supplemental normal retirement benefit of a Participant who
is eligible therefor under this Article II shall be an amount equal to his or her Maximum
Supplemental Retirement Benefit Amount (reduced by the total of any amounts previously received by
the Participant as supplemental disability retirement benefit payments under Article IV of the
Plan) and shall be payable in one hundred and eighty (180) equal consecutive monthly installments.
Monthly supplemental normal retirement benefits shall be paid to the retired Participant commencing
with the month following the month of his or her Retirement, and shall be payable monthly
thereafter during the remainder of such one hundred and eighty (180)-month term. Notwithstanding
the preceding, in the event the Participant is a Specified Employee upon his or her Retirement, the
first six (6) monthly installments under this Article II shall be paid in a lump sum in the seventh
(7th) month following the month of his or her Retirement (along with the seventh
(7th) monthly installment), and remaining monthly installments shall be payable monthly
thereafter during the remainder of such one hundred and eighty (180)-month term.

ARTICLE III.

SUPPLEMENTAL EARLY RETIREMENT BENEFITS

     1. Eligibility. A Participant shall be eligible for a supplemental early retirement
benefit upon his or her Early Retirement.

     2. Amount and Payment. The supplemental early retirement benefit of a Participant who
is eligible therefor under this Article III shall be an amount equal to his or her Maximum
Supplemental Retirement Benefit Amount (reduced by the total of any amounts previously received by
the Participant as supplemental disability retirement benefit payments under Article

- 4 -

 

IV of the Plan) reduced by five percent (5%) for each full year by which the Participant’s
Early Retirement precedes the date on which the Participant attains age sixty-six (66); provided,
however, that such reduction shall not exceed fifty percent (50%). Payment of a supplemental early
retirement benefit shall be made in the same manner as a supplemental normal retirement benefit
commencing with the month following the month in which the Participant attains age sixty-five (65);
provided, however, that if the Participant is a Specified Employee upon his or her Early
Retirement, in no event shall any payment be made earlier than six (6) months following the
Participant’s Early Retirement. In the event any monthly payment is delayed under the preceding
sentence with respect to a Participant who is a Specified Employee, such payment or payments shall
be paid in a lump sum in the seventh (7th) month following the month of his or her Early
Retirement (along with the normal installment for that month), and remaining monthly installments
shall be payable monthly thereafter during the remainder of such one hundred and eighty (180)-month
term.

ARTICLE IV.

SUPPLEMENTAL DISABILITY RETIREMENT BENEFITS

     1. Eligibility. A Participant shall be eligible for a supplemental disability
retirement benefit upon his or her Total Disability.

     2. Amount and Payment. The supplemental disability retirement benefit of a
Participant who is eligible therefor under this Article IV shall be an amount equal to his or her
Maximum Supplemental Retirement Benefit Amount and shall be payable in two hundred and forty (240)
equal consecutive monthly installments. Monthly supplemental disability retirement benefits shall
be paid to such Participant commencing with the month following the month in which the Total
Disability occurs and shall be payable monthly thereafter until the earlier of: (a) the
Participant’s recovery from the Total Disability prior to age sixty-five (65), or (b) the two
hundred and fortieth (240th) monthly supplemental disability retirement benefit payment
is made.

     3. Proof of Total Disability. The Company may require, to its satisfaction,
certification of a Participant’s Total Disability from a physician acceptable to the Company: (a)
before any supplemental disability retirement benefit payments are made under this Article IV and
(b) from time to time in the event payment of the supplemental disability retirement benefit
commences prior to the Participant’s attainment of age sixty-five (65).

     4. Recovery. In the event a Participant recovers from Total Disability prior to his
or her attainment of age sixty-five (65) and before the two hundred and fortieth (240th)
supplemental monthly disability retirement benefit payment is made, such payments shall cease. If,
following such recovery, the Participant returns to the employ of the Company and subsequently
again becomes Totally Disabled, the monthly supplemental disability retirement benefit payments
shall resume and continue until a total of two hundred and forty (240) such payments have been made
in connection with all periods during which the Participant was Totally Disabled.

- 5 -

 

ARTICLE V.

DEATH BENEFITS

In the event the Participant dies after his or her Retirement, Early Retirement or Total Disability
and before his or her benefits under Article II, III or IV, as applicable, have been fully paid,
any remaining amounts shall be paid in a lump sum payment to his or her Beneficiary within thirty
(30) days of the Participant’s death.

ARTICLE VI.

FORFEITURE

     The right of any Participant to a benefit hereunder will be forfeited or, if payment thereof
has begun, all further payments, whether to a Participant or to any person claiming under or
through him, will be discounted and forfeited in the event:

     1. such Participant is discharged for Cause;

     2. such Participant wrongfully discloses any secret process or trade secret of the Company or
any of its subsidiaries;

     3. such Participant engages, either directly or indirectly, as an officer, trustee, employee,
consultant, partner, or substantial shareholder, on his or her own account or in any other
capacity, in a business venture at any time prior to the expiration of ten (10) years following his
or her attainment of age sixty-five (65), which the Company’s Board of Directors reasonably
determines to be competitive with the Company to a degree materially contrary to the Company’s best
interests; or

     4. it is discovered following termination of such Participant’s employment with the Company
that in connection with his or her employment such Participant committed acts constituting grounds
for discharge for Cause.

ARTICLE VII.

ADMINISTRATION

     1. General. The Committee is responsible for the administration of the Plan and is
granted the following rights and duties:

	 	(a)	 	The Committee shall have the exclusive duty, authority and
discretion to interpret and construe the provisions of the Plan, to determine
eligibility for and the amount of any benefit payable under the Plan, and to
decide any dispute which may rise regarding the rights of Participants (or
their beneficiaries) under this Plan;
	 
	 	(b)	 	The Committee shall have the authority to adopt, alter, and
repeal such administrative rules, regulations, and practices governing the
operation of the Plan as it shall from time to time deem advisable;

- 6 -

 

	 	(c)	 	The Committee may appoint a person or persons to act on behalf
of, or to assist, the Committee in the administration of the Plan,
establishment of forms (including electronic forms) desirable for Plan
operation, and such other matters as the Committee deems necessary or
appropriate;
	 
	 	(d)	 	The decision of the Committee in matters pertaining to this
Plan shall be final, binding, and conclusive upon the Company, any Affiliate,
the Participant, the Participant’s beneficiary, and upon any person affected by
such decision, subject to the claims procedure set forth in Article VIII; and
	 
	 	(e)	 	In any matter relating solely to a Committee member’s
individual rights or benefits under this Plan, such Committee member shall not
participate in any Committee proceeding pertaining to, or vote on, such matter.

     2. Allocation and Delegation of Duties.

	 	(a)	 	The Committee shall have the authority to allocate, from time
to time, by instrument in writing filed in its records, all or any part of its
respective responsibilities under the Plan to one or more of its members as may
be deemed advisable, and in the same manner to revoke such allocation of
responsibilities. In the exercise of such allocated responsibilities, any
action of the member to whom responsibilities are allocated shall have the same
force and effect for all purposes hereunder as if such action had been taken by
the Committee. The Committee shall not be liable for any acts or omissions of
such member. The member to whom responsibilities have been allocated shall
periodically report to the Committee concerning the discharge of the allocated
responsibilities.
	 
	 	(b)	 	The Committee shall have the authority to delegate, from time
to time, by written instrument filed in its records, all or any part of its
responsibilities under the Plan to such person or persons as the Committee may
deem advisable (and may authorize such person to delegate such responsibilities
to such other person or persons as the Committee shall authorize) and in the
same manner to revoke any such delegation of responsibility. Any action of the
delegate in the exercise of such delegated responsibilities shall have the same
force and effect for all purposes hereunder as if such action had been taken by
the Committee. The Committee shall not be liable for any acts or omissions of
any such delegate. The delegate shall periodically report to the Committee
concerning the discharge of the delegated responsibilities.

ARTICLE VIII.

CLAIMS PROCEDURE

     1. General. A Participant or Beneficiary (“claimant”) who believes he or she is
entitled to Plan benefits which have not been paid may file a written claim for benefits with the
Committee within one (1) year of the Participant’s Separation from Service. If any such claim is

- 7 -

 

not filed within one (1) year of the Participant’s Separation from Service, neither the Plan
nor the Company or any Affiliate shall have any obligation to pay the disputed benefit and the
claimant shall have no further rights under the Plan. If a timely claim for a Plan benefit is
wholly or partially denied, notice of the decision will be furnished to the claimant by the
Committee within a reasonable period of time, not to exceed sixty (60) days (or forty-five (45)
days in the event of a claim involving a Total Disability determination), after receipt of the
claim by the Committee. The Committee may extend the initial period up to any additional sixty
(60) days (or thirty (30) days, in the case of a claim involving a Total Disability determination),
provided the Committee determines that the extension is necessary due to matters beyond the Plan’s
control and the claimant is notified of the extension before the end of the initial 60-day (or, as
applicable, 45-day) period and the date by which the Committee expects to render a decision. (In
the case of a claim involving a Total Disability determination, the Committee may extend this
period for an additional thirty (30) days if the claimant is notified of the extension before the
end of the initial 30-day extension.) Any claimant who is denied a claim for benefits will be
furnished written notice setting forth:

	 	(a)	 	the specific reason or reasons for the denial;
	 
	 	(b)	 	specific reference to the pertinent Plan provision upon which
the denial is based;
	 
	 	(c)	 	a description of any additional material or information
necessary for the claimant to perfect the claim; and
	 
	 	(d)	 	an explanation of the Plan’s appeals procedure.

     2. Appeals Procedure. To appeal a denial of a claim, a claimant or the claimant’s
duly authorized representative:

	 	(a)	 	may request a review by written application to the Committee
not later than sixty (60) days (or one-hundred eighty (180) days in the case of
a claim involving a Total Disability determination) after receipt by the
claimant of the written notification of denial of a claim;
	 
	 	(b)	 	may review pertinent documents; and
	 
	 	(c)	 	may submit issues and comments in writing.

A decision on review of a denied claim will be made by the Committee not later than sixty (60) days
(or forty-five (45) days in the event of a claim involving a Total Disability determination) after
receipt of a request for review, unless special circumstances require an extension of time for
processing, in which case a decision will be rendered within a reasonable period of time, but not
later than one hundred twenty (120) days (or ninety (90) days in the event of a claim involving a
Total Disability determination) after receipt of a request for review. The decision on review will
be in writing and shall include the specific reasons for the denial and the specific references to
the pertinent Plan provisions on which the decision is based.

- 8 -

 

ARTICLE IX.

AMENDMENT AND TERMINATION

     The Company reserves the right to amend or terminate the Plan at any time by action of its
Board of Directors; provided, however, that no such action shall adversely affect any individual
who is a Participant under the Plan prior to such amendment or termination or any Participant or
Beneficiary who is receiving supplemental retirement benefit payments hereunder.

     Notwithstanding the preceding, the Company may, by action of its Board of Directors, within
the thirty (30) days preceding or twelve (12) months following a Change in Control, partially
terminate the Plan and distribute benefits to all affected Participants within twelve (12) months
after such action, provided that all plans sponsored by the service recipient immediately after the
Change in Control (which are required to be aggregated with this Plan pursuant to Code Section
409A) are also terminated and liquidated with respect to each affected Participant.

ARTICLE X.

MISCELLANEOUS

     1. Non-Alienation of Rights or Benefits. Neither the Participant nor any Beneficiary
shall encumber or dispose of his or her right to receive any payments hereunder, which payments or
the right thereto are expressly declared to be non-assignable and nontransferable. If a Participant
or Beneficiary without the written consent of the Company attempts to assign, transfer, alienate or
encumber his or her right to receive any payment hereunder or permits the same to be subject to
alienation, garnishment, attachment, execution or levy of any kind, then thereafter during the life
of such Participant or of such Beneficiary, as the case may be, and also during any period in which
any Participant’s Beneficiary is incapable in the judgment of the Company of attending to his or
her financial affairs, any payment which the Company is required to make hereunder may be made, in
the discretion of the Company, directly to such Participant or to such Beneficiary or to any other
person for his or her use or benefit or that of his or her dependents, if any, including any person
furnishing goods or services to or for his or her use or benefit or the use or benefit of his or
her dependents, if any. Each such payment may be made without the intervention of a guardian, the
receipt of the payee shall constitute a complete acquittance to the Company with respect thereto,
and the Company shall have no responsibility for the proper application thereof.

     2. No Death Benefit. No benefits shall be payable under this Plan in the event a
Participant dies prior to his or her Retirement, Early Retirement or Total Disability.

     3. Plan Non-Contractual. Nothing herein contained shall be construed as a commitment
or agreement on the part of any person employed by the Company to continue his or her employment
with the Company, and nothing herein contained shall be construed as a commitment on the part of
the Company to continue the employment or the annual rate of compensation of any such person for
any period, and all participants shall remain subject to discharge to the same extent as if this
Plan has never been put into effect.

     4. Interest of Participant. The obligation of the Company under the Plan to provide
the Participant with a supplemental retirement benefit merely constitutes the unsecured promise

- 9 -

 

of the Company to make payments as provided herein, and neither any Participant nor any person
claiming under or through any Participant shall have any interest in, or any lien or prior claim
upon, the property of the Company.

     5. Claims of Other Persons. The provisions of this Plan shall in no event be
construed as giving any person, firm or corporation, any legal or equitable right as against the
Company, its officers, employees, or directors; except any such rights as are specifically provided
for in the Plan or are hereafter treated in accordance with the terms and provisions of the Plan.

     6. Severability. The invalidity or unenforceability of any particular provision of
the Plan shall not affect any other provision hereof, and this Plan shall be construed in all
respects as if such invalid or unenforceable provision were omitted herefrom.

     7. Governing law. The provisions of the Plan shall be governed by and construed in
accordance with the laws of the State of Ohio to the extent not preempted by federal law.

     8. Successors and Assigns. This Plan and the obligations created hereunder shall be
binding upon the Company and its successors and assigns:

     EXECUTED this 28th day of November, 2007, but effective as of
January 1, 2005.

	 	 	 	 	 
	 	JO-ANN STORES, INC.

 	 
	 	BY:  	/s/ Darrell Webb
 	 
	 	 	Darrell Webb, Chairman of the Board, 	 
	 	 	President and Chief Executive Officer 	 
	 

- 10 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}]]