8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): November 18, 2005

Jo-Ann Stores, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

Ohio	001-06695	34-0720629
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
5555 Darrow Rd., Hudson, Ohio		44236
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: (330) 656-2600

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On November 18, 2005, the Compensation Committee of the Board of Directors (the "Committee") of Jo-Ann Stores, Inc. (the "Company") approved a retention program which provided a guaranteed cash retention payment, in lieu of a bonus opportunity under the Jo-Ann Stores Management Incentive Plan, and awarded restricted stock and stock options under the Jo-Ann Stores 1998 Incentive Compensation Plan (the "1998 Plan") to David Holmberg, Executive Vice President, Store Operations, and other key management employees of the Company.

The Committee established guaranteed retention payouts to be paid 50% in May 2006 and the remaining 50% to be paid in November 2006.

Under the 1998 Plan, Mr. Holmberg received awards of restricted stock and stock options in the amounts set forth below. The restricted stock awards will vest 50% on March 1, 2007 and 50% on March 1, 2008, while the stock option awards will vest 50% on March 1, 2009 and 50% on March 1, 2010. The restricted stock and stock options will be fo rfeited if Mr. Holmberg ceases to be employed by the Company. A form of the restricted stock award agreement is attached hereto as Exhibit 10.1 and a form of the notice of grant of non-qualified stock option is attached hereto as Exhibit 10.2.

Executive Officer: David Holmberg
Guaranteed Retention Payout: $230,000
Restricted Stock Award: 25,000 Shares
Stock Option Award: 50,000 Shares

In addition to the retention program approved by the Committee on November 18, 2005, the Company and Mr. Holmberg entered into a letter agreement on November 23, 2005 regarding Mr. Holmberg's employment with the Company. Under the terms of that letter agreement:

• If Mr. Holmberg elects to terminate his employment with the Company during the period from the sixth through the twelfth month anniversaries following the start date of the new President, then the Company would pay him a lump sum payment equal to 24 months of his base salary, contingent upon the delivery of a non-compete and non - -solicitation agreement by Mr. Holmberg.

• If the Company elects to terminate Mr. Holmberg's employment during the 24-month period following the start date of the new President, the Company would pay him a lump sum payment equal to 24 months of his base salary and the guaranteed retention payout of $230,000, described above.

• If Mr. Holmberg ceases to be an employee of the Company, his benefits, other than long-term disability, and car allowance would continue for a maximum of 24 months and the Company would provide him with outplacement assistance.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit 10.1 Form of Restricted Stock Award Agreement
Exhibit 10.2 Form of Notice of Grant of Non-Qualified Stock Option

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Jo-Ann Stores, Inc.
November 23, 2005	By:	/s/ Alan Rosskamm
		Name: Alan Rosskamm
		Title: Chairman, President and Chief Executive Officer

Exhibit Index

Exhibit No.	Description
10.1	Form of Restricted Stock Award Agreement
10.2	Form of Notice of Grant of Non-Qualified Stock Option

EX-10.1

Exhibit 10.1

RESTRICTED STOCK AWARD AGREEMENT

THIS AGREEMENT, is made as of November 18, 2005, and is between JO-ANN STORES, INC., an Ohio corporation (the “Company”), and (the “Employee”).

1. Award of Restricted Stock. Pursuant to the terms of the Company’s 1998 Incentive Compensation Plan (the “Plan”), the Employee is hereby granted a Restricted Stock Award with respect to Common Shares, without par value, of the Company (the “Shares”).

2. Restrictions. The Employee hereby accepts the Restricted Stock Award and agrees that the Shares shall be subject to the following restrictions:

a. The Employee shall not sell, assign, transfer, pledge, hypothecate, or otherwise dispose of the Shares until the restrictions lapse; and

b. The Employee shall forfeit all of his or her right to the Shares and shall deliver to the Company the certificate(s) representing the Shares unless the Employee remains in the continuous employment of the Company or any of its subsidiaries (as defined in the Plan) until the restrictions lapse; provided, however, that the foregoing restrictions may lapse or be removed before such date in accordance with the provisions of Sections III (6) and III (7) of the Committee Rules for the Plan. The Employee acknowledges and agrees that the certificates representing the shares shall bear a legend referring to the foregoing restrictions. Upon the lapse of the restrictions in accordance with the Plan, the Company will cause new certificates without such legend to be issued to the employee in exchange for the certificates that bear the legend.

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c. Your restricted stock has the following vesting schedule:

One-half will vest – March 1, 2007

One-half will vest – March 1, 2008

3. Other Terms and Conditions of the Award. The Employee acknowledges receipt of a copy of the Plan Prospectus and the Committee Rules and agrees that the Restricted Stock Award made hereby shall be subject to all of the provisions of the Plan.

4. Parties Bound. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, and successors.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Employee has hereunto set his or her hand as of the date first above written.

JO-ANN STORES, INC.

BY:

Exhibit 10.2

NOTICE OF GRANT OF NON-QUALIFIED STOCK OPTION

TO:

We are pleased to notify you that, by action of the Compensation Committee of the Board of Directors on 11-18-05, you have been granted a non-qualified stock option to purchase Jo-Ann Stores, Inc. Common Shares at an option price of $12.42 per share. The stock option is subject to the terms of the Company’s 1998 Incentive Compensation Plan and the Committee Rules implementing the Plan.

At this time, we wish to call your attention to several of the important aspects of the stock option granted to you. This summary is not intended to be a complete explanation of your rights or the grants and is qualified in its entirety by reference to the Plan and the Committee Rules.

This stock option shall be exercisable as to one-half of the shares on March 1, 2009 and one-half of the shares on March 1, 2010. Please refer to Section II(6) of the Committee Rules for a description of the limited circumstances in which your stock option may be exercised after you terminate employment.

You will not realize any income from the grant of this stock option; however, upon payment of the option price in cash, the excess of the fair market value of the shares on the date of exercise will be taxed as compensation to you. Payment of the option price with Common Shares will also result in income taxable to you in an amount equal to the difference between the fair market value of the additional shares received and the cash, if any, paid as part of the option price.

If a one-half installment of the number of shares subject to the option would otherwise include a fraction of a share, that installment (unless it is the last installment) shall be rounded up to the next larger number of full shares.

You are not permitted to sell or assign this stock option to anyone other than your spouse, your children, other lineal descendants, or a trust for their benefit. The option will terminate, and your right to purchase shares of Common Stock shall expire on 11-18-2012.

This stock option may only be exercised by delivery to the Supervisor, Financial Services of the Company a signed copy of the Election to Exercise Stock Option form attached to this Notice. Please note that full payment of the option price must accompany the Election to Exercise Stock Option.

As stated above, this grant of a stock option is further subject to all the terms and conditions of the Plan and the Committee Rules.

JO-ANN STORES, INC.

By:

DATE OF
NOTICE: 11-18-2005

The undersigned hereby accepts the stock option referenced to above in accordance with the terms of this Notice.

Date: , 2005 By: