Crafting stylish rewards in the Jo-Ann merger…

There may not be a pattern book yet that teaches companies how they, too, can create a $1.6 billion deal, as Jo-Ann Stores, Inc. (JAS) did at the end of December with an affiliate of private-equity firm Leonard Green & Partners, L.P. But if there is demand for such a book, we think that Jo-Ann’s Chairman/CEO, Darrell Webb, is definitely the guy to write it.

The preliminary merger proxy that Jo-Ann Stores filed last week gave us insight into how Webb will fare if the merger agreement closes in the next few months. For starters, all of his unvested stock options will benefit from accelerated vesting, and Webb will walk away with a tidy sum of more than $5.87 million from options alone.

And that’s just the tip of the iceberg. Webb also owns 376,378 restricted shares and 4,670 restricted stock units (RSUs) and stock equivalent units (SEUs). That’s where this handy passage from the preliminary merger proxy comes into play:

“The merger agreement also provides that, as of the effective time of the merger, each outstanding RSU and SEU under the Company stock plans will be cancelled and will entitle the holder thereof to receive, as soon as reasonably practicable after the effective time (but in any event no later than the first payroll date after the effective time), the per share merger consideration, less any required withholding taxes.”

For Webb, those interests turn out to be worth more than $23.24 million.

And if he loses his job within 24 months after the merger, he gets severance, too. In that scenario, Webb gets “a lump sum equal to three times the sum of his base salary plus bonus”; based on the April, 2010 proxy, that adds up to approximately $7.875 million. If there are unpaid bonuses for prior years, Webb also gets those, as well as a pro rata bonus for the year in which his employment ends. In addition, he gets continued group term life insurance coverage for three years, and another check for $64,799 to pay for health and dental insurance. The company also agreed to pay any taxes that Webb owes as a result of the change in control.

Since not everything can be quantified just yet, we’re left with a ballpark estimate that Webb may walk away with more than $29.11 million if the merger occurs, and at least another $7.94 million if his job disappears within two years of the deal closing. Surely that’s enough for Webb to pay for any hobbies that he takes up in his newly found free time.

Image source: nataliezdrieu via flickr