X0303 4 2008-08-01 0000812906 HANCOCK FABRICS INC HKFIQ.PK 0001386790 Sopris Capital Advisors LLC 314 SOUTH GALENA STREET, SUITE 300 ASPEN CO 81611-1818 0 0 1 0 0001127939 ASPEN ADVISORS LLC 152 WEST 57TH STREET 39TH FLOOR NEW YORK NY 10019 0 0 1 0 0001366950 EnterAspen LTD 152 WEST 57TH STREET 39TH FLOOR NEW YORK NY 10019 0 0 1 0 0001237606 HECHT NIKOS C/O ASPEN ADVISORS LLC 314 SOUTH GALENA STREET, SUITE 300 ASPEN CO 81611-1818 0 0 1 0 0001402240 Sopris Partners, Series A of Sopris Capital Partners, L.P. 314 SOUTH GALENA STREET, SUITE 300 ASPEN CO 81611-1818 0 0 1 0 0001402239 Sopris Capital LLC 314 SOUTH GALENA STREET, SUITE 300 ASPEN CO 81611-1818 0 0 1 0 Common Stock Warrants (right to buy) 1.12 2008-08-01 4 P 0 2103 A 2008-08-01 2013-08-01 Common Stock 841219 841219 I Through managed accounts Common Stock Warrants (right to buy) 1.12 2008-08-01 4 P 0 7238 A 2008-08-01 2013-08-01 Common Stock 2895256 2895256 I Through partner-ships and managed accounts Some of the reported securities are included within units purchased by the reporting persons at a price of $1,000 per unit. Each unit consisted of one 4.5% floating rate nonconvertible secured note due in 2013 in the face amount of $1,000 and one warrant to purchase 400 shares of Common Stock. The reporting persons purchased 1,739 units which included warrants to purchase 695,600 shares of Common Stock. The remaining securities are included within additional warrants to purchase 145,619 shares of Common Stock issued as a fee for the agreement by the reporting persons to commit to purchase a fixed number of units in excess of their pro-rata share in a Rights Offering of such units. All of the 841,219 shares reported in Table II are owned by EnterAspen Limited ("EnterAspen") through its account managed by Aspen Advisors LLC, a Delaware limited liability company ("Aspen Advisors"). Aspen Advisors disclaims any beneficial interest in the securities owned by EnterAspen, except to the extent of its pecuniary interest therein. Mr. Nikos Hecht is the managing member of Aspen Advisors. By virtue of such status, he may be deemed the beneficial owner of the securities held by EnterAspen under Regulation 13D-G under the Exchange Act. Mr. Hecht disclaims any beneficial interest in the securities owned by EnterAspen, except to the extent of his pecuniary interest therein. Except as expressly acknowledged herein, this report shall not be deemed an admission that any such person or entity is the beneficial owner of, any such securities for purposes of Section 16 of the Exchange Act or for any other purpose. Some of the reported securities are included within units purchased by the reporting persons at a price of $1,000 per unit. Each unit consisted of one 4.5% floating rate nonconvertible secured note due in 2013 in the face amount of $1,000 and one warrant to purchase 400 shares of Common Stock. The reporting persons purchased 5,985 units which included warrants to purchase 2,394,000 shares of Common Stock. The remaining securities are included within additional warrants to purchase 501,256 shares of Common Stock issued as a fee for the agreement by the reporting persons to commit to purchase a fixed number of units in excess of their pro-rata share in a Rights Offering of such units. Of the warrants to purchase 2,895,256 shares reported in Table II, (i) Sopris Partners Series A, of Sopris Capital Partners, L.P, a Delaware limited partnership (the "Sopris Partnership"), owns warrants to purchase 1,647,140 shares, (ii) a private investment partnership (the "Managed Partnership") managed by Sopris Capital Advisors, LLC, a Delaware limited liability company ("Sopris Advisors") owns warrants to purchase 424,748 shares and (iii) private institutional accounts, including EnterAspen (the "Sopris Managed Accounts") managed by Sopris Advisors own warrants to purchase 823,368 shares. Sopris Capital LLC (the "Sopris General Partner") is the general partner of the Sopris Partnership and the Managed Partnership. (Continued in Footnote 5). The Sopris Partnership, the Managed Partnership and the Sopris General Partner disclaim any beneficial interest in the securities owned by the Sopris Managed Accounts, the Sopris General Partner disclaims any beneficial interest in the securities owned by the Sopris Partnership in excess of its pecuniary interest therein and the Sopris General Partner disclaims any beneficial interest in the securities owned by the Managed Partnership in excess of its pecuniary interest therein. Sopris Advisors disclaims any beneficial interest in the securities owned by the Sopris Partnership, the Managed Partnership and the Sopris Managed Accounts. Mr. Nikos Hecht is the sole member of the managing member of the Sopris General Partner and the managing member of Sopris Advisors. (Continued in Footnote 6). By virtue of such status he may be deemed the beneficial owner of the securities held by the Sopris Partnership, the Managed Partnership and the Sopris Managed Accounts under Regulation 13D-G under the Exchange Act. Mr. Hecht disclaims any beneficial interest in the securities owned by the Sopris Partnership other than his pecuniary interest therein. Mr. Hecht disclaims any beneficial interest in the securities owned by the Managed Partnership other than his pecuniary interest therein. He disclaims any beneficial interest in the securities owned by the Sopris Managed Accounts. Except as expressly acknowledged herein, this report shall not be deemed an admission that any such person or entity is the beneficial owner of, or has a pecuniary interest, in any such securities for purposes of Section 16 of the Exchange Act or for any other purpose. SOPRIS PARTNERS SERIES A, of SOPRIS CAPITAL PARTNERS, L.P. By: Sopris Capital, LLC, its general partner By:/s/ Nikos Hecht, Sole Member of the Managing Member 2008-08-15 SOPRIS CAPITAL LLC By:/s/ Nikos Hecht Sole Member of the Managing Member 2008-08-15 ASPEN ADVISORS LLC By:/s/ Nikos Hecht Managing Member 2008-08-15 SOPRIS CAPITAL ADVISORS, LLC By:/s/ Nikos Hecht Managing Member 2008-08-15 ENTERASPEN LIMITED By: ASPEN ADVISORS LLC Its Attorney-in-fact with respect to accounts managed by Aspen Advisors LLC By:/s/ Nikos Hecht, Managing Member 2008-08-15 ENTERASPEN LIMITED By: SOPRIS CAPITAL ADVISORS, LLC Its Attorney-in-fact with respect to accounts managed by Sopris Capital Advisors, LLC By:/s/ Nikos Hecht, Managing Member 2008-08-15 /s/ NIKOS HECHT 2008-08-15