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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>UNITED
      STATES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>SECURITIES
      AND EXCHANGE COMMISSION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>WASHINGTON,
      D.C. 20549</strong></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>FORM
      8-K</strong></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>CURRENT
      REPORT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Pursuant
      to Section 13 or 15(d) of the</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Securities
      Exchange Act of 1934</strong></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Date
      of
      report (Date of earliest event reported): <strong>June 20, 2007 (June 15,
      2007)</strong></font></div>
    <div><br></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>HANCOCK
      FABRICS, INC.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(Exact
      Name of Registrant as Specified in Charter)</font></div>
    <div><br></div>
    <div><br></div>
    <div align="center">
      <table cellpadding="0" cellspacing="0" width="90%">

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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><strong>Delaware</strong></font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><strong>1-9482</strong></font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><strong>64-0740905</strong></font></div>
            </td>
          </tr>
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            <td valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">(State
                or other jurisdiction</font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">(Commission</font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">(I.
                R. S. Employer</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">of
                incorporation)</font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">File
                Number)</font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Identification
                No.)</font></div>
            </td>
          </tr>

      </table>
    </div>
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    <div><br></div>
    <div align="center">
      <table cellpadding="0" cellspacing="0" width="60%">

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            <td valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><strong>One
                Fashion Way, Baldwyn, MS</strong></font></div>
            </td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><strong>38824</strong></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">(Address
                of Principal Executive Offices)</font></div>
            </td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">(Zip
                Code)</font></div>
            </td>
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      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Registrant's
      telephone number, including area code: <strong>(662)
      365-6000</strong></font></div>
    <div><br></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">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:</font></div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><font style="DISPLAY: inline;" face="Wingdings">o</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Written
                communications pursuant to Rule 425 under the Securities Act (17
                CFR
                230.425)</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

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            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><font style="DISPLAY: inline;" face="Wingdings">o</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Soliciting
                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><font style="DISPLAY: inline;" face="Wingdings">o</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Pre-commencement
                communications pursuant to Rule 14d-2(b) under the Exchange Act (17
                CFR
                240.14d-2(b))</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><font style="DISPLAY: inline;" face="Wingdings">o</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Pre-commencement
                communications pursuant to Rule 13e-4(c) under the Exchange Act (17
                CFR
                240.13e-4(c))</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div><br></div>
    <div><br></div><br>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Item
                1.01</strong></font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Entry
                Into A Material Definitive
                Agreement.</strong></font></div>
            </td>
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      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">On
      June
      15, 2007, Hancock Fabrics, Inc. (the "Company") entered into Loan and Security
      Agreement (the "Loan Agreement") along with HF Merchandising, Inc.
      ("Merchandising"), Hancock Fabrics of MI, Inc. ("Fabrics MI"),
      hancockfabrics.com, Inc. ("Fabrics.com"), Hancock Fabrics, LLC ("Fabrics LLC",
      and together with the Company, Merchandising, Fabrics MI and Fabrics.com,
      collectively, the "Borrowers"), HF Enterprises, Inc. ("Enterprises"), HF
      Resources, Inc. ("Resources", and together with Enterprises, collectively,
      the
      "Guarantors"), with certain lenders from time to time (collectively, the
      "Lenders") and Ableco Finance LLC, in its capacity as agent for the Lenders
      ("Agent").</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
      Loan
      Agreement provides for a term loan facility in the aggregate principal amount
      of
      up to $17,500,000. The Company intends to use the proceeds of the loans made
      under the Loan Agreement for general working capital purposes and to pay fees
      and expenses related to the Loan Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
      Borrowers' obligations under the Loan Agreement are collateralized by
      substantially all of their real, personal, tangible and intangible assets
      (whether owned as of the date of the Loan Agreement or subsequently acquired
      or
      existing), including, without limitation, (a)&#160;accounts; (b)&#160;general
      intangibles (including intellectual property); (c)&#160;goods (including
      inventory and equipment); (d)&#160;real property and fixtures; (e)&#160;chattel
      paper (including tangible and electronic chattel paper); (f)&#160;instruments
      (including promissory notes); (g)&#160;documents; (h)&#160;deposit accounts;
      (i)&#160;letters of credit, banker's acceptances and similar instruments;
      (j)&#160;supporting obligations and present and future liens, security
      interests, rights, remedies, title and interest in, to and in respect of
      receivables; (k)&#160;investment property (including securities, securities
      accounts, security entitlements, commodity contracts or commodity accounts);
      (l)&#160;monies, credit balances, deposits and other property of any Borrower or
      Guarantor now or hereafter held or received by or in transit to Agent or any
      Lender (or its affiliates) at any other depository or other institution;
      (m)&#160;commercial tort claims; (n)&#160;receivables (to the extent not
      previously described above); (o)&#160;leasehold real property interests existing
      as of March 22, 2007 (excluding fixtures and subject to certain limitations);
      and (p)&#160;all records.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
      Loan
      Agreement contains terms and conditions customary for financing arrangements
      of
      this nature. The replacement term loan facility will mature on the earlier
      to
      occur of (a)&#160;June&#160;15, 2009, (b)&#160;the confirmation of a plan of
      reorganization for Borrowers and Guarantors in the previously disclosed Chapter
      11 cases of Borrowers and Guarantors (which are being administered under the
      Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
      Court for the District of Delaware), or (c)&#160;the last termination date set
      forth in the Permanent Financing Order (as defined in the Loan
      Agreement).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Certain
      borrowings under the Loan Agreement ("Prime Rate Loans") will bear interest
      at a
      rate equal to two (2%) percent per annum in excess of the greater of (a) 8.25%,
      (b) the rate from time to time publicly announced by JPMorgan Chase Bank in
      New
      York, New York, or its successors, as its prime rate, whether or not such
      announced rate is the best rate available at such bank or (c)&#160;the federal
      funds rate as published by the Federal Reserve Bank of New York in effect on
      such day <em>plus</em> one-half (1/2%) percent. Other borrowings under the Loan
      Agreement ("Eurodollar Rate Loans") will bear interest at a rate equal to five
      (5%) percent per annum in excess of rate per annum determined by dividing (a)
      the rate of interest per annum appearing on Reuters Screen LIBO Page as the
      London interbank offered rate for deposits in dollars at approximately
      11:00&#160;a.m. (London time) two business days prior to the first day of the
      applicable interest period by (b) a percentage equal to: (i) one (1)
<em>minus</em> (ii) the percentage which is in effect from time to time under
      Regulation D of the Board of Governors of the Federal Reserve System as the
      maximum reserve requirement applicable with respect to Euro-denominated
      liabilities, provided that such rate shall not be less than 5.25%. Agent may,
      at
      its option or at the direction of the requisite number of Lenders, increase
      the
      interest rates to the rate of five (5%) percent per annum in excess of the
      applicable rate for Prime Rate Loans and the rate of eight (8%) percent per
      annum in excess of the applicable rate for Eurodollar Rate Loans in certain
      circumstances.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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      <div id="HDR">
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
      representations, covenants and events of default in the Loan Agreement are
      customary for financing transactions of this nature. Certain mandatory
      prepayments of the term loan facility will be required upon the occurrence
      of
      specified events, including upon the sale of certain assets. Events of default
      in the Loan Agreement include, among others, (a) the failure to pay when due
      the
      obligations owing under the credit facilities; (b) the failure to perform (and
      not timely remedy, if applicable) certain covenants; (c) the revocation or
      purported revocation of the obligations of a Guarantor; (d) the occurrence
      of
      certain bankruptcy or insolvency events; (e)&#160;certain judgments against the
      Borrowers; (f) any representation or warranty made by the Borrowers subsequently
      proven to have been false or misleading in any material respect;
      (g)&#160;certain cross default events and (h) the occurrence of a Change in
      Control (as defined in the Loan Agreement). Upon the occurrence of an event
      of
      default, the lenders may terminate the loan commitments, accelerate all loans
      and exercise any of their rights under the Loan Agreement and the ancillary
      loan
      documents as a secured party.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">A
      copy of
      the executed Loan Agreement is attached to this Current Report on Form 8-K
      as
      Exhibit&#160;99.1 and is incorporated herein by reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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            <td style="WIDTH: 72pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Item
                2.03</strong></font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Creation
                of a Direct Financial Obligation or an Obligation under an
                Off-Balance</strong></font></div>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Sheet
                Arrangement of a
                Registrant.</strong></font></div>
            </td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">See
      response to Item 1.01.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Item
      9.01&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Financial
      Statements and Exhibits.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>(d)</strong></font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Exhibits</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="center">
      <table cellpadding="0" cellspacing="0" width="90%">

          <tr>
            <td align="justify" valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><strong>Exhibit
                Number</strong></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">&#160;</font></td>
            <td align="justify" valign="bottom" width="60%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><strong>Description</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">99.1</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">&#160;</font></td>
            <td align="justify" valign="bottom" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Loan
                and Security Agreement, dated June 15,
                2007</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div><br></div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div><br>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div><br>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>SIGNATURE</strong></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">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 thereunto
      duly authorized.</font></div>
    <div><br></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>HANCOCK
      FABRICS, INC.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(Registrant)</font></div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top">
            <td style="WIDTH: 216pt">
              <div>&#160;</div>
            </td>
            <td style="WIDTH: 63pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">&#160;&#160;&#160;&#160;By:</font></div>
            </td>
            <td style="WIDTH: 198pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><u>/s/
                Larry D. Fair</u></font></div>
            </td>
            <td>&#160;</td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top">
            <td style="WIDTH: 225pt">
              <div>&#160;</div>
            </td>
            <td style="WIDTH: 54pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Name:</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Larry
                D. Fair</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top">
            <td style="WIDTH: 225pt">
              <div>&#160;</div>
            </td>
            <td style="WIDTH: 54pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Title:</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Vice
                President, Finance (Principal</font></div>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Financial
                and Accounting Officer)</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Date:
      June 20, 2007</font></div>
    <div><br></div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div><br>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div><br>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>INDEX
      TO EXHIBITS</strong></font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td valign="bottom" width="9%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Exhibit</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Number</strong></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">&#160;</font></td>
            <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Description</strong></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">99.1</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">&#160;</font></td>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Loan
                and Security Agreement, dated June 15,
                2007</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div><br></div><br><br></body>
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hancock8k061907.htm
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):
June 20, 2007 (June 15,
      2007)
HANCOCK
      FABRICS, INC.
(Exact
      Name of Registrant as Specified in Charter)
Delaware
1-9482
64-0740905
(State
                or other jurisdiction
(Commission
(I.
                R. S. Employer
of
                incorporation)
File
                Number)
Identification
                No.)
One
                Fashion Way, Baldwyn, MS
38824
(Address
                of Principal Executive Offices)
(Zip
                Code)
Registrant's
      telephone number, including area code:
(662)
      365-6000
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:
o
Written
                communications pursuant to Rule 425 under the Securities Act (17
                CFR
                230.425)
o
Soliciting
                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)
o
Pre-commencement
                communications pursuant to Rule 14d-2(b) under the Exchange Act (17
                CFR
                240.14d-2(b))
o
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
      June
      15, 2007, Hancock Fabrics, Inc. (the "Company") entered into Loan and Security
      Agreement (the "Loan Agreement") along with HF Merchandising, Inc.
      ("Merchandising"), Hancock Fabrics of MI, Inc. ("Fabrics MI"),
      hancockfabrics.com, Inc. ("Fabrics.com"), Hancock Fabrics, LLC ("Fabrics LLC",
      and together with the Company, Merchandising, Fabrics MI and Fabrics.com,
      collectively, the "Borrowers"), HF Enterprises, Inc. ("Enterprises"), HF
      Resources, Inc. ("Resources", and together with Enterprises, collectively,
      the
      "Guarantors"), with certain lenders from time to time (collectively, the
      "Lenders") and Ableco Finance LLC, in its capacity as agent for the Lenders
      ("Agent").
The
      Loan
      Agreement provides for a term loan facility in the aggregate principal amount
      of
      up to $17,500,000. The Company intends to use the proceeds of the loans made
      under the Loan Agreement for general working capital purposes and to pay fees
      and expenses related to the Loan Agreement.
The
      Borrowers' obligations under the Loan Agreement are collateralized by
      substantially all of their real, personal, tangible and intangible assets
      (whether owned as of the date of the Loan Agreement or subsequently acquired
      or
      existing), including, without limitation, (a) accounts; (b) general
      intangibles (including intellectual property); (c) goods (including
      inventory and equipment); (d) real property and fixtures; (e) chattel
      paper (including tangible and electronic chattel paper); (f) instruments
      (including promissory notes); (g) documents; (h) deposit accounts;
      (i) letters of credit, banker's acceptances and similar instruments;
      (j) supporting obligations and present and future liens, security
      interests, rights, remedies, title and interest in, to and in respect of
      receivables; (k) investment property (including securities, securities
      accounts, security entitlements, commodity contracts or commodity accounts);
      (l) monies, credit balances, deposits and other property of any Borrower or
      Guarantor now or hereafter held or received by or in transit to Agent or any
      Lender (or its affiliates) at any other depository or other institution;
      (m) commercial tort claims; (n) receivables (to the extent not
      previously described above); (o) leasehold real property interests existing
      as of March 22, 2007 (excluding fixtures and subject to certain limitations);
      and (p) all records.
The
      Loan
      Agreement contains terms and conditions customary for financing arrangements
      of
      this nature. The replacement term loan facility will mature on the earlier
      to
      occur of (a) June 15, 2009, (b) the confirmation of a plan of
      reorganization for Borrowers and Guarantors in the previously disclosed Chapter
      11 cases of Borrowers and Guarantors (which are being administered under the
      Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
      Court for the District of Delaware), or (c) the last termination date set
      forth in the Permanent Financing Order (as defined in the Loan
      Agreement).
Certain
      borrowings under the Loan Agreement ("Prime Rate Loans") will bear interest
      at a
      rate equal to two (2%) percent per annum in excess of the greater of (a) 8.25%,
      (b) the rate from time to time publicly announced by JPMorgan Chase Bank in
      New
      York, New York, or its successors, as its prime rate, whether or not such
      announced rate is the best rate available at such bank or (c) the federal
      funds rate as published by the Federal Reserve Bank of New York in effect on
      such day
plus
one-half (1/2%) percent. Other borrowings under the Loan
      Agreement ("Eurodollar Rate Loans") will bear interest at a rate equal to five
      (5%) percent per annum in excess of rate per annum determined by dividing (a)
      the rate of interest per annum appearing on Reuters Screen LIBO Page as the
      London interbank offered rate for deposits in dollars at approximately
      11:00 a.m. (London time) two business days prior to the first day of the
      applicable interest period by (b) a percentage equal to: (i) one (1)
minus
(ii) the percentage which is in effect from time to time under
      Regulation D of the Board of Governors of the Federal Reserve System as the
      maximum reserve requirement applicable with respect to Euro-denominated
      liabilities, provided that such rate shall not be less than 5.25%. Agent may,
      at
      its option or at the direction of the requisite number of Lenders, increase
      the
      interest rates to the rate of five (5%) percent per annum in excess of the
      applicable rate for Prime Rate Loans and the rate of eight (8%) percent per
      annum in excess of the applicable rate for Eurodollar Rate Loans in certain
      circumstances.
The
      representations, covenants and events of default in the Loan Agreement are
      customary for financing transactions of this nature. Certain mandatory
      prepayments of the term loan facility will be required upon the occurrence
      of
      specified events, including upon the sale of certain assets. Events of default
      in the Loan Agreement include, among others, (a) the failure to pay when due
      the
      obligations owing under the credit facilities; (b) the failure to perform (and
      not timely remedy, if applicable) certain covenants; (c) the revocation or
      purported revocation of the obligations of a Guarantor; (d) the occurrence
      of
      certain bankruptcy or insolvency events; (e) certain judgments against the
      Borrowers; (f) any representation or warranty made by the Borrowers subsequently
      proven to have been false or misleading in any material respect;
      (g) certain cross default events and (h) the occurrence of a Change in
      Control (as defined in the Loan Agreement). Upon the occurrence of an event
      of
      default, the lenders may terminate the loan commitments, accelerate all loans
      and exercise any of their rights under the Loan Agreement and the ancillary
      loan
      documents as a secured party.
A
      copy of
      the executed Loan Agreement is attached to this Current Report on Form 8-K
      as
      Exhibit 99.1 and is incorporated herein by reference.
Item
                2.03
Creation
                of a Direct Financial Obligation or an Obligation under an
                Off-Balance
Sheet
                Arrangement of a
                Registrant.
See
      response to Item 1.01.
Item
      9.01                      Financial
      Statements and Exhibits.
(d)
Exhibits
Exhibit
                Number
Description
99.1
Loan
                and Security Agreement, dated June 15,
                2007
SIGNATURE
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 thereunto
      duly authorized.
HANCOCK
      FABRICS, INC.
(Registrant)
By:
/s/
                Larry D. Fair
Name:
Larry
                D. Fair
Title:
Vice
                President, Finance (Principal
Financial
                and Accounting Officer)
Date:
      June 20, 2007
INDEX
      TO EXHIBITS
Exhibit
Number
Description
99.1
Loan
                and Security Agreement, dated June 15,
                2007