Document:

EX-4.8 Form of Subscription

Exhibit 4.8

FORM OF SUBSCRIPTION CERTIFICATE

Certificate No.:                                         

Name of Registered Holder

Address of Registered Holder

___ Subscription Rights

TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH

IN THE COMPANY’S PROSPECTUS, DATED JUNE 19, 2008,

AND ARE INCORPORATED HEREIN BY REFERENCE.

COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM

WUNDERLICH SECURITIES, INC., THE SUBSCRIPTION AGENT.

 

HANCOCK FABRICS, INC.

A Delaware Corporation

SUBSCRIPTION CERTIFICATE

Evidencing the number of Subscription Rights stated above, each right representing the right to
purchase one $1,000 principal amount of floating rate secured note (“Note”) and a warrant
(“Warrant”) to purchase 400 shares of common stock at an exercise price equal to the greater of (i)
$1.00 and (ii) the volume weighted average trading price for the 30 days prior to the
3rd business day before the date of issuance of the warrants.
Subscription Price: $1,000

VOID IF NOT EXERCISED BEFORE 5:00 P.M., EASTERN TIME ON

JULY 18, 2008.

THIS CERTIFIES THAT the registered owner whose name is inscribed herein is the owner of the number
of Subscription Rights set forth above, each of which entitles the owner to subscribe for and
purchase one Note and one Warrant of Hancock Fabrics, Inc., a Delaware corporation, on the terms
and subject to the conditions set forth in the Prospectus and the instructions relating hereto. The
Subscription Rights represented by this Subscription Certificate may be exercised by completing
Section 1 hereof. Special delivery restrictions may be specified by completing Section 2 hereof.

Dated: June 19, 2008

	 	 	 
	 

	 	 
	Jane F. Aggers

	 	Robert W. Driskell
	President

	 	Secretary

 

 

SECTION 1. EXERCISE AND SUBSCRIPTION

The undersigned irrevocably exercises Subscription Rights to subscribe for Notes and Warrants as
indicated below on the terms and subject to the conditions specified in the Prospectus, the receipt
of which is hereby acknowledged.

	 	(a)	 	Number of Subscription Rights subscribed:                     
	 
	 	(b)	 	Total Subscription Price (total number of Subscription Rights subscribed for
multiplied by the Subscription Price of

 $1,000):                     

METHOD OF PAYMENT (CHECK ONE)

	 	 	 
	[ ]

	 	Certified check or bank draft (cashier’s check) drawn on a
U.S. bank or money order, payable to Wunderlich
Securities, Inc., as Subscription Agent.
	 
	 	 
	[ ]

	 	Wire transfer of immediately available funds directed to
the account maintained by Wunderlich Securities, Inc.,
Subscription Agent for Hancock Fabrics, Inc. at Wachovia
Bank, ABA # 053000219, Account No. 2000041008548.

If the amount enclosed or transmitted is not sufficient to pay the purchase price for all
Subscription Rights that are stated to be subscribed for, or if the number of Subscription Rights
being subscribed for is not specified, the number of Subscription Rights subscribed for will be
assumed to be the maximum number that could be subscribed for upon payment of such amount. If the
amount enclosed or transmitted exceeds the purchase price for all Subscription Rights that the
undersigned has the right to subscribe for (such excess amount, the “Subscription Excess”) the
Subscription Agent will return the Subscription Excess to the subscriber without interest or
deduction.

SECTION 2. SPECIAL ISSUANCE OR DELIVERY INSTRUCTIONS FOR SUBSCRIPTION RIGHTS HOLDERS:

(a) To be completed ONLY if the Notes and Warrants are to be issued in a name other than that of
the registered holder. See the Instructions. DO NOT FORGET TO COMPLETE THE GUARANTEE OF
SIGNATURE(S) SECTION BELOW.

	 	 	 
	Name in which to be issued:

	 	Soc. Sec. #/Tax ID #:
	 
	 	 
	 

	 	 
	Address:
	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

(b) To be completed ONLY if the certificate representing Notes and Warrants are to be sent to the
registered holder at an address other than that show above. See the Instructions. DO NOT FORGET TO
COMPLETE THE GUARANTEE OF SIGNATURE(S) SECTION BELOW

	 	 	 
	Name:

	 	Address:
	 
	 	 
	 

	 	 

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ACKNOWLEDGMENT — THE SUBSCRIPTION ORDER FORM IS NOT VALID UNLESS YOU SIGN BELOW

I/We acknowledge receipt of the Prospectus and understand that, after delivery to the Subscription
Agent for Hancock Fabrics, Inc., I/we may not modify or revoke this Subscription Certificate.
Under penalties of perjury, I/we certify that the information contained herein, including the
social security number or taxpayer identification number given above, is correct.

The signature below must correspond with the name of the registered holder exactly as it appears on
the books of the Company’s transfer agent without any alteration or change whatsoever.

	 	 	 
	Signature(s) of Registered Holder:

	 	Date:
	 
	 	 
	 

	 	 

If signature is by trustee(s), executor(s), administrator(s), guardian(s), attorney(s)-in-fact,
agent(s), officer(s) of a corporation or another acting in a fiduciary or representative capacity,
please provide the following information (please print). See the Instructions.

	 	 	 	 	 
	Name:

	 	Capacity:
	 	Soc. Sec. #/Tax ID #
	 
	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 
	Address:

	 	 	 	Phone:
	 
	 	 	 	 
	 	 	 

GUARANTEE OF SIGNATURE(S)

All Subscription Rights Holders who specify special issuance or delivery instructions must have
their signatures guaranteed by an Eligible Institution, as defined in Rule 17Ad-15 of the
Securities Exchange Act of 1934, as amended. See the Instructions.

	 	 	 	 	 
	Authorized Signature:

	 	 	 	Name of Firm:
	 
	 	 	 	 
	   	 	 
	 
	 	 	 	 
	Name:

	 	Title:
	 	Soc. Sec. #/Tax ID #:
	 
	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 
	Address:

	 	 	 	Phone:
	 
	 	 	 	 
	   	 	 

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YOU MUST HAVE YOUR SIGNATURE GUARANTEED IF YOU WISH TO HAVE YOUR SHARES DELIVERED TO AN ADDRESS
OTHER THAN YOUR OWN OR TO A STOCKHOLDER OTHER THAN YOURSELF.

	 	 	 	 	 	 	 	 	 
	 	 	Signature Guaranteed:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name of Bank or Firm:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 

BACKUP WITHHOLDING CERTIFICATIONS

TIN:                                         

TAXPAYER I.D. NUMBER. The Taxpayer Identification Number shown above (TIN) is my correct taxpayer
identification number.

[ ] BACKUP WITHHOLDING. I am not subject to backup withholding either because I have not been
notified that I am subject to backup withholding as a result of a failure to report all interest
or dividends, or the Internal Revenue Service has notified me that I am no longer subject to
backup withholding.

[ ] EXEMPT RECIPIENTS. I am an exempt recipient under the Internal Revenue Service Regulations.

[ ] NONRESIDENT ALIENS. I am not a United States person, or if I am an individual, I am neither a
citizen nor a resident of the United States.

SIGNATURE: I certify under penalties of perjury the statements checked in this section.

	 	 	 	 	 
	Signature:

	 	Date:	 	 
	 
	 	 	 	 
	 

	 	 

	 	 

(See “Federal Income Tax Consequences — Information Reporting and Backup Withholding” in the
Hancock Fabrics, Inc. Prospectus dated June 19, 2008 for information concerning this certification
and U.S. federal income tax withholding that may apply.

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FORM OF INSTRUCTIONS FOR USE OF HANCOCK FABRICS, INC.

SUBSCRIPTION CERTIFICATES

The following instructions relate to a rights offering (the “Rights Offering”) by Hancock Fabrics,
Inc., a Delaware corporation (the “Company”), to the holders of its common stock, par value $0.01
per share (“Common Stock”), as described in the Company’s prospectus dated June 19, 2008 (the
“Prospectus”). Holders of record of Common Stock at the close of business on June 17, 2008 (the
“Record Date”) will receive one transferable subscription right (the “Subscription Rights”) for
each 970 shares of Common Stock held by them as of the close of business on the Record Date. An
aggregate of up to 20,000 Subscription Rights exercisable to purchase an aggregate of up to
$20,000,000 principal amount of floating rate secured notes (“Notes”) and warrants to purchase up
to 8,000,000 shares of the Company’s Common Stock (“Warrants”) are being distributed in connection
with the Rights Offering. Each Subscription Right is exercisable, upon payment of $1,000 in cash
(the “Subscription Price”), to purchase one Note in the principal amount of $1,000 accompanied by a
Warrant to purchase 400 shares of Common Stock. See “Prospectus Summary” and “The Rights Offering”
in the Prospectus.

No fractional Subscription Rights or cash in lieu thereof will be issued or paid. The total number
of Subscription Rights issued to each stockholder will be rounded down to the nearest full
Subscription Right.

The Subscription Rights will expire at 5:00 p.m., Eastern Time, on July 18, 2008 (the “Expiration
Date”).

The number of Subscription Rights to which you are entitled is printed on the face of your
Subscription Certificate. You should indicate your wishes with regard to the exercise of your
Subscription Rights by completing the appropriate section on your Subscription Certificate and
returning the Subscription Certificate to the Subscription Agent in the envelope provided.

THE SUBSCRIPTION AGENT MUST RECEIVE YOUR SUBSCRIPTION CERTIFICATE ON OR BEFORE THE EXPIRATION DATE.
IN ADDITION, THE SUBSCRIPTION AGENT MUST RECEIVE PAYMENT OF THE SUBSCRIPTION PRICE FOR ALL
SUBSCRIPTION RIGHTS EXERCISED ON OR BEFORE THE EXPIRATION DATE. ONCE A HOLDER OF SUBSCRIPTION
RIGHTS HAS EXERCISED THE SUBSCRIPTION RIGHTS, SUCH EXERCISE MAY NOT BE REVOKED.

1. SUBSCRIPTION RIGHTS. To exercise Subscription Rights, properly complete and execute your
Subscription Certificate and send it, together with payment in full of the Subscription Price to
the Subscription Agent. Delivery of the Subscription Certificate must be made by mail, by hand
delivery or by overnight delivery. FACSIMILE DELIVERY OF THE SUBSCRIPTION CERTIFICATE WILL NOT BE
ACCEPTED AND WILL NOT CONSTITUTE VALID DELIVERY. All payments must be made in United States dollars
by (i) certified check or bank draft (cashier’s check) drawn on a U.S. bank or money order payable
to Wunderlich Securities, Inc., as Subscription Agent or (ii) wire transfer of immediately
available funds. Banks, brokers, trusts, depositaries or other nominee holders of the Subscription
Rights who exercise the Subscription Rights on behalf of beneficial owners of Subscription Rights
will

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be required to certify to the Subscription Agent and the Company on a Nominee Holder Certification
Form as to the aggregate number of Subscription Rights that have been exercised by each beneficial
owner of Subscription Rights on whose behalf such nominee holder is acting. In the event such
certification is not delivered in respect of a Subscription Certificate, the Subscription Agent
shall for all purposes be entitled to assume that such certificate is exercised on behalf of a
single beneficial owner.

ACCEPTANCE OF PAYMENTS. Payments will be deemed to have been received by the Subscription Agent
only upon the receipt by the Subscription Agent of any certified check or bank draft (cashier’s
check) drawn on a U.S. bank, money order or immediately available funds transferred through a wire
transfer.

CONTACTING THE SUBSCRIPTION AGENT. The address, telephone and facsimile numbers of the Subscription
Agent, Wunderlich Securities, Inc. are as follows:

	 	 	 	 	 
	 

	 	If by Hand Delivery, Overnight Delivery,
	 	 
	 

	 	First Class Mail or Registered Mail:	 	 
	 
	 	 	 	 
	 

	 	Wunderlich Securities, Inc.	 	 
	 

	 	6000 Poplar Avenue, Suite 210	 	 
	 

	 	Memphis, TN 38119	 	 
	 

	 	Attention: Jim Harwood	 	 
	 

	 	Telephone: (901) 251-2233	 	 
	 

	 	Facsimile: (901) 251-1349	 	 

PARTIAL EXERCISE. If you exercise less than all of the Subscription Rights evidenced by your
Subscription Certificate, the Subscription Agent will issue to you a new Subscription Certificate
evidencing the unexercised Subscription Rights. However, if you choose to have a new Subscription
Certificate sent to you, you may not receive any such new Subscription Certificate in sufficient
time to permit exercise of the Subscription Rights being exercised, or if you do not deliver the
dollar amount sufficient to purchase the number of shares subscribed for, you will be deemed to
have exercised the Subscription Right with respect to the maximum number of whole Subscription
Rights which may be exercised for the Subscription Price payment you deliver.

2. DELIVERY OF NOTES AND WARRANTS, ETC. The following deliveries and payments to you will be made
to the address shown on the face of your Subscription Certificate unless you provide instructions
to the contrary on your Subscription Certificate.

(a) SUBSCRIPTION RIGHTS. As soon as practicable after the valid exercise of Subscription Rights
and the Expiration Date, the Subscription Agent will mail to each exercising Subscription Rights
holder (i) evidence of the Notes, and (ii) Warrant certificates, each purchased pursuant to the
Subscription Rights.

(b) EXERCISE PAYMENTS. As soon as practicable after the Expiration Date and after all prorations
and adjustments contemplated by the terms of the Rights Offering have been effected, the
Subscription Agent will mail to each Subscription Rights holder any excess funds received

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(without interest or deduction) in payment of the Subscription Price for shares that are subscribed
for but not allocated to such Subscription Rights holder.

3. TO HAVE A SUBSCRIPTION CERTIFICATE DIVIDED INTO SMALLER DENOMINATIONS. To have a Subscription
Certificate divided into certificates for smaller numbers of Subscription Rights, send your
Subscription Certificate, together with complete instructions (including specification of the whole
number of Subscription Rights you wish to be evidenced by each new Subscription Certificate) signed
by you, to the Subscription Agent, allowing three to five days for the Subscription Certificates to
be issued and returned so that they can be used prior to the Expiration Date. Alternatively, you
may ask a bank or broker to effect such actions on your behalf. As a result of delays in the mail,
the time of the transmittal, the necessary processing time and other factors, you may not receive
the new Subscription Certificates in time to enable you to complete an exercise by the Expiration
Date. Neither Hancock Fabrics, Inc. nor the Subscription Agent will be liable to you for any such
delays.

4. EXECUTION.

(a) EXECUTION BY REGISTERED HOLDER. The signature on the Subscription Certificate must correspond
with the name of the registered holder exactly as it appears on the face of the Subscription
Certificate without any alteration or change whatsoever. Persons who sign the Subscription
Certificate in a representative or other fiduciary capacity must indicate their capacity when
signing and, unless waived by the Subscription Agent in its sole and absolute discretion, must
present to the Subscription Agent satisfactory evidence of their authority so to act.

(b) EXECUTION BY PERSON OTHER THAN REGISTERED HOLDER. If the Subscription Certificate is executed
by a person other than the holder named on the face of the Subscription Certificate, prior evidence
of authority of the person executing the Subscription Certificate must accompany the name unless
the Subscription Agent, in its discretion, dispenses with proof of authority.

(c) SIGNATURE GUARANTEES. Your signature must be guaranteed by an Eligible Guarantor Institution
if you specify special issuance or delivery instructions.

5. METHOD OF DELIVERY. The method of delivery of Subscription Certificates and the payment of the
Subscription Price to the Subscription Agent will be at the election and risk of the Subscription
Rights holder. If sent by mail, it is recommended that they be sent by registered mail, properly
insured, with return receipt requested, and that a sufficient number of days be allowed to ensure
delivery to the Subscription Agent prior to the Expiration Date.

7EX-10.45 Subscription Agent Agreement.

Exhibit 10.45

     This Subscription Agent Agreement is made as of June 17, 2008.

	 	 	 	 	 
	 

	 	  BETWEEN:
	 	HANCOCK FABRICS, INC., a Delaware corporation,
(the “COMPANY”)
	 
	 	 	 	 
	 

	 	 	 	- and –
	 
	 	 	 	 
	 

	 	 	 	WUNDERLICH SECURITIES, INC., (the “AGENT”)

     WHEREAS the Company has resolved to offer rights (the “Rights”) at a price of $1,000 per
Right. Each Right will allow certain stockholders of the Company to purchase one $1,000 principal
amount of floating rate secured note (“Notes”) and a warrant (“Warrants”) to purchase 400 shares of
the Company’s Common Stock at an exercise price equal to the greater of (i) $1.00 and (ii) the
volume weighted average trading price for the 30 days prior to the 3rd business day
before the date of issuance of the Warrants;

     WHEREAS the Rights are to be issued only to certain stockholders holding Common Stock of the
Company as hereinafter described, which stockholders held Common Stock of the Company on the Record
Date; and

     WHEREAS the Company deems it expedient that the Agent act as subscription agent for the Rights
and as custodian of monies tendered upon exercise of the Rights;

     NOW THEREFORE, in consideration of the mutual covenants herein set forth, the parties hereto
agree as follows:

	 
	1.	 	DEFINITIONS:
	 
	1.01.	 	In this Agreement:

	 	(a)	 	“Agreement” means this agreement;
	 
	 	(b)	 	“Common Stock” means the issued and outstanding shares of common stock of the
Company, par value $0.01;
	 
	 	(c)	 	“Expiration Date” means 5:00 p.m., (Eastern Time), on July 18, 2008;
	 
	 	(d)	 	“Qualified Stockholders” means all Common Stockholders who owned at least 970
shares of Common Stock on the Record Date;
	 
	 	(e)	 	“Notes” has the meaning set forth in the Recitals to this Agreement;
	 
	 	(f)	 	“Record Date” means as of the close of business on June 17, 2008;

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	 	(g)	 	“Rights” means the right of Stockholders owning at least 970 shares of Common
Stock on the Record Date to purchase Notes and Warrants;
	 
	 	(h)	 	“Rights Offering” means the offering of the Rights as described in the Rights
Offering Prospectus and expected to close on July 18, 2008.
	 
	 	(i)	 	“Rights Offering Prospectus” means the prospectus pursuant to which the Rights
are issued, a copy of which is attached hereto as Appendix A;
	 
	 	(j)	 	“Stockholders” means the holders on the Record Date of the Common Stock;
	 
	 	(k)	 	“Subscription Certificates” has the meaning set forth in Section 2.02(a);
	 
	 	(l)	 	“Subscription Funds” means any and all monies tendered by eligible holders of
Rights on subscription for the Notes and Warrants; and
	 
	 	(m)	 	“Warrants” has the meaning set forth in the Recitals to this Agreement.

	 
	2.	 	APPOINTMENT OF AGENT:

2.01. The Agent is hereby appointed as subscription agent for the Rights and the Agent hereby
accepts such appointment upon the terms hereinafter set forth.

2.02. The Agent shall keep the Company’s register of Rights, register of transfers and supply of
unissued Subscription Certificates and, subject to such instructions as may be from time to time
given by the Company in writing through any of its Chairman, President or Secretary or other duly
authorized officer, the Agent shall:

	 	(a)	 	in accordance with Article 3, issue to Qualified Stockholders certificates
representing the Rights (“Subscription Certificates”) which are to be held by them, as
contemplated by the Rights Offering Prospectus or transferred to them after the initial
issuance, respectively, and enter such certificates on the Company’s register of
transfers;
	 
	 	(b)	 	permit transfers to be made upon register of transfers by holders of Rights, or
by their duly authorized attorneys, and cancel Subscription Certificates surrendered
upon such transfers provided that no transfer of Rights shall be made or Subscription
Certificate issued to any Stockholder that is not a Qualified Stockholder;
	 
	 	(c)	 	in accordance with the Rights Offering Prospectus, accept Subscription
Certificates and Subscription Funds from Qualified Stockholders, and cancel such
Subscription Certificates properly presented for exercise from the register of Rights;
	 
	 	(d)	 	in the event that any Notes and Warrants remain available on the Expiration
Date after the exercise of the Rights, advise the Company of the number of Notes and
Warrants which remain available;

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	 	(e)	 	after the Expiration Date and after all duly tendered Subscription Certificates
for the Notes and Warrants have been calculated, cancel all Rights from the register;
	 
	 	(f)	 	until the Expiration Date, make such entries from time to time in the said
register as may be necessary in order that the account of each holder of Rights of the
Company may be properly and accurately kept;
	 
	 	(g)	 	supply the Company from time to time, as required, with lists of holders of
Rights, as shown by the said register, correct to the dates of such lists showing the
name and last known address of each holder and the number of Rights held by each
holder; and
	 
	 	(h)	 	the Agent shall:

	 	(i)	 	prior to the closing of the Rights Offering, provide to the
Company a complete list of holders of Rights who have elected to subscribe to
the Notes, including the principal amount of Notes to be issued to each such
holder and the number of Warrants to be issued to each such holder;
	 
	 	(ii)	 	as soon as possible following the closing of the Rights
Offering, issue and mail (by first class insured mail) notification to each
subscriber advising the same of the number of Warrants subscribed for and
issued and the principal amount of Notes subscribed for and purchased by such
holder pursuant to the Rights Offering.

3. THE RIGHTS: The Rights will be issued to Qualified Stockholders shown on the Company’s register
of Common Stock as owning at least 970 shares of Common Stock on the Record Date. The Rights will
be in fully registered form and will be freely transferable. The Rights will be exercisable in
accordance with the Rights Offering Prospectus.

4. TAX MATTERS: The Company shall instruct the Agent in writing of the tax forms, if any, that are
to be issued and the appropriate filings that are to be made with the Internal Revenue Service
prior to the Expiration of the Rights Offering. Absent written instruction from the Company, the
Agent shall not be responsible for any tax filings.

5. APPOINTMENT OF CUSTODIAN: The Agent is hereby appointed as custodian for the receipt and
holding of the Subscription Funds and the Agent hereby accepts such appointment.

6. DELIVERY OF SUBSCRIPTION FUNDS:

6.01. Any Subscription Funds which may happen to be received by the Company will promptly be
delivered or paid over to the Agent together with all necessary information regarding the
subscriber.

6.02. After the Expiration Date, and after the calculation and tabulation of all properly tendered
subscriptions, the Subscription Funds will be paid by the Agent to the Company upon the
authentication of the global notes representing the Notes and the Warrants subscribed for and

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purchased in the Rights Offering.

6.03. ANY SUBSCRIPTION FUNDS OR OTHER FUNDS HELD BY THE AGENT DURING THE TERMS OF THIS AGREEMENT
SHALL BE EITHER (i) HELD BY AGENT AS CASH, OR (ii) INVESTED BY AGENT IN SHARES OF THE FEDERATED
AUTOMATED GOVERNMENT MONEY TRUST, WHICH INVESTS IN OBLIGATIONS OF, OR GUARANTEED BY, THE UNITED
STATES GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES, MATURING IN ONE YEAR OR LESS, WHICH
OBLIGATIONS MAY BE PURCHASED THROUGH REPURCHASE AGREEMENTS WITH SAID OBLIGATIONS AS COLLATERAL. ANY
INTEREST EARNED ON ANY OF THE SUBSCRIPTION FUNDS OR OTHER FUNDS SHALL BE PAID TO THE COMPANY.

	7.	 	COVENANTS BY THE COMPANY: The Company covenants with the Agent that:

	 	(a)	 	it shall provide the Agent with (i) access to and use of the Company’s
personnel as needed by the Agent, (ii) access to the Company’s outside professional
resources, such as attorneys and accountants and (iii) such other resources and support
as reasonably required by the Agent in the performance of services under this
Agreement; and
	 
	 	(b)	 	it shall promptly give notice to the Agent of any and all changes to the terms
and conditions of the Rights which it may resolve to make from time to time and that it
shall prepare and execute any and all documents to amend this Agreement pursuant to any
such changes made.

	8.	 	REPLACEMENT OF LOST RIGHTS CERTIFICATES:

8.01. The authority of the Agent shall also extend to the issue as subscription agent of any
Subscription Certificate, the issue of which shall be authorized in writing by the Company through
any of its Chairman, President or Secretary, or other duly authorized officer, in lieu of a
Subscription Certificate shown to have been lost, destroyed or stolen as provided in Sections 8.02
and 8.03.

8.02. The applicant for the issue of a new Subscription Certificate(s) pursuant to this Article 8
shall bear the cost of the issue thereof and in case of loss, destruction or theft shall, as a
condition precedent to the issue thereof, furnish to the Agent and the Company such evidence of
ownership and of the loss, destruction or theft of the certificate satisfactory to the Company and
to the Agent in their sole discretion, and such applicant shall also be required to furnish an
indemnity bond satisfactory to the Company and the Agent, to save each of them harmless, and shall
pay the expenses, charges and any taxes applicable thereto to the Company and the Agent in
connection therewith.

8.03. No new Subscription Certificates shall be issued in lieu of Subscription Certificate claimed
to have been lost, destroyed or stolen until a statutory declaration and indemnity bond, if
required, in form satisfactory to the Company and the Agent shall have been furnished to the Agent.

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9. FEES AND EXPENSES:

9.01. The Company shall pay to the Agent:

	 	(i)	 	A “base fee” of $10,000 (payable (x) $5,000 upon effectiveness
of the Registration Statement on Form S-l related to the Rights Offering and
(y) $5,000 upon expiration of the Rights Offering and the remittance by the
Agent to the Company of all Subscription Funds and processed Subscription
Certificates received during that period), and
	 
	 	(ii)	 	a “per subscription fee” of $100 per Subscription Certificate,
up to a maximum of $15,000, for a total fee potential of $25,000.

9.02. The Company shall reimburse the Agent for reasonable out-of-pocket expenses incurred in
connection with services rendered by the Agent under this Agreement. No out of town travel will be
undertaken unless approved by the Company in advance. Expenses shall be billed on a monthly basis
by the Agent and shall be due upon receipt of billing. Services to be provided by other
professionals such as attorneys or accountants shall be engaged directly by the Company and payment
for such services shall be the direct responsibility of the Company.

9.03. The Company shall reimburse the Agent for any legal or other expenses reasonably incurred by
the Agent in connection with investigating, preparing to defend or defending any lawsuits, claims,
or other proceedings arising in any manner out of or in connection with the Agent’s rendering of
services hereunder, or in the Agent’s enforcement of the payment terms of this Agreement.

10. INDEMNITY OF THE AGENT:

10.01. The Company shall indemnify the Agent and hold it harmless against any losses, claims,
damages or liabilities to which the Agent may become subject arising in any manner out of or in
connection with (a) actions taken or omitted to be taken (including any untrue statements made or
statements omitted to be made) by the Company or (b) actions taken or omitted to be taken by the
Agent in conformity with either (i) instructions of the Company or (ii) actions taken or omitted to
be taken by the Company; or otherwise arising out of or in connection with the Agent’s rendering of
services hereunder unless it is finally judicially determined that such losses, claims, damages, or
liabilities arose out of the gross negligence or bad faith of the Agent.

10.02. The Agent shall have no duties except those which are expressly set forth herein. The Agent
is neither (i) acting as underwriter, agent or solicitor of the Rights Offering; nor (ii) opining
on the merits of the transaction or recommending a purchase of securities in the Rights Offering.

10.03. The Company agrees that it shall perform, execute, acknowledge and deliver or cause to be
delivered all such further and other acts, instruments and assurances as may reasonably be required
by the Agent for the carrying out or performing by the Agent of the provisions of this Agreement.

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11. TERM AND TERMINATION: The term of this Agreement shall extend from the date hereof until
terminated. Either party may terminate the Agreement at any time, without cause, by giving the
other party at least 15 days’ prior written notice; provided, however, that the Company’s
obligations pursuant to Article 9 and Article 10 hereof shall survive any such termination.

12. CONFIDENTIALITY: Any information which is delivered to the Agent by the Company shall be kept
confidential and shall not be revealed to any third party without the prior consent of the Company,
except as is required by law or in the Agent’s performance of services as described herein.
Likewise, this and all other documents delivered to the Company by the Agent shall be kept
confidential by the Company and shall not be shared with any party except for the Company’s
attorneys or independent accountants. Any advice provided by the Agent under this Agreement shall
not be disclosed to third parties without the Agent’s prior approval.

13. RIGHT TO ADVERTISE: The Company agrees that the Agent has the right to place advertisements in
financial and other newspapers and journals, at its own expense, describing its services to the
Company hereunder, provided that the Agent will submit a copy of any such advertisements to the
Company so that it can consent to the form of the advertisements, which consent shall not be
unreasonably withheld or delayed. The Agent agrees that the Company has the right to name the Agent
as the provider of the services stated herein on the prospectus to be distributed to existing
equity holders and for related purposes.

14. NOTICES: All payments required to be made or given pursuant to this Agreement shall be mailed
by first class mail postage prepaid or delivered by hand and any notice required to be made or
given pursuant to this Agreement shall be in writing and shall be deemed to be validly given if
delivered or if sent by registered letter, postage prepaid or if sent by facsimile. Any notice so
mailed shall be deemed to have been given and received by the addressee on the fourth business day
next following the day on which such notice is mailed, or, if sent by facsimile shall be deemed to
have been received on the date upon which an acknowledgement of receipt is received from the
addressee provided that if such acknowledgement of receipt is received after 5:00 p.m., Eastern
Time, such notice shall be deemed to be received on the next business day, or, if delivered, shall
be deemed to have been given on the delivery date, at the offices and to the parties at the
addresses shown below:

	 	 	 
	If to the Agent:

	 	Wunderlich Securities, Inc.
	 

	 	6000 Poplar Avenue, Suite 150
	 

	 	Memphis, TN 38119
	 

	 	Attention: James E. Harwood
	 

	 	Facsimile: (901) 251-1349
	 
	 	 
	If to the Company:

	 	Hancock Fabrics, Inc.
	 

	 	One Fashion Way
	 

	 	Baldwyn, MS 38824
	 

	 	Attention: Robert W. Driskell
	 

	 	Facsimile: (602) 365-6025

6

 

	 	 	 
	with a copy to:

	 	Sam D. Chafetz, Esq.
	 

	 	Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
	 

	 	165 Madison Avenue #2200
	 

	 	Memphis, TN 38103
	 

	 	Facsimile: (901) 577-0854

15. GENERAL:

15.01. It is understood and agreed that any benefits accruing to the holders of Rights at any time
are held by each and every holder as against the Company alone; in all respects, the Agent shall
act as agent of the Company in the execution of duties specifically ascribed to Agent hereunder.

15.02. In the event of any inconsistency between the provisions of this Agreement and the Rights
Offering Prospectus, the terms of the Rights Offering Prospectus shall govern.

15.03. Time shall be of the essence with regard to this Agreement.

15.04. This Agreement shall inure to the benefit of and be binding upon the Company, its successors
and assigns, including, without limitation, any entity which may acquire all or substantially all
of the Company’s assets and business or into which the Company may be consolidated or merged, and
the Agent, its successors and assigns, including, without limitation, any entity which may acquire
all or substantially all of the Agent’s assets and business or into which the Agent may be
consolidated or merged. The Agent may assign its right to payment, but not its obligations, under
this Agreement.

15.05. This Agreement supersedes all prior understandings between the parties. It may not be
amended orally, but only by writing signed by the parties hereto.

15.06. This Agreement shall be governed by and construed in accordance with the laws of the
Tennessee.

15.07. Subject headings as used in this Agreement are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.

15.08. This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original and all of which, taken together, shall constitute one and the same instrument.

[Signature page follows]

7

 

IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day and year first
above written.

	 	 	 	 	 
	 	Hancock Fabrics, Inc.

 	 
	 	By: 	/s/ Robert
W. Driskell	 
	 	Name:  	Robert
W. Driskell	 
	 	Title:  	Senior
Vice President and Chief Financial Officer	 
	 

	 	 	 	 	 
	 	Wunderlich Securities, Inc.

 	 
	 	By:  	/s/
James E. Harwood	 
	 	Name:  	James
E. Harwood	 
	 	Its: 	Managing
Director	 
	 

8

 

APPENDIX A

Rights Offering Prospectus

A

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