HAST Hastings Entertainment, Inc. (MM)

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON                     , 2014

NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the “ Special Meeting ”) of Hastings Entertainment, Inc. (the “ Company ” or “ Hastings ”) will be held on                     , 2014, at             , Central Time, at the Hastings Store Support Center, located at 3601 Plains Boulevard in Amarillo, Texas 79102. At the Special Meeting, holders of record on                     , 2014 of our common stock will be asked to vote on the following matters:

After careful consideration, our board of directors unanimously determined that the Merger Agreement and the transactions contemplated by the Merger Agreement are fair to, and in the best interests of, the Company and its shareholders and approved, adopted and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger. Our board of directors unanimously recommends approval of the Merger Agreement by the shareholders of the Company and our board of directors unanimously recommends that you vote “FOR” the proposal to approve the Merger Agreement, “FOR” the proposal to adjourn the Special Meeting and “FOR” the advisory (non-binding) proposal to approve the compensation for each of our named executive officers that is based on or otherwise relates to the Merger.

We cannot complete the Merger unless the holders of at least two-thirds of the outstanding shares of our common stock vote to approve the Merger Agreement. Approval of the proposal to adjourn the Special Meeting requires the affirmative vote of the holders of a majority of the shares present in person or by proxy at the Special Meeting if a quorum is present. The advisory (non-binding) proposal to approve the compensation for our named executive officers that is based on or otherwise relates to the Merger will be approved if at least a majority of the shares represented in person or by proxy at the Special Meeting and entitled to vote on the subject matter vote in favor of this proposal. The obligations of the Company and Parent to complete the Merger are also subject to the satisfaction or waiver of several other conditions. We encourage you to read the accompanying proxy statement, including the annexes, in its entirety because it explains the proposed Merger, the documents related to the Merger and other related matters.

You are urged to submit your proxy as soon as possible by completing, dating, signing and returning the enclosed proxy card in the accompanying envelope, which does not require postage if mailed in the United States, or by granting your proxy electronically by telephone or via the Internet as instructed on the proxy card. YOUR

Table of Contents

VOTE IS IMPORTANT. If your shares are held in an account at a brokerage firm, bank or other nominee, you should instruct your broker, bank or nominee how to vote your shares using the enclosed voting instruction form furnished by your broker, bank or nominee. If you do not vote or do not instruct your broker, bank or nominee how to vote, it will have the same effect as voting against the proposal to approve the Merger Agreement. Submitting your proxy will not prevent you from voting in person at the Special Meeting.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Merger, passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

The proxy statement is dated                     , 2014, and it and the proxy card are first being mailed to shareholders on or about                     , 2014. The close of business on                     , 2014 was fixed as the record date for determining the shareholders entitled to notice of, and to vote at, the Special Meeting or any adjournments thereof.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

SHAREHOLDER MEETING TO BE HELD ON                     , 2014

Our Proxy Statement, 2013 Annual Report, and Annual Report on Form 10-K for the fiscal year ended January 31, 2014 are available online at http://phx.corporate-ir.net/phoenix.zhtml?c=109628&p=proxy. In accordance with Securities and Exchange Commission rules, this website provides complete anonymity with respect to any shareholder accessing it.

Amarillo, Texas

                    , 2014

YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED REPLY ENVELOPE. IF YOU HOLD SHARES DIRECTLY IN YOUR NAME, YOU MAY ALSO SUBMIT YOUR PROXY OVER THE INTERNET OR BY TELEPHONE BY FOLLOWING THE INSTRUCTIONS PRINTED ON YOUR PROXY CARD. IF YOUR SHARES ARE HELD IN AN ACCOUNT AT A BROKERAGE FIRM, BANK OR OTHER NOMINEE, YOU SHOULD INSTRUCT YOUR BROKER, BANK OR NOMINEE HOW TO VOTE YOUR SHARES USING THE ENCLOSED VOTING INSTRUCTION FORM FURNISHED BY YOUR BROKER, BANK OR NOMINEE. EVEN IF YOU SUBMIT A PROXY, YOU CAN STILL ATTEND THE SPECIAL MEETING AND VOTE IN PERSON IF YOU DESIRE TO DO SO.

Table of Contents

Table of Contents

Table of Contents

SU MMARY

The following summary, together with the section of this proxy statement entitled “Questions and Answers about the Special Meeting and the Merger,” highlights selected information from this proxy statement and may not contain all of the information that is important to you as a shareholder of the Company or that you should consider before voting on the proposal to approve the Merger Agreement and the other proposals to be voted on at the Special Meeting. Accordingly, to better understand the Merger and the matters to be voted on at the Special Meeting (as defined below) more fully and to obtain a more complete description of the legal terms of the Merger Agreement (as defined below), we encourage you to read carefully this entire proxy statement, its annexes and the documents incorporated by reference in this proxy statement before voting. Each item in this summary includes a page reference directing you to a more complete description of that item. You may obtain without charge copies of documents incorporated by reference into this proxy statement by following the instructions under “Where You Can Find More Information” beginning on page 79. In this proxy statement, unless the context requires otherwise, the terms “ Hastings ,” “ the Company ,” “ we ,” “ our ” and “ us ” refer to Hastings Entertainment, Inc. The term “ Parent ” refers to Draw Another Circle, LLC, and the term “ Merger Sub ” refers to Hendrix Acquisition Corp. The term “ Merger Agreement ” refers to the Agreement and Plan of Merger, dated as of March 17, 2014, by and among Parent, Merger Sub and Hastings, as it may be amended from time to time.

The Parties to the Merger

Hastings Entertainment, Inc.

3601 Plains Boulevard

Amarillo, Texas 79102

Phone: (806) 351-2300

Hastings Entertainment, Inc. (NASDAQ: HAST) is a Texas corporation. Incorporated in 1972, Hastings is a leading multimedia entertainment retailer. Hastings operates entertainment superstores that buy, sell, trade and rent various home entertainment products, including books, music, software, periodicals, movies on DVD and Blu-Ray, video games, video game consoles, hobby, sports and recreation, lifestyle and consumer electronics. Hastings also offers consumables and trends products such as apparel, t-shirts, action figures, posters, greeting cards and seasonal merchandise. In addition, Hastings operates two concept stores that sell a wide range of bicycles and related accessories, skateboards, and various other athletic equipment, apparel and shoes and one concept store that sells predominantly used and new books, CDs, DVDs, Blu-Rays, video games and video game systems and other consumer merchandise. Hastings also operates a multimedia entertainment e-commerce web site offering a broad selection of books, software, video games, movies on DVD and Blu-Ray, music, trends, comics, sports and recreation and electronics

Additional information about Hastings is contained in its public filings, which are incorporated by reference herein. See “Where You Can Find Additional Information” on page 79.

Draw Another Circle, LLC

c/o National Entertainment Collectibles Association, Inc.

603 Sweetland Avenue

Hillside, NJ 07205

Parent, a Delaware limited liability company, is a holding company which, following the consummation of the Merger, will hold all of the outstanding shares of the Company. Parent is an affiliate of National Entertainment Collectibles Association, Inc., a New Jersey corporation (“ NECA ”), which operates as a media and entertainment company in the United States and internationally, with divisions dedicated to consumer products, filmed entertainment, and online retailing/digital distribution.

Hendrix Acquisition Corp.

c/o National Entertainment Collectibles Association, Inc.

603 Sweetland Avenue

Hillside, NJ 07205

1

Table of Contents

Merger Sub, a Texas corporation, is a wholly-owned subsidiary of Parent. Merger Sub was formed on March 11, 2014 solely for the purpose of entering into the Merger Agreement and consummating the transactions contemplated by the Merger Agreement. Merger Sub has not conducted any business operations other than those incident to its formation and the transactions contemplated by the Merger Agreement. If the Merger is completed, Merger Sub will cease to exist following the Merger with and into the Company.

The Special Meeting

Date, Time and Place of Special Meeting; Purpose of Special Meeting (page 19)

The Special Meeting will be held on                     , 2014, at             Central Time, at Hastings’ Store Support Center located at 3601 Plains Boulevard, Amarillo, Texas 79102.

The purpose of the Special Meeting is:

Recommendation of Our Board of Directors; Our Reasons for the Merger (pages 20 and 31)

Our Board of Directors (the “ Board ”), acting upon the unanimous recommendation of a committee of the Board consisting solely of the four independent directors of the Company (the “ Special Committee ”), unanimously determined that the Merger Agreement and the transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of, the Company and our shareholders and approved and declared advisable the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

The Board unanimously recommends that the shareholders of the Company vote “FOR” the proposal to approve the Merger Agreement, “FOR” the proposal to adjourn the Special Meeting and “FOR” the advisory (non-binding) proposal to approve the compensation of each of our named executive officers that is based on or otherwise relates to the Merger. For a description of the reasons considered by the Special Committee and the Board in deciding to recommend approval of the proposal to approve the Merger Agreement, see “The Merger—Reasons for the Merger and Recommendation of the Board of Directors” beginning on page 31.

Shareholders Entitled to Vote; Record Date (page 20)

If you owned shares of our common stock of record at the close of business on                     , 2014, the record date for the Special Meeting, you are entitled to notice of and to vote at the Special Meeting, or any adjournment or postponement thereof. You have one vote for each share of our common stock owned on the record date. As of the close of business on the record date, there were             shares of our common stock entitled to vote at the Special Meeting. NECA holds approximately 12.4% shares of our outstanding common stock as of the record date and, pursuant to a letter agreement with Parent, has agreed to vote its shares in favor of approving the Merger Agreement. Additionally, under the terms of a support agreement, Mr. Marmaduke, his wife and The John

2

Table of Contents

H. Marmaduke Family Limited Partnership (the “ Marmaduke Holders ”), who collectively hold approximately 30.4% of our outstanding common stock as of the record date, agreed, among other things, to vote their respective shares in favor of the approval of the Merger Agreement.

Quorum; Required Vote (page 20)

A quorum of shareholders is necessary to hold the Special Meeting. The presence, in person or by proxy, of the holders of a majority of the shares of our common stock issued and outstanding on the record date will constitute a quorum for purposes of voting at the Special Meeting. Thus,             shares of our common stock must be represented at the Special Meeting for there to be a quorum. If a quorum is not present in person or by proxy at the Special Meeting, we expect that the Special Meeting will be adjourned or postponed to solicit additional votes at the Company’s expense. Abstentions count as present for establishing a quorum.

The approval of the Merger Agreement requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of our common stock. Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of our common stock present or represented by proxy at the Special Meeting. Approval of the related compensation proposal also requires the affirmative vote of the holders of a majority of our common stock present or represented by proxy at the Special Meeting. The vote on the related compensation proposal is advisory in nature and will not be binding on Hastings or the Board. If you abstain or fail to submit your proxy or vote in person at the Special Meeting, it will have the same effect as a vote “AGAINST” the proposal to approve the Merger Agreement. If you fail to submit your proxy and do not attend the Special Meeting, it will have no effect on the outcome of the adjournment proposal or the related compensation proposal, but if you abstain, it will have the same effect as a vote against these proposals.

Voting; Submission of Proxy (page 21)

Our shareholders of record can submit their proxy three ways:

If you hold your shares in “street name” through a broker or other nominee, you will receive separate instructions from your broker or nominee, and you must instruct the broker or other nominee on how to vote your shares by following the instructions that they provide to you with those materials.

Revocability of Proxies (page 21)

If you are a shareholder of record, you may revoke your proxy at any time before it is voted at the Special Meeting by:

3

Table of Contents

Simply attending the Special Meeting will not constitute revocation of your proxy. If your shares are held in “street name” by your broker or other nominee, you should follow the instructions of your broker or nominee regarding revocation of proxies.

The Me rger (page 22 )

Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub, a wholly-owned subsidiary of Parent, will merge with and into Hastings. Hastings will be the surviving corporation in the Merger and will become a wholly-owned subsidiary of Parent. As a result of the Merger, our common stock will cease to be publicly traded. The Merger Agreement is attached as Annex A to this proxy statement. We encourage you to carefully read the Merger Agreement in its entirety.

Consideration to be Received in the Merger (page 58)

If the Merger is completed, subject to the terms and conditions of the Merger Agreement, you will be entitled to receive $3.00 in cash, without interest and less any applicable withholding taxes, for each share of our common stock held immediately prior to the time of completion of the Merger (the “ Merger Consideration ”), unless you are a dissenting shareholder and you perfect your rights of dissent and appraisal under the Texas Business Organizations Code (as amended, the “ TBOC ”). In that case, your shares will not be converted into the right to receive the Merger Consideration, but will represent the right to receive the fair value of such shares as determined by a court in accordance with the TBOC. Any shares of our common stock then held by us or any of our wholly owned subsidiaries or held in our treasury and any shares of our common stock then held by NECA or any other member of Parent, Parent, Merger Sub or any of their respective affiliates shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange.

Additionally, upon the completion of the Merger, each option to purchase our common stock that is outstanding immediately prior to the completion of the Merger will be cancelled and terminated and, to the extent any such option is vested immediately prior to such time and held by a person other than Messrs. John Marmaduke, Dan Crow, Alan Van Ongevalle or Philip McConnell (collectively, the “ Insiders ”), such option will be converted into the right to receive a cash amount equal to the Option Consideration for each share then subject to such option. “ Option Consideration ” means, with respect to any share issuable under each such option, an amount equal to the excess, if any, of (i) the Merger Consideration over (ii) the exercise price payable in respect of such share issuable under such option.

Opinion of SunTrust Robinson Humphrey, Inc. (page 34)

The Special Committee retained SunTrust Robinson Humphrey, Inc. ( “ STRH ”) and George K. Baum Capital Advisors, Inc. (“ Baum ”) to act as its financial advisors in connection with the proposed Merger. In connection with the Merger, at the meeting of the Special Committee and the Board on March 16, 2014, STRH delivered to the Special Committee an oral opinion, which was confirmed by delivery of a written opinion, dated March 16, 2014, to the effect that, as of the date of the opinion and based upon and subject to the conditions, limitations, qualifications and assumptions set forth in the opinion, the $3.00 per share of common stock to be received in the Merger by the holders of our common stock, other than NECA or any equity holder of Parent, Parent, Merger Sub and their respective affiliates and associates (the “ Unaffiliated Shareholders ”), in exchange for their common stock was fair, from a financial point of view, to such Unaffiliated Shareholders.

The full text of the written opinion of STRH, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion of STRH, is attached as Annex B to this proxy statement and is incorporated herein by reference. Shareholders are urged to read STRH’s written opinion carefully and in its entirety. STRH’s opinion was furnished solely for the use of the Special Committee (solely in its capacity as such) in connection with its evaluation of the Merger. STRH’s opinion is limited solely to the fairness to the Unaffiliated Shareholders, from a financial point of view, of the $3.00 per share of common stock to be paid to the Unaffiliated Shareholders in exchange for their common stock in connection with

4

Table of Contents

the Merger and does not address the Company’s underlying business decision to effect the Merger or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available with respect to the Company. STRH’s opinion does not constitute a recommendation to any shareholder of the Company as to how such shareholder should vote or act with respect to the Merger or any other matter. STRH’s opinion was approved by an internal opinion committee of STRH authorized to approve opinions of this nature.

Source of Funds (page 42)

Parent estimates that the total amount of funds necessary to complete the Merger and the related transactions and financings will be approximately $22.1 million, which is inclusive of the fees and expenses incurred therewith. Parent expects this amount to be funded through a combination of the following: (i) a contribution by Mr. Joel Weinshanker, the president and sole stockholder of NECA and president and indirect holder of all outstanding equity interests of Parent, of $7.1 million in cash to Parent in exchange for equity interests therein and (ii) $15 million in a debt financing provided by Pathlight Capital LLC (“ Pathlight ”).

Guaranty (page 42)

In connection with the Merger Agreement, Mr. Weinshanker entered into a Guaranty, dated as of March 17, 2014 (the “ Guaranty ”), with the Company whereby Mr. Weinshanker agreed to personally guaranty the obligations of Parent to pay the Merger Consideration following the closing of the Merger and to pay the holders of vested options to acquire Hastings shares (other than the Insiders) the Option Consideration, in each case pursuant to the Merger Agreement and the Guaranty. Under the Guaranty, Mr. Weinshanker agreed to personally guaranty the obligation of Parent to reimburse Hastings for certain expenses in the event Hastings terminates the Merger Agreement under certain circumstances. In addition, the Guaranty contains representations of Mr. Weinshanker regarding, among other things, his personal financial statement furnished to the Special Committee and covenants of Mr. Weinshanker to maintain a minimum tangible net worth of at least four times the amount of the Merger Consideration and the Option Consideration and, under certain circumstances, to use commercially reasonable efforts to provide Parent with financing sufficient to allow Parent to pay either the Merger Consideration and the Option Consideration or the reimbursement of certain expenses in the event of termination of the Merger Agreement by the Company under certain circumstances, as applicable. The Guaranty will terminate upon the earlier to occur of (1) Parent’s irrevocable deposit of the Merger Consideration with Parent’s paying agent and payment of the Option Consideration, in each case pursuant to the Merger Agreement, and (2) the termination of the Merger Agreement (provided that if such termination results in Parent becoming obligated to reimburse Hastings for certain agreed-upon expenses, the Guaranty will survive such termination with respect to such reimbursement until such reimbursement is paid to Hastings in accordance with the Merger Agreement).

What We Need to Do to Complete the Merger (page 70)

We, Parent and Merger Sub are not required to complete the Merger unless a number of conditions are satisfied or waived. These conditions include, among other conditions:

5

Table of Contents

See “The Merger Agreement (Proposal 1)—Conditions to Merger.”

Non-Solicitation and Adverse Recommendation (page 66)

We have agreed, subject to certain exceptions with respect to unsolicited proposals, that the Company will not and will cause its subsidiaries not to and will not permit our respective representatives to, directly or indirectly:

6

Table of Contents

Termination of the Merger Agreement (page 72)

The Merger Agreement may be terminated at any time prior to the effective time of the Merger, whether before or after approval from our shareholders has been obtained:

Termination Fee and Expense Reimbursement (page 73)

We will be required to pay Parent a termination fee equal to the greater of $850,000 and the amount of Parent’s expenses to which it is entitled to reimbursement under the Merger Agreement (provided that we are only obligated to reimburse such expenses up to an aggregate amount of $1.5 million and that such $850,000 termination fee shall be reduced by the amount of any such expense reimbursement paid by Hastings to Parent), under the following circumstances:

7

Table of Contents

Generally, all fees and expenses incurred in connection with the transaction contemplated by the Merger Agreement will be the obligation of the respective party incurring such fees and expenses. If the Merger Agreement is terminated in specified circumstances, Parent or Hastings may be required to pay to the other party such party’s documented, out-of-pocket expenses not to exceed $1.5 million, which in some circumstances may be credited against a termination fee payable by Hastings as described above.

See “The Merger Agreement (Proposal 1)—Effect of Termination: Fees and Reimbursement.”

Shares Owned by Hastings’ Directors and Executive Officers (page 76)

As of                     , 2014, the record date for the Special Meeting, our directors and executive officers beneficially owned and were entitled to vote an aggregate of             shares of our common stock, representing approximately             % of the voting power of the outstanding shares entitled to vote. We currently expect that our directors and executive officers will vote their shares in favor of the proposal to approve the Merger Agreement, although none of them, other than Mr. John Marmaduke, has entered into any agreement obligating them to do so. On March 17, 2014, as a condition to Parent and Merger Sub entering into the Merger Agreement, the Marmaduke Holders entered into a support agreement with Parent and Merger Sub (the “ Support Agreement ”) whereby the Marmaduke Holders agreed, among other things, to vote their respective shares in favor of approving the Merger Agreement. See “The Special Meeting—Voting by Hastings’ Directors and Executive Officers.” In addition to the Support Agreement, the Insiders entered into an Insider Agreement, dated as of March 17, 2014 (the “ Insider Agreement ”), with the Parent, whereby the Insiders agreed not to exercise any options with respect to Hastings’ shares and acknowledged that, at the effective time of the Merger, any shares of our common stock held by the Insiders would be converted into the Merger Consideration.

Interests of Directors and Executive Officers of Hastings in the Merger (page 42)

In considering the recommendation of the Board to approve the Merger Agreement, shareholders should be aware that our executive officers and directors may have certain interests in the Merger that may be different from, or in addition to, the interests of our shareholders generally. These interests are described in the section entitled “The Merger—Interests of Directors and Executive Officers of Hastings in the Merger.” The Board was aware of these interests and considered them, among other matters, in evaluating, negotiating and approving the Merger Agreement and the Merger, and in recommending that our shareholders vote for the approval of the Merger Agreement. These interests include the following, among others:

8

Table of Contents

Rights of Dissent and Appraisal (page 52)

Under Texas law, you are entitled to rights of dissent and appraisal in connection with the Merger.

If you comply with the requirements of Subchapter H of Chapter 10 of the TBOC, you will have the right under Texas law to demand payment for the fair value of your shares as determined by a court in accordance with the statutory requirements. Your rights of dissent and appraisal are subject to a number of restrictions and technical requirements. Generally, in order to exercise your rights of dissent and appraisal, you must comply with the following procedures:

9

Table of Contents

Merely voting against the approval of the Merger Agreement will not preserve your appraisal rights, which require you to take all the steps provided under Texas law. If you hold your shares in “street name,” you must instruct your broker or other nominee to take action in strict compliance with the TBOC to exercise your rights of dissent and appraisal. Requirements under Texas law for exercising rights of dissent and appraisal rights are described in further detail under “The Merger—Rights of Dissent and Appraisal.” Subchapter H of Chapter 10 of the TBOC regarding rights of dissent and appraisal available to shareholders is reproduced and attached as Annex C to this proxy statement. If you wish to avail yourself of your rights of dissent and appraisal, you should consult your legal advisor.

Material U.S. Federal Income Tax Considerations (page 46)

The receipt of cash in exchange for shares of our common stock pursuant to the Merger will generally be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder will recognize a gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash you receive (determined before the deduction of any applicable withholding taxes) and the adjusted tax basis of your shares of our stock. Any such gain or loss will be capital gain or loss if the holder holds the shares as capital assets, and will be long-term capital gain or loss if the holding period for the shares of our common stock exceeds one year. This may also be a taxable transaction under applicable state, local and/or foreign income or other tax laws. Please see “The Merger—Material U.S. Federal Income Tax Consequences” for a more detailed explanation of the tax consequences of the Merger. Tax matters can be complicated, and the tax consequences of the Merger to you will depend on your particular tax situation. We urge you to consult your tax advisor on how specific tax consequences of the Merger apply to you.

Market Price

Our common stock is listed on NASDAQ under the symbol “HAST.” On March 14, 2014, the last full trading day prior to the public announcement of the proposed Merger, our common stock closed at $1.91 per share. On                     , 2014, the latest practicable trading day before the printing of this proxy statement, our common stock closed at $            . Until the effective time of the Merger, the Merger Agreement does not permit us to declare, set aside or pay any dividend or other distribution without the prior written consent of Parent. Following the Merger, there will be no further market for our common stock.

Delisting and Deregistration of Our Common Stock (page 42)

If the Merger is completed, our common stock will no longer be listed on NASDAQ and will be deregistered under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and we will no longer file periodic reports with the U.S. Securities and Exchange Commission (the “ SEC ”).

Legal Proceedings Relating to the Merger (page 51)

On March 28, 2014, a lawsuit challenging the Merger, captioned CV-00072-J—Andreas Oberegger and David A. Capps, directly and derivatively on behalf of Hastings Entertainment, Inc., v. Danny W. Gurr, Ann S. Lieff, Frank O. Marrs, John H. Marmaduke, Jeffrey G. Shrader, Draw Another Circle, LLC, Hendrix Acquisition Corp., Joel Weinshanker and National Entertainment Collectibles Association, Inc., as defendants, and Hastings Entertainment, Inc., as a nominal defendant, was filed in the United States District Court for the Northern District of Texas, Amarillo Division. The plaintiffs are purported shareholders of the Company and are alleging several claims in connection with the Merger Agreement and the transactions contemplated therein. Plaintiffs allege, among other things, that the Merger contemplated in the Merger Agreement provides for insufficient consideration to be paid to the Company’s shareholders in exchange for their shares of the Company’s common stock, that the officers and directors of the Company breached their respective fiduciary duties in the course of negotiating and approving the Merger Agreement and that the other defendants aided and abetted such breach of fiduciary duties. The lawsuit

10

Table of Contents

seeks to enjoin the Merger or rescind the Merger if it is consummated and compensatory damages in an unspecified amount. The Company believes that the lawsuit was improperly and prematurely filed under Texas law. On April 16, 2014, the Company filed a Motion to Dismiss the Action, and Parent, Merger Sub, NECA and Mr. Weinshanker filed a Joinder to this Motion to Dismiss the Action on April 18, 2014. The Court has not yet ruled on the motion. The Company’s management believes that the lawsuit’s allegations are without merit and intends to vigorously defend themselves.

Prior to filing the lawsuit, the plaintiffs’ counsel sent the Company a demand letter dated March 20, 2014 demanding that the Board of Directors commence an action on behalf of the Company against the Directors. The Board of Directors appointed a Special Committee composed of independent directors to review the plaintiffs’ allegations. The Committee has not yet completed its review or made any determination as to what action, if any, should be taken in response to those allegations.

QUESTIONS AN D ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are provided for your convenience and briefly address some commonly asked questions about the Merger and the Special Meeting. They highlight only selected information from this proxy statement. You should carefully read this entire proxy statement, its annexes and the documents incorporated by reference in this proxy statement.

The Special Me eting

11

Table of Contents

As of the record date, our directors and executive officers beneficially owned             of our outstanding shares, representing approximately             % of our total outstanding shares. As described below under “The Special Meeting—Voting by Hastings’ Directors and Executive Officers,” the Marmaduke Holders have agreed in the Support Agreement to, among other things, vote all of their shares of our common stock “For” these proposals.

12

Table of Contents

You can also attend the Special Meeting and vote in person. Do NOT enclose or return any stock certificates with your proxy. If the Merger is completed you will receive instructions with respect to delivering your certificates and receiving the Merger Consideration.

13

Table of Contents

For the adjournment proposal and the related compensation proposal, you may vote FOR, AGAINST or ABSTAIN. If you abstain, it will have the same effect as a vote against these proposals. Failure to submit your proxy and to attend the Special Meeting will have no effect on the approval of the adjournment proposal and the related compensation proposal. In addition, if your shares are held in the name of a broker or other nominee, your broker or other nominee also will not be entitled to vote your shares on the these proposals in the absence of specific instructions from you. These non-voted shares, or “broker non-votes,” will be counted for purposes of determining a quorum, but will have no effect on the outcome of these proposals.

If you sign your proxy card without indicating how you wish to vote, your shares will be voted “FOR” the approval of the Merger Agreement, “FOR” the adjournment proposal and “FOR” the approval of the related compensation proposal, and in accordance with the recommendations of the Board on any other matters properly brought before the Special Meeting for a vote.

14

Table of Contents

If you are a beneficial owner holding your shares in “street name,” you may change your vote only by submitting new voting instructions to your broker, bank, trustee or other nominee. See “The Special Meeting.”

The M erger

After the Merger is completed, Parent will arrange for a letter of transmittal to be sent to each of our shareholders of record. The Merger Consideration will be paid to each shareholder of record once that shareholder submits the letter of transmittal, properly endorsed stock certificates and any other required

15

Table of Contents

documentation to the paying agent identified in the letter of transmittal. Shareholders who hold their shares in street name will not be required to deliver a letter of transmittal or stock certificate to the paying agent in order to receive their Merger Consideration; rather, they will receive instructions from their broker or other nominee as to receipt of payment of the Merger Consideration.

Shares held by a shareholder who has properly perfected rights of dissent and appraisal with respect to such shares and who otherwise complies with the TBOC will not be converted into the right to receive the Merger Consideration but will represent the right to receive the fair value of such shares as determined in accordance with the TBOC.

Merger Sub, a Texas corporation, is a wholly-owned subsidiary of Parent. Merger Sub was formed on March 11, 2014 solely for the purpose of entering into the Merger Agreement and consummating the transactions contemplated by the Merger Agreement.

16

Table of Contents

17

Table of Contents

If you elect to exercise your rights of dissent and appraisal in connection with the Merger, then you must submit your stock certificates to the surviving corporation in the manner described on page 54 under “—Delivery of Share Certificates to the Surviving Corporation.”

CAUTIONARY STATE MENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement and the documents incorporated by reference in this proxy statement contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management, based on information currently available to our management. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements can be identified by the use of the future tense or other forward-looking words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “should,” “may,” “objective,” “projection,” “forecast,” “management believes,” “continue,” “strategy,” “position” or the negative of those terms or other variations of them or by comparable terminology. In particular, statements, express or implied, concerning future actions, conditions or events, including with respect to the Merger, future operating results, the ability to generate sales, income or cash flow or to pay dividends are forward-looking statements.

Although we believe that these estimates and forward-looking statements are based on reasonable assumptions, they are subject to risks and uncertainties and are made in light of information currently available to us. Many factors, in addition to the factors described in this proxy statement, may cause actual results to differ from those projected in our forward-looking statements. We urge you to read carefully this entire proxy statement and the documents incorporated by reference into this proxy statement with the understanding that actual future results may be materially different from what we expect. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from those in the forward-looking statements include:

18

Table of Contents

See “Where You Can Find More Information” and “Incorporation by Reference.” The foregoing list and the risks reflected in our documents incorporated by reference in this proxy statement should not be construed to be exhaustive. Forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation to update or to review any forward-looking statement because of new information, future events or other factors. Forward-looking statements involve risks and uncertainties and are not guarantees of future performance. There is no assurance that any of the risks described in, or that any of the uncertainties associated with the forward-looking statements discussed in this proxy statement or the documents incorporated by reference into this proxy statement will occur, or if any of them do, when they will occur or what impact they will have on our operations or financial condition. Future results and performance may differ materially from those expressed in these forward-looking statements due to, but not limited to, the factors mentioned above. Because of these uncertainties, you should not place undue reliance on these forward-looking statements when making your decision.

THE SPECIAL MEETING

Date, Time, Place and Purpose of the Special Meeting

This proxy statement is being furnished to our shareholders in connection with the solicitation of proxies by the Board for use at the Special Meeting to be held on             , 2014, beginning at             , Central Time at Hastings’ Store Support Center, located at 3601 Plains Boulevard, Amarillo, Texas 79102. The purpose of the Special Meeting is:

19

Table of Contents

Recommendations of the Board and the Special Committee

The Board, acting upon the unanimous recommendation of the Special Committee, unanimously determined that the Merger Agreement, the performance by us of our obligations thereunder and the consummation of the transaction contemplated by the Merger Agreement are fair to, advisable to and in the best interests of the Company and our shareholders, and the Board has unanimously adopted and approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. Accordingly, the Board unanimously recommends that our shareholders vote “FOR” the proposal to approve the Merger Agreement. If there are insufficient votes at the time of the Special Meeting to approve the Merger Agreement, we may propose to adjourn the Special Meeting, if advisable or necessary, including for the purpose of soliciting additional proxies to approve the Merger Agreement. The Board unanimously recommends that our shareholders vote “FOR” the Adjournment Proposal. The Board also unanimously recommends that our shareholders vote “FOR” the approval of the Related Compensation Proposal.

Record Date; Quorum

As of the close of business on             , 2014, the record date for the Special Meeting, there were             shares of our common stock entitled to vote at the Special Meeting. NECA holds approximately 12.4% shares of our outstanding common stock as of the record date and, pursuant to a letter agreement with Parent, has agreed to vote its shares of our common stock in favor of approving the Merger Agreement. Additionally, under the terms of the Support Agreement, the Marmaduke Holders, who collectively hold approximately 30.4% of our outstanding common stock as of the record date, agreed, among other things, to vote their respective shares in favor of the approval of the Merger Agreement.

The presence, in person or by proxy, of the holders of a majority of the shares of our common stock issued and outstanding on the record date entitled to vote will constitute a quorum at the Special Meeting. Shares of our common stock represented in person or by proxy will be counted for purposes of determining whether a quorum is present at the Special Meeting. Abstentions and broker non-votes will be counted as present for the purpose of determining the existence of a quorum. In the event that a quorum is not present at the Special Meeting, we currently expect that we will adjourn the Special Meeting, which would subject the Company to additional expense.

Required Vote

The presence, in person or by proxy, of the holders of a majority of the shares of our common stock issued and outstanding on the record date will constitute a quorum for purposes of voting at the Special Meeting. The approval of the Merger Agreement requires the affirmative vote of the holders of at least two-thirds of the shares of our common stock outstanding on the record date. Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority of our common stock present or represented by proxy at the Special Meeting. Approval of the Related Compensation Proposal requires the affirmative vote of the holders of a majority of our common stock present or represented by proxy at the Special Meeting. The vote on the Related Compensation Proposal is advisory in nature and will not be binding on Hastings or the Board. If you abstain or fail to submit your proxy or vote in person at the Special Meeting, it will have the same effect as a vote against the proposal to approve the Merger Agreement. If you abstain, it will have the same effect as a vote against the approval of the Adjournment Proposal and the Related Compensation Proposal. If you fail to submit your proxy and do not attend the Special Meeting, it will have no effect on the outcome of the Adjournment Proposal or the Related Compensation Proposal.

Brokers or other nominees who hold shares of our common stock in “street name” for customers who are the beneficial owners of such shares may not vote those customers’ shares on the proposal to approve the Merger Agreement or the other two proposals in the absence of specific instructions from those customers. These non-voted shares of our common stock, or “broker non-votes,” will be counted for the purpose of determining whether a quorum is present, but will not be counted as shares voting on any of the proposals. Accordingly, broker non-votes will have the same effect as votes “against” the proposal to approve of the Merger Agreement and will have no effect on the outcome of the Adjournment Proposal and the Related Compensation Proposal.

20

Table of Contents

Voting; Submission of Proxy

Shareholders may vote their shares by attending the Special Meeting and voting their shares of our common stock in person.

Shareholders may submit their proxy by:

All shares of our common stock represented by properly executed proxies received in time for the Special Meeting will be voted at the Special Meeting in the manner specified by the holder. If a written proxy card is signed by a shareholder and returned without instructions, the shares of our common stock represented by the proxy will be voted “FOR” the proposal to approve the Merger Agreement, “FOR” the Adjournment Proposal and “FOR” the Related Compensation Proposal, and in accordance with the recommendations of the Board on any other matters properly brought before the Special Meeting for a vote.

Shareholders who have questions or requests for assistance in completing and submitting proxy cards should contact Angie Knight, our Corporate Secretary, at (806) 351-2300 or by email at Angie.Knight@goHastings.com.

Shareholders who hold their shares in “street name,” meaning in the name of a broker or other nominee, must either direct the broker or nominee how to vote their shares pursuant to the instructions they receive from their broker or other nominees or obtain a proxy from the record holder to vote their shares at the Special Meeting, in which case the shareholder attending the Special Meeting must present proper identification.

Revocability of Proxies

If you are a shareholder of record, you may revoke your proxy at any time before it is voted at the Special Meeting by:

Simply attending the Special Meeting will not constitute revocation of your proxy. If your shares are held in “street name” by your broker or other nominee, you should follow the instructions of your broker or nominee regarding revocation of proxies.

21

Table of Contents

Voting by Hastings’ Directors and Executive Officers

As of             , 2014, the record date for the Special Meeting, our directors and executive officers beneficially owned and were entitled to vote an aggregate of             shares of our common stock, representing approximately             % of the voting power of the outstanding shares entitled to vote. We currently expect that our directors and executive officers will vote their shares in favor of the proposal to approve the Merger Agreement and the other two proposals, although none of them, other than Mr. Marmaduke, has entered into any agreement obligating them to do so. On March 17, 2014, as a condition to Parent and Merger Sub entering into the Merger Agreement, the Marmaduke Holders entered into the Support Agreement with Parent and Merger Sub, whereby the Marmaduke Holders agreed, among other things, to vote their shares in favor of approving the Merger Agreement.

Solicitation of Proxies; Expenses

In addition to solicitation by mail, our directors, officers and employees may solicit proxies by telephone, other electronic means or in person. These persons will not receive any additional compensation for their services, but we will reimburse them for their out-of-pocket expenses. We will reimburse banks, brokers, nominees, custodians and fiduciaries and their nominees for their reasonable expenses in forwarding copies of this proxy statement to the beneficial owners of shares of our stock and in obtaining voting instructions from those owners.

Other Business

We are not currently aware of any business to be acted upon at the Special Meeting other than the matters discussed in this proxy statement. Under our bylaws, business transacted at the Special Meeting is limited to the purposes stated in the notice of the Special Meeting, which is provided at the beginning of this proxy statement. If other matters do properly come before the Special Meeting, or at any adjournment or postponement of the Special Meeting, we intend that shares of our common stock represented by properly submitted proxies will be voted in accordance with the recommendations of the Board.

Adjournments

Adjournments may be made for the purpose of, among other things, soliciting additional proxies. Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of our common stock present or represented by proxy at the Special Meeting, whether or not a quorum exists. At any adjourned meeting, Hastings may transact any business that it might have transacted at the original meeting, provided that a quorum is present at such adjourned meeting. Proxies submitted by Hastings shareholders for use at the Special Meeting will be used at any adjournment or postponement of the Special Meeting. References to the Special Meeting in this proxy statement are to such Special Meeting as adjourned or postponed.

THE MERGER

This section of proxy statement describes the material aspects of the proposed transaction. This section may not contain all of the information that is important to you. You should carefully read this entire proxy statement, including the full text of the Merger Agreement (which is attached as Annex A), for a more complete understanding of the transaction. In addition, important business and financial information about us which you should read is incorporated by reference into this proxy statement. See “Where You Can Find More Information” and “Incorporation by Reference.”

Background of the Merger

Hastings operates entertainment superstores that buy, sell, trade and rent various home entertainment products, including books, music, software, periodicals, movies on DVD and Blu-Ray, video games, video game consoles, hobby, sports and recreation, lifestyle and consumer electronics. Commencing with Hastings’ fiscal year ended January 31, 2012, Hastings has reported net losses, primarily due to significant decreases in total revenues, year over year, from its historical core businesses of selling books, music and movies and renting movies. During that period, Hastings’ total revenues have declined from $496.4 million for the year ended January 31, 2012 to $436.0 million for the year ended January 31, 2014.

22

Table of Contents

Digital delivery of content has impacted all companies that compete in Hastings’ industry and has impacted each of the product categories that have historically provided Hastings’ largest revenues. Rental kiosks (such as Red Box, for example) have severely impacted its movie rental revenue, which has impacted earnings due to the substantially higher gross margins historically realized from rentals as compared to merchandise sales. In addition, book sales have been negatively impacted by electronic readers; sales of music CDs have been negatively impacted by digital downloads and MP3 music players and sales of movies have been negatively impacted by on demand delivery of content digitally to TVs and tablets through subscription services such as Netflix.

Hastings has adopted a number of initiatives to attempt to return Hastings to profitability. During the last three-year period, Hastings has closed 20 stores and has reduced selling, general and administrative expenses through management restructuring and other initiatives. Hastings has also undertaken a number of initiatives to increase its total revenues, including opening TRADESMART and Sun Adventure Sports stores that expand on lifestyle and recreational trends, changing its pricing strategy for video rentals, offering tablets and resetting the floor plan of its stores to increase the product footprint. While Hastings believes that these actions have reduced losses, they have not sufficiently offset declines in revenues or enabled Hastings to return to profitable operations.

Hastings has forecasted that its losses, although decreasing, will continue for at least the next four years. While Hastings anticipates that the magnitude of losses will decrease over that period, continuing losses could have a negative impact on the company’s liquidity and access to capital. Until the Company returns to profitability, Hastings does not anticipate paying any dividends or funding any share repurchases and the Board does not anticipate any significant increases in the market price of our common stock.

Under these circumstances, the Board and management determined to explore strategic alternatives to obtain value for the Hastings shareholders. The Company engaged STRH on June 21, 2012 for the purpose of assisting the Company in evaluating various strategic alternatives, including the possible sale of the Company. As part of this evaluation, the Board and the management considered the effectiveness of the initiatives to reduce expenses and increase total revenues as described above. In early 2013, the Board determined to pursue a sale process, with the assistance of STRH, because these initiatives had not resulted in a return to profitability or had sufficient impact to enable the Board to predict that the Company would return to profitability within the near future. In the spring of 2013, STRH presented information to the Board regarding the implications of a potential sale transaction.

Beginning on May 28, 2013, at the request and direction of the Board, STRH began contacting potentially interested parties regarding a possible acquisition of Hastings. The marketing process focused on a mix of 15 strategic and 39 financial buyers identified by the Board, management and STRH. Following an initial contact with each of these potentially interested parties, STRH delivered a one page high-level overview of the Company (a “ teaser ”) to 39 potential buyers. Based on the response to the teasers, STRH, on behalf of the Company, entered into confidentiality agreements with 20 potential buyers, including NECA, and delivered to each of these parties a copy of a detailed confidential executive summary regarding Hastings and its business. STRH followed up with these potential buyers by email and/or phone to determine their interest in moving forward through further discussions with STRH and management.

On June 3, 2013, STRH contacted NECA, the holder of approximately 12.4% of our common stock, to determine its interest in pursuing a transaction with Hastings, and on June 4, 2013, STRH, on behalf of and with the authority of the Company, entered into a confidentiality agreement with NECA in order to facilitate discussions related to NECA’s possible acquisition of the Company. Upon receiving an executed confidentiality agreement from NECA, STRH furnished NECA with a Confidential Executive Summary regarding Hastings and its business.

On July 16, 2013, NECA submitted a non-binding, preliminary indication of interest in response to STRH’s solicitation (the “ Indication of Interest Letter ”) setting forth two alternative acquisition structures: (1) a cash purchase by NECA of all of the issued and outstanding shares of our common stock for a purchase price of $3.50 per share or (2) a cash purchase by NECA of 100% of the shares of our common stock held by non-insider

23

Table of Contents

shareholders, and up to 50% of the shares held by certain insider shareholders composed of management and founding equity holders each for a purchase price of $4.00 per share. These insiders would “roll over” their remaining shares to become equity-holders in the surviving corporation, subject to certain redemption rights at a later date at a purchase price of at least $4.00 per share, based upon a to-be-agreed upon valuation methodology. The Company had not received an indication of interest from any other party and none of the other 19 potential parties indicated any interest in pursuing discussions with Hastings at this time.

On August 1, 2013, STRH updated the Hastings Board on the sales process, including the number of parties contacted, the number of parties entering into confidentiality agreements and the status of indications of interest, including the fact that NECA was the only party to submit an indication of interest or express any interest in pursuing an acquisition or combination with Hastings. STRH also provided the Board with additional background information regarding NECA. Following this presentation, the Board determined that it would be advisable to pursue preliminary discussions with NECA, particularly with respect to its proposal to purchase all of the shares of the non-insider shareholders, and 50% of the shares held by certain insider shareholders, at a price of $4.00 per share.

Also, on August 1, 2013, the Board directed STRH to advise NECA that the Company was willing to discuss on a preliminary basis NECA’s indication of interest. On August 2, 2013, a representative of STRH called Mr. Weinshanker, the President and sole shareholder of NECA, to discuss NECA’s Indication of Interest Letter. Mr. Weinshanker expressed his continued interest in exploring a transaction with Hastings, and, on August 5, 2013, Mr. Marmaduke, at the Board’s direction, contacted Mr. Weinshanker to arrange a meeting to discuss a possible acquisition of Hastings.

During August of 2013, two independent members of the Board separately contacted two companies previously contacted by STRH to inquire as to whether such companies would have any interest in acquiring Hastings. Neither company indicated any interest in such an acquisition.

On August 18, 2013, Mr. Weinshanker and Mr. Marmaduke met in Las Vegas, Nevada to discuss a possible acquisition. Mr. Marmaduke requested the Board be provided with NECA’s financial information to assure the Board of NECA’s financial capacity with respect to a potential acquisition.

On August 20, 2013, Mr. Weinshanker provided Mr. Marmaduke with the balance sheet included in NECA’s 2012 income tax return, which was then furnished by Mr. Marmaduke to the Board.

On September 5, 2013, after receiving a phone call from Mr. Weinshanker, a representative of STRH informed Mr. Marmaduke of the revised terms of a potential acquisition by NECA in a bifurcated transaction. Under the revised proposal, NECA would acquire: (a) all shares of Hastings other than shares held by Insiders and NECA, for $4.00 per share in cash and (b) all of Hastings shares owned by the Insiders for (i) an initial payment of $2.00 per share in cash, payable six months after the closing of the transaction, and (ii) a second payment, equal to the greater of (1) $2.00 per share in cash and (2) a per-share price in cash to be determined based upon the fair market value of Hastings’ business as of the date four years from the closing of the transaction. This proposal varied from the proposal set forth by NECA in its Indication of Interest Letter in that the Insiders would no longer obtain equity in the surviving corporation and instead would only be entitled to two deferred payments for all of their shares.

On September 13, 2013, Cooley, LLP (“ Cooley ”), counsel to NECA, Parent, Merger Sub and their affiliates, submitted to a representative of STRH, on behalf of NECA, a formal non-binding proposal to acquire Hastings consistent with the proposal conveyed by Mr. Weinshanker on September 5, 2013. Over the next several days, Hastings’ outside counsel, Kelly Hart & Hallman, LLP (“ Kelly Hart ”) and Cooley participated in numerous conference calls to discuss and negotiate the terms of the proposal letter. As part of those negotiations, the parties’ respective legal counsel discussed the potential structure of the acquisition as a single-step merger rather than a tender offer followed by a short form merger and discussed NECA’s request for exclusivity, which ultimately was not given. During this time, Kelly Hart also advised Hastings’ executive officers and directors regarding the potential process of an acquisition of the Company by a private acquiror and discussed the fiduciary duties of the Board in connection with the acquisition process. Kelly Hart recommended the appointment of a special, independent committee of the Board to oversee the process. At the request of the Company, Kelly Hart provided a memorandum summarizing these matters.

24

Table of Contents

On September 16, 2013, Mr. Marmaduke informed the Hastings Board of the revised proposal from NECA and the Board members each concurred that Hastings should continue its discussions with NECA, with a focus on the transaction structure providing for the purchase of the shares of the non-insider shareholders at a price of $4.00 per share and the purchase of the shares held by the Insiders in consideration for the two deferred payments described above.

On September 17, 2013, Mr. Weinshanker and Mr. Marmaduke discussed via telephone the possibility of Hastings’ executives waiving a number of existing rights with respect to compensation in connection with the proposed transaction with NECA. In particular, Mr. Weinshanker expressed a desire for such executives to forfeit certain options to purchase Hastings shares, all of which would vest upon a change-in-control of the Company, waive the right to receive retention bonuses previously established by the Company, agree to terminate their respective employment agreements with the Company and enter into new agreements to be approved by NECA, and otherwise renegotiate the executives’ respective compensation. Mr. Marmaduke informed Mr. Weinshanker that Hastings’ executives would likely be hesitant to agree to forfeit such options and otherwise agree to such requests in the absence of a suitable alternative.

On September 24, 2013, Mr. Marmaduke and Mr. Weinshanker discussed via telephone the possibility of utilizing debt financing provided by Pathlight in connection with the possible acquisition of Hastings. During this call, Mr. Marmaduke suggested that the second deferred payment to the Insiders should be subject to a guaranty and other payment protections by a party other than Hastings.

On September 25 and 26, 2013, Mr. Weinshanker toured the Company’s TRADESMART store located in Denver and a Company superstore located in Amarillo. Following the tour of the Company’s Amarillo superstore on September 26, 2013, Messrs. Weinshanker, Marmaduke and Van Ongevalle held a meeting at the Hastings’ Store Support Center in Amarillo, Texas to discuss the various synergies that might be possible by virtue of the strengthened relationship between Hastings and NECA resulting from NECA’s acquisition strategy.

On September 27, 2013, the parties entered into a non-binding letter outlining the terms of the proposed transaction.

On October 2, 2013, the Hastings Board held a special meeting, during which the Board approved the formation of the Special Committee consisting of Danny W. Gurr, Ann S. Lief, Frank O. Marrs and Jeffrey G. Shrader, each of whom is a member of the Board, and each of whom was determined to be an independent director with no interest in any transaction with Mr. Weinshanker or NECA different from any Hastings securityholders. The Board members were aware that Mr. Shrader’s law firm has performed services for the Company for many years and considered the fees paid to Mr. Shrader’s firm in both absolute dollar amount and relative to the firm’s total revenue in determining that Mr. Shrader is independent. The Board authorized the Special Committee to approve or reject, monitor and direct the process of reviewing NECA’s proposal, negotiate the terms of the transaction and the terms of any other transaction proposed as an alternative to a transaction with NECA or Mr. Weinshanker and determine, on behalf of the Board and the Company, whether such transaction with NECA, Mr. Weinshanker or such alternative transaction, as applicable, is advisable and fair to, and in the best interests of, the Company’s shareholders. The Board authorized the Special Committee to retain independent financial and legal advisors to advise it with regard to the potential transaction with Mr. Weinshanker or NECA. The Board also authorized the payment of $10,000 per month to the chairman of the Special Committee and the payment of $5,000 per month to the other members of the Special Committee (an aggregate payment of $25,000 per month) as consideration for their service on such committee.

On October 2, 2013, the Special Committee held its organizational meeting, during which it elected Mr. Shrader to serve as Chairman and retained Haynes and Boone, LLP (“ Haynes and Boone ”) as its independent legal advisor. Haynes and Boone joined the meeting at the request of the Special Committee and reviewed with the Special Committee its fiduciary duties applicable to the proposed transaction with NECA. The Special Committee also determined to amend the engagement letter with STRH to provide that STRH would perform advisory services for, and render its fairness opinion to, the Special Committee.

25

Table of Contents

On October 2, 2013, Cooley delivered an initial due diligence request list to Kelly Hart.

On October 7, 2013, a data room was established by STRH to facilitate due diligence in relation to the proposed acquisition.

On October 8, 2013, Messrs. Marmaduke, Shrader (on behalf of the Special Committee) and a representative of STRH met in person to discuss the potential acquisition, at which meeting Messrs. Marmaduke and Shrader expressed concerns regarding the structure and financing of the transaction, particularly whether the proposed structure could be dependent on Hastings incurring or guarantying additional indebtedness related to the acquisition. Messrs. Marmaduke and Shrader also discussed concerns that the proposed transaction structure imposed a great deal of risk upon the Insiders due to the deferral of the payments of the proposed merger consideration to be made to the Insiders and that definitive agreements would need to contain protections with respect to the deferred payments to the Insiders. Among other things, both Mr. Marmaduke and Mr. Shrader expressed their preference for a transaction that paid all shareholders a cash purchase price for their shares at the effective time of the Merger. However, NECA’s indication of interest letter and subsequent conversations with Mr. Weinshanker made it clear that NECA was willing to pay a higher cash price to outside shareholders only if the Insiders were willing to defer receipt of their payment, without interest. Mr. Marmaduke indicated that he was willing to do so, and he believed that the other Insiders were also willing to do so, provided that the Merger documents would contain reasonable assurances that the deferred payments would be made and that there was a reasonable possibility that an increased payment could be earned. Finally, the parties discussed concerns as to whether NECA could finance the proposed transaction.

On October 16, 2013, STRH amended the terms of its existing engagement to reflect its engagement by the Special Committee.

On October 30, 2013, Cooley submitted an initial draft of the Merger Agreement to Kelly Hart for its review.

On November 5, 2013, Kelly Hart and Haynes and Boone had a conference call with Messrs. Marmaduke, Crow and Shrader, acting on behalf of the Special Committee, and representatives of STRH regarding the initial draft of the Merger Agreement. During this call, the parties and their respective legal counsel discussed numerous provisions (or the absence of provisions) of the proposed Merger Agreement, regarding, among other things, the guaranty of the payment of merger consideration to the non-Insider shareholders and the Insiders, representations, warranties and covenants regarding NECA’s proposed debt financing, the “no-shop” provision and related “fiduciary out” provision, the materiality threshold to be applied to Hastings’ representations and warranties, the inclusion of certain representations and warranties in the Merger Agreement, the proposed operating covenants in the Merger Agreement and the absence of certain ancillary documents addressing the second deferred payment to the Insiders. The STRH representative indicated that he was scheduled to meet with Mr. Weinshanker on the following day and indicated that he would discuss these matters with Mr. Weinshanker at this meeting.

On November 6, 2013, representatives of STRH met with Mr. Weinshanker and, at the request of the Board and the Special Committee, discussed the proposed transaction and presented Mr. Weinshanker with numerous concerns regarding the Merger Agreement. Mr. Weinshanker suggested that Hastings provide a revised version of the Merger Agreement addressing these concerns and expressed his willingness to move the acquisition forward on an expedited schedule. Mr. Weinshanker also stated that he would expect Hastings to retain its current management team following the closing of the Merger.

On November 7, 2013, Cooley submitted a supplemental due diligence request to Kelly Hart.

On November 12, 2013, Cooley and Kelly Hart spoke via telephone call to discuss, among other things, the structure of the Merger, the financing of the Merger and the proposed treatment of options under the Merger Agreement.

26

Table of Contents

On November 18, 2013, Mr. Crow, Cooley and Kelly Hart held a conference call to discuss issues related to the proposed debt financing. Mr. Crow expressed concerns that, should the parties cause any indebtedness associated with the acquisition to be reflected as a liability of Hastings, such indebtedness could result in Hastings’ auditor rendering a going-concern opinion with respect to Hastings. Mr. Crow stated that the Company’s receipt of such a qualified opinion would have critical negative effects on Hastings’ dealings with its venders and trade creditors. On that same day, Cooley sent initial drafts of the Insider Agreement and Support Agreement to Kelly Hart.

On November 19, 2013, Mr. Marmaduke and Mr. Van Ongevalle met with Mr. Weinshanker to tour Graceland, a property being managed and operated by Mr. Weinshanker, and to discuss Mr. Weinshanker’s acquisition strategy. During the meeting, the parties discussed the potential debt financing for the proposed transaction and the terms of the deferred payments to the Insiders. Mr. Weinshanker stated that he was not willing to provide any guaranty to the Insiders with respect to the second deferred payment for their shares to be made four years after the closing of the Merger, but he suggested the possibility of transferring to Hastings, after the closing of the Merger, certain assets owned by NECA that would benefit Hastings. Mr. Marmaduke and Mr. Van Ongevalle told Mr. Weinshanker that any debt financing obtained from Pathlight in connection with a potential acquisition must be limited, as the $15 million in debt proposed by Mr. Weinshanker would reduce Hastings’ borrowing capacity and ability to make capital expenditures. Messrs. Weinshanker, Marmaduke and Van Ongevalle also agreed that, in the event of a subsequent acquisition of Hastings by a third party (after NECA’s acquisition of Hastings), the second payment due to the Insiders would be accelerated. Mr. Marmaduke, on behalf of the Insiders, continued to reiterate his concerns regarding the lack of a guaranty of the obligations for the second payment to the Insiders.

On November 24, 2013, Messrs. Marmaduke and Crow, Mr. Shrader, on behalf of the Special Committee, and Mr. Weinshanker discussed via telephone Mr. Weinshanker’s acquisition proposal, including the potential adverse impact any debt financing could have on Hastings ongoing operations and the lack of security or other protections to the Insiders with respect to the deferred payments for their shares.

On November 27, 2013 Kelly Hart provided Cooley with comments to the Merger Agreement, the Insider Agreement and the Support Agreement based on the input received from the Special Committee and its counsel Haynes and Boone, and from management of Hastings.

On December 4, 2013, Mr. Weinshanker e-mailed Mr. Marmaduke with a proposal that Mr. Weinshanker would guaranty a portion of the second deferred payment to the Insiders. Mr. Marmaduke, on behalf of the Insiders, indicated that such a partial guaranty would not be sufficient.

On December 5, 2013, the Board of Hastings held a regular meeting during which the Board discussed, among other things, the status of the potential transaction with NECA. Mr. Shrader provided the Board with an update on the work performed by STRH in attempting to identify potential buyers of the Company and that, at that date, NECA remained the only potential buyer that had evidenced interest in acquiring the Company. The Board discussed various alternatives to such an acquisition, including continuing to operate the Company as a publicly-traded company and causing the Company to undertake a going-private transaction with the Company’s management. The Board discussed the initiatives currently being pursued by the Company in an effort to return to profitability and the lack of immediate success of such initiatives. Mr. Marmaduke also informed the Board that he was not interested in leading a going-private transaction structured as a management buyout. After discussing these alternatives and the current state of negotiations with NECA, the Board determined that Messrs. Marmaduke and Shrader should continue to negotiate with Mr. Weinshanker regarding his possible acquisition of the Company.

On December 12, 2013, Mr. Marmaduke, Mr. Shrader, on behalf of the Special Committee, and Mr. Weinshanker had a conference call to discuss, among other things, the transaction structure, the proposed terms of the debt financing to be used in connection with the transaction (particularly with regard to whether this financing would be reflected as a liability of Hastings), a partial guaranty for the second deferred payment to the Insiders, the treatment of options, certain of the proposed representations and warranties and the amount of the termination fee.

27

Table of Contents

On December 16, 2013, Kelly Hart and Cooley had a conference call to discuss the Merger Agreement and related documents. On this call, the parties’ respective legal counsel discussed, among other things, the treatment of options, the terms of the deferred payments to the Insiders, the amount of the termination fee and the representations and warranties to be provided by the Company in the Merger Agreement. Cooley inquired whether the Insiders would be interested in receiving an equity interest in the surviving corporation as an alternative to the deferred payments previously proposed, and Kelly Hart indicated that the Insiders were not interested in this arrangement.

On December 18, 2013, Cooley e-mailed Kelly Hart to relay and clarify Mr. Weinshanker’s position on several issues discussed during the December 16 call, including the treatment of options, the debt financing proposed to be used for the Merger and Mr. Weinshanker’s position that he would not agree to contribute any assets or make any covenants regarding Hastings’ future earnings or operations for purposes of supporting Hastings’ earnings, assets or credit position or to protect or enhance the deferred payments to the Insiders.

On December 23, 2013, Cooley sent to Haynes and Boone revised drafts of the Merger Agreement, the Insider Agreement and the Support Agreement.

On December 27, 2013, Cooley sent to Kelly Hart and Haynes and Boone an initial draft of the template employment agreement proposed to be entered into between the purchaser and each of Messrs. Marmaduke, Crow, Van Ongevalle and McConnell to be effective as of the closing of the Merger.

On January 4, 2014, the Special Committee held a special meeting, in which Mr. Marmaduke and Haynes and Boone participated, to discuss the status of negotiations with NECA. Mr. Marmaduke advised the Special Committee that the parties had made little progress in resolving open issues in the Merger Agreement and related documents. The Special Committee reviewed a draft letter prepared by Kelly Hart at the direction of Messrs. Marmaduke and Shrader that outlined the material open issues and the Company’s proposed position with respect to each open issue. The Special Committee discussed the fact that the proposed unsecured deferred payments to the Insiders, who hold over 40% of the outstanding shares of Hastings, were the source of most of the unresolved issues and the fact that the Company needed the support of the Insiders to approve the transaction given the fact that approval of the Merger Agreement would require the approval of two-thirds of the outstanding shares under Texas law. The Special Committee believed that the position taken by the Insiders that they could not support the transaction as currently proposed was reasonable, and, accordingly, the Special Committee discussed an alternative transaction structure and requested that the letter to Mr. Weinshanker include a proposal providing that the Insiders agree to resign at the effective time of the Merger and receive the same fixed merger consideration as the other shareholders.

On January 6, 2014, Mr. Marmaduke sent a letter to Mr. Weinshanker expressing Hastings’ continued interest in exploring a potential acquisition by NECA and providing a list of the material outstanding issues in the Merger Agreement, the Insider and Support Agreement and the proposed employment agreements. This list included, among other things, the lack of any guaranty of the obligations to make the payments to the Insiders and Hastings’ other shareholders, the scope of the representations and warranties to be given by Hastings in the Merger Agreement, the absence of protective covenants regarding the debt financing to be used for the Merger, the lack of clarity regarding the “fiduciary out” exception to the no-shop provision, the venue for resolving any disputes under the Merger Agreement and related documents and the deferred payments to the Insiders.

On January 7, 2014, Cooley called Haynes and Boone to discuss Mr. Marmaduke’s letter. Cooley indicated to Haynes and Boone that Mr. Weinshanker was interested in attempting to resolve the open issues listed in the letter.

On January 13, 2014, Kelly Hart, Haynes and Boone and Cooley held a conference call to discuss the open issues in Mr. Marmaduke’s letter, including the scope of the proposed guaranty, the debt financing, and covenants relating to the deferred payments to the Insiders, including proposed restrictions on the operation of Hastings following the closing. The next day, Cooley communicated to Kelly Hart and Haynes and Boone certain follow up responses from Mr. Weinshanker.

28

Table of Contents

On January 16, 2014, Messrs. Weinshanker and Marmaduke spoke via telephone. Mr. Weinshanker indicated that he was not willing to provide to the Insiders any additional protections with respect to the future value of the deferred payments other than the covenants included in the prior draft agreements sent by Cooley. Mr. Weinshanker informed Mr. Marmaduke that he was, however, willing to revise his proposal to pay all Hastings shareholders, including the Insiders, $3.00 per share in cash at the closing, without any payment deferrals. Under this revised proposal, all vested options to purchase shares of our common stock, other than options held by the Insiders, would be converted into the right to receive cash in the amount by which $3.00 exceeds the per-share exercise price of such options, multiplied by the number of shares subject to such options. All options, including the options held by the Insiders, would be terminated upon the effective time of the Merger. Mr. Marmaduke informed Mr. Weinshanker that he would discuss this proposal with the other members of the Board.

On January 22, 2014, Mr. Weinshanker sent a non-binding proposal letter confirming the $3.00 per share proposal. Pursuant to this new proposal, Mr. Weinshanker, and not NECA, would be responsible for the acquisition and Mr. Weinshanker would personally guaranty the payment of the Merger Consideration to Hastings’ shareholders. This proposal provided that Messrs. Marmaduke and Crow would retire from their positions as Chief Executive Officer and Chief Financial Officer, respectively, in exchange for severance payments of $1.5 million and $750,000, respectively, and would waive all rights with respect to any other severance payments owed to them by Hastings in connection with a change in control of Hastings. The proposal also provided that Messrs. Van Ongevalle and McConnell would continue their employment with Hastings under the terms of their existing employment agreements but would waive any rights with respect to the Merger as a change in control of Hastings under such employment agreements. Under the terms of this proposal, none of Messrs. Marmaduke, Crow, Van Ongevalle or McConnell would receive any consideration for their vested options, regardless of the exercise price thereof.

On January 22, 2014, the Special Committee, together with Mr. Marmaduke, Mr. Van Ongevalle, representatives of STRH and Baum (which Baum representative had previously served as one of the Special Committee’s contacts at STRH, as described below) and Haynes and Boone, met via conference call to discuss Mr. Weinshanker’s new proposal. The Special Committee discussed the difference in consideration to be paid to Hastings shareholders under this new proposal and noted that the previous proposal provided for a higher price per share to non-insider shareholders at the expense of the Insiders, who were being asked to accept deferred payments without interest or any meaningful protections or guaranty of future payment. The Special Committee discussed the challenges currently facing the Company, including the shift to digital distribution of certain products and the increasing popularity of video rental kiosks and the risks and uncertainties of remaining an independent public company. The Special Committee determined that Messrs. Marmaduke and Shrader, together with Kelly Hart and Haynes and Boone, should continue to negotiate with Mr. Weinshanker and Cooley regarding this new proposal and asked Kelly Hart and Haynes and Boone to schedule a conference call with Cooley to clarify several aspects of this proposal. The Special Committee also determined that, as a preliminary matter, Mr. Weinshanker would need to provide a formal written summary of this new, clarified proposal and personal financial information supporting his ability to guaranty the payment of the Merger Consideration to Hastings’ shareholders. Kelly Hart, Haynes and Boone and Cooley had a conference call later that night, in which Cooley clarified the proposals regarding options and the employment of Messrs. Marmaduke, Crow, Van Ongevalle and McConnell.

On January 28, 2014, Cooley sent Haynes and Boone a proposed form of confidentiality agreement protecting financial information of Mr. Weinshanker.

On January 29, 2014, Cooley, Kelly Hart, Haynes and Boone and Mr. Van Ongevalle held a conference call to discuss certain proposed representations and warranties regarding Hastings’ intellectual property and logistics software.

On February 10, 2014, the Board of Hastings held a regular meeting. Haynes and Boone, Kelly Hart, Messrs. Van Ongevalle and Crow and representatives of STRH and Baum participated in a portion of this meeting, during which STRH reported on the status of its evaluation of Mr. Weinshanker’s revised proposal and the further evaluation necessary for STRH to render a written fairness opinion with respect to the transactions contemplated by this proposal. The Board discussed strategic alternatives to Mr. Weinshanker’s proposal, including remaining an independent public company and the risks and uncertainties of these alternatives, including the fact that the

29

Table of Contents

Company would likely not return to profitability for at least four years. Following discussions, the directors comprising the Special Committee authorized continuing negotiations with Mr. Weinshanker and requested that Messrs. Marmaduke and Shrader seek a higher price than $3.00 per share proposed by Mr. Weinshanker. On February 12, 2014, Messrs. Shrader and Marmaduke, at the direction of the Special Committee, held a conference call with Mr. Weinshanker during which they requested that Mr. Weinshanker pay more than $3.00 per share.

On February 16, 2014, Mr. Marmaduke discussed with Mr. Weinshanker via telephone Mr. Crow’s scheduled retirement and the need to engage Mr. Crow to provide consulting services after his retirement given the resignation of Mike Molinar, Hastings’ controller. Mr. Crow indicated that he would agree to provide consulting services as needed through February 15, 2015 without receiving any additional consideration for such services.

On or about February 17, 2014, Messrs. Shrader and Marmaduke called Mr. Weinshanker to further discuss the possibility of Mr. Weinshanker increasing the per-share price. During this discussion, Mr. Weinshanker stated that he was not willing to offer more than $3.00 per share and that this price was his best and final offer. Messrs. Shrader and Marmaduke reported these statements by Mr. Weinshanker to the Special Committee.

On February 20, 2014, Hastings, acting with the approval of the Special Committee, and Mr. Weinshanker executed a non-binding proposal letter reflecting the $3.00 per share proposal (the “ Revised Proposal Letter ”). The Revised Proposal Letter amended the confidentiality agreement entered into by NECA and STRH on June 4, 2013 to clarify that NECA and its representatives were permitted to contact certain officers and other representatives of Hastings in connection with the negotiation of the Merger Agreement.

On February 24, 2014, the Board held a regular meeting, during which Mr. Crow noted that the Company’s actual losses for the recently completed fiscal year would be approximately 25% greater than those shown in the projections previously furnished to Mr. Weinshanker.

On February 24, 2014, Hastings entered into a confidentiality agreement with Mr. Weinshanker regarding certain financial information of Mr. Weinshanker to be provided to the Special Committee, Mr. Marmaduke and Haynes and Boone for the purpose of verifying Mr. Weinshanker’s ability to guaranty the payment of the Merger Consideration.

On March 4, 2014, Cooley sent Kelly Hart and Haynes and Boone a revised draft of the Merger Agreement reflecting the terms of the Revised Proposal Letter. From March 4 through March 14, 2014, Cooley, Kelly Hart and Haynes and Boone exchanged multiple drafts of the Merger Agreement and conducted multiple conference calls for the purpose of finalizing the terms of the Merger Agreement.

On March 10, 2014, the Special Committee held a conference call with Mr. Weinshanker to discuss the personal financial information provided to the Special Committee, Mr. Marmaduke and Haynes and Boone by Mr. Weinshanker in support of his ability to undertake the obligations under the Guaranty. Mr. Weinshanker and Mr. Shrader discussed the fact that NECA and another of his affiliates were negotiating the terms of a credit facility with an affiliate of STRH. In addition, the Special Committee reviewed and discussed with Mr. Weinshanker his personal financial information. Also on this date, the Special Committee and Baum executed an agreement pursuant to which Baum was engaged for the purposes of assisting the Special Committee in its consideration of a potential sale of the Company. The Special Committee elected to engage Baum for this purpose because Michael Sheff, who had previously acted as the Special Committee’s primary contact at STRH, had left STRH and joined Baum effective January 6, 2014. In connection with the engagement of Baum, the Special Committee executed a third amendment to the STRH engagement letter, pursuant to which STRH agreed to reduce its fee by the amount payable to Baum under its engagement letter with the Special Committee.

On March 12, 2014, Cooley provided Haynes and Boone with additional information regarding the potential credit facility between affiliates of Mr. Weinshanker and an affiliate of STRH. Cooley stated that the STRH affiliate had entered into a commitment letter with NECA and an affiliate of NECA with respect to a $37 million credit facility as described below under “Opinion of SunTrust Robinson Humphrey, Inc.—Miscellaneous.”

30

Table of Contents

On March 13, 2014, counsel for STRH provided Haynes and Boone with substantially the same information as furnished by Cooley on March 12. STRH also confirmed that none of the members of the STRH core investment banking team involved in the financial advisory engagement for the Company or the Special Committee had been engaged in working on the financings for Mr. Weinshanker or his affiliates. Members of the Special Committee subsequently discussed the proposed financing to be provided to Mr. Weinshanker or his affiliates and related fees and determined that such information was not material to the services being provided to the Special Committee by STRH.

On March 16, 2014, a meeting of the Board and the Special Committee was held via conference call to discuss the Merger Agreement. Kelly Hart and Haynes and Boone participated in this conference call, as did representatives of STRH and Mr. Sheff from Baum. A representative of STRH reviewed financial analyses relating to the Company and the proposed transaction. Following its presentation and discussion, representatives of STRH rendered STRH’s oral opinion to the Special Committee, subsequently confirmed by delivery of a written opinion dated March 16, 2014, that, as of March 16, 2014, and based upon and subject to the factors and assumptions set forth therein, the $3.00 price per share to be received by shareholders of the Company pursuant to the Merger Agreement was fair to such shareholders (excluding NECA or any other shareholder of Parent, Merger Sub and their respective affiliates) from a financial point of view. The Board and Special Committee discussed the fact that the Company’s liability for future operating lease payments is in excess of $120 million, which is not reflected on the Company’s balance sheet, and that the liquidation of the Company would accelerate the due date of the lease payments. Because these liabilities would be accelerated upon a liquidation of the Company, it was noted that (i) such liquidation would result in shareholders receiving substantially less than $3.00 per share, and perhaps nothing at all, and (ii) the Company’s book value was not useful as a valuation metric. The Board also discussed the risks and uncertainties of remaining an independent public company (as described below under “—Reasons for the Merger and Recommendation of the Board of Directors”). Haynes and Boone and Kelly Hart then described the terms of the Merger Agreement to the Board and the Special Committee. The Board then temporarily adjourned its meeting and the Special Committee convened a separate meeting via conference call with the participation of Haynes and Boone and Kelly Hart. During this separate meeting, the Special Committee discussed the matters addressed at the Board meeting and a number of considerations with respect to the Merger and the Merger Agreement (as described below under “—Reasons for the Merger and Recommendation of the Board of Directors”), and unanimously determined to recommend to the full Board the adoption and approval of the Merger Agreement. The Special Committee then adjourned this separate meeting and the full Board reconvened its meeting, with the participation of Kelly Hart and Haynes and Boone. Mr. Shrader informed the Board of the Special Committee’s recommendations (as described above), and, based on these recommendations, the Board unanimously (i) determined that the transactions contemplated by the Merger Agreement, including the Merger, are fair to and in the best interests of the Company’s shareholders (other than NECA) (ii) adopted, approved and declared advisable the Merger Agreement and the transactions contemplated therein, including the Merger and, (iii) resolved to recommend that the Company’s shareholders vote their shares of our common stock in favor of the approval of the Merger Agreement.

Following this meeting, Mr. Shrader notified Mr. Weinshanker that the Board had adopted and approved the Merger Agreement and Cooley and Kelly Hart exchanged executed signature pages of the Merger Agreement and related documents, under the condition that such signature pages would be released on 12:01 a.m. Central time on March 17.

On the morning of March 17, 2014 before the opening of trading on NASDAQ, Hastings issued a press release announcing the execution of the Merger Agreement.

Reasons for the Merger and Recommendation of the Board of Directors

Determinations of the Special Committee

On March 16, 2014, the Special Committee, consisting entirely of independent and disinterested directors, and acting with the advice of its own independent legal and financial advisors, unanimously (i) determined that the transactions contemplated by the Merger Agreement, including the Merger, are fair to and in the best interests of the Company’s shareholders (other than NECA), (ii) recommended that the Board adopt, approve and declare advisable the Merger Agreement and the transactions contemplated therein, including the Merger, and (iii) recommended that the Company’s shareholders vote their shares of our common stock in favor of the approval of the Merger Agreement.

31

Table of Contents

In the course of making the determinations described above, the Special Committee considered the following factors relating to the Company, its business and prospects, and the risks and challenges facing it, and relating to the Merger Agreement and the transactions contemplated thereby, including the Merger (all of which factors tended to support the recommendation and consummation of such agreement and transactions, but which factors are not intended to be exhaustive and are not presented in any relative order of importance):

32

Table of Contents

The Board also considered a variety of risks and other potentially negative factors of the Merger Agreement and the Merger, including the following:

The foregoing discussion of the information and factors considered by the Special Committee is not intended to be exhaustive but includes the material factors considered by the Special Committee. In view of the variety of factors considered in connection with its evaluation of the Merger (many of which are listed above), the Special Committee did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual members of the Special Committee may have given different weights to different factors. The Special Committee recommended to the Board the approval of the Merger Agreement and the Merger based upon the totality of the information it considered.

33

Table of Contents

Recommendation of the Board of Directors

On March 16, 2014, the Board, acting upon the unanimous recommendation of the Special Committee, unanimously (i) determined on behalf of the Company that the transactions contemplated by the Merger Agreement, including the Merger, are fair to, and in the best interests of, the Company and its shareholders (other than NECA), (ii) adopted, approved and declared advisable the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated therein, including the Merger, and (iii) resolved to recommend that the Company’s shareholders vote for the approval of the Merger Agreement.

In the course of making such determinations, the Board considered the following factors (which factors are not intended to be exhaustive and are not in any relative order of importance):

The foregoing discussion of the information and factors considered by the Board is not intended to be exhaustive but includes the material factors considered by the Board. In view of the variety of factors considered in connection with its evaluation of the Merger, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The Board made its recommendation based upon the totality of the information it considered.

The Board unanimously recommends that the shareholders of the Company vote “FOR” the proposal to approve the Merger Agreement.

Opinion of SunTrust Robinson Humphrey, Inc.

On March 16, 2014, STRH delivered to the Special Committee an oral opinion, which was confirmed by delivery of a written opinion, dated March 16, 2014, to the effect that, as of the date of the opinion and based upon and subject to the conditions, limitations, qualifications and assumptions set forth in the opinion, the $3.00 per share of our common stock to be received in the Merger by the Unaffiliated Shareholders in exchange for their common stock was fair, from a financial point of view, to such Unaffiliated Shareholders. STRH has consented to the use of its opinion and related disclosure in this proxy statement.

The full text of the written opinion of STRH, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion of STRH, is attached as Annex B to this proxy statement and is incorporated herein by reference. You are urged to read STRH’s written opinion carefully and in its entirety. STRH’s opinion was furnished solely for the use of the Special Committee (solely in its capacity as such) in connection with its evaluation of the Merger. STRH’s opinion is limited solely to the fairness to the Unaffiliated Shareholders, from a financial point of view, of the $3.00 per share of our common stock to be paid to the Unaffiliated Shareholders in exchange for their shares of common stock in connection with the Merger and does not address the Company’s underlying business decision to effect the Merger

34

Table of Contents

or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available with respect to the Company. STRH’s opinion does not constitute a recommendation to any shareholder of the Company as to how such shareholder should vote or act with respect to the Merger or any other matter. STRH’s opinion was approved by an internal opinion committee of STRH authorized to approve opinions of this nature.

In connection with its delivery of its opinion, STRH conducted such reviews, analyses and inquiries as STRH deemed necessary and appropriate under the circumstances. Among other things, STRH reviewed the following:

STRH also had discussions with certain members of the management of the Company regarding the business, financial condition, results of operations, and prospects of the Company and the Merger and undertook such other studies, analyses and investigations as STRH deemed appropriate.

STRH relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to STRH, discussed with or reviewed by STRH, or publicly available, and did not assume any responsibility with respect to such data, material and other information. STRH’s role in reviewing such data, material and other information was limited solely to performing such review as STRH deemed necessary and appropriate to support its opinion. In addition, management of the Company advised STRH, and STRH assumed, that the Projections were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management of the Company as to the future financial results and condition of the Company. STRH expressed no opinion with respect to the Projections or the assumptions on which they were based, or any other assumptions discussed in its opinion. STRH relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company since the date of the most recent financial statements and other information, financial or otherwise, provided to STRH and that there was no information, facts or circumstances that would make any of the information discussed with or reviewed by STRH inaccurate, incomplete or misleading.

STRH also relied upon and assumed without independent verification that (a) the representations and warranties of all parties to the Merger Agreement are true and correct; (b) each party to the Merger Agreement will fully and timely perform all of the covenants and agreements required to be performed by such party under the Merger Agreement; (c) all conditions to the consummation of the Merger will be satisfied without waiver thereof; (d) the Merger will be consummated in accordance with the terms of the Merger Agreement without waiver, modification or amendment of any term, condition or agreement therein; and (e) in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the Merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on the Company or the expected benefits of the Merger. In addition, STRH assumed that the Merger Agreement, when executed by the parties thereto, would conform to the draft reviewed by STRH in all respects material to STRH’s analysis and its opinion.

35

Table of Contents

Furthermore, in connection with its opinion, STRH was not requested to make, and did not make, any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of the Company or any other person or entity, nor was STRH provided with any such appraisal or evaluation. STRH undertook no independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities to which the Company or any other person or entity was or might have been a party or was or might have been subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which the Company was or might have been a party or was or might have been subject.

The opinion of STRH was necessarily based on financial, economic, monetary, market and other conditions as in effect on, and the information made available to STRH as of, the date of the delivery of its opinion, March 16, 2014. STRH had and has no obligation to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring or information that has become or becomes available after its delivery of its opinion.

The opinion of STRH only addresses the fairness, from a financial point of view, of the $3.00 per share of our common stock to be received in the Merger pursuant to the Merger Agreement by the Unaffiliated Shareholders, and does not address any other term, aspect or implication of the Merger or any agreement, arrangement or understanding entered into in connection therewith or otherwise. STRH was not requested to opine as to, and its opinion does not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the Company, its security holders or any other person or entity to proceed with or effect the Merger; (ii) the form, structure or any other portion or aspect of, the Merger; (iii) the fairness of any portion, term, aspect or implication of the Merger to the holders of debt of the Company, or any particular holder of securities, creditors or other constituencies of the Company, or to any other person or entity, except as expressly set forth in the last paragraph of the opinion; (iv) the relative merits of the Merger as compared to any alternative business strategies that might exist for the Company or any other person or entity or the effect of any other transaction in which the Company or any other person or entity might engage; (v) whether or not Parent, the Company, its security holders or any other person or entity is receiving or paying reasonably equivalent value in the Merger; (vi) the solvency, creditworthiness, viability, ability to pay debts when due, or fair value of the Company or any other participant in the Merger, or any of their respective assets, including under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or the impact of the Merger on such matters; (vii) the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the Merger or any class of such persons; or (viii) the fairness of any term or aspect of the Merger to any one class of the Company’s security holders relative to any other class of the Company’s security holders, including the allocation of any consideration among or within such classes.

The STRH opinion was not intended to be, and does not constitute, a recommendation to the Special Committee, the Board of the Company, the Company, any security holder of the Company or any other person or entity as to how to act or vote with respect to any matter relating to the Merger or otherwise. As specified in the engagement letter between STRH and the Company relating to the delivery of STRH’s opinion, (i) STRH was engaged by the Company and its opinion was to be delivered to the Special Committee, (ii) nothing in the engagement letter shall be deemed to create a fiduciary or agency relationship between STRH and the Company or its shareholders, and (iii) the Company’s engagement of STRH was not intended to confer on any person or entity (other than the Company, the Company’s Board, the Special Committee and certain indemnified parties identified in the engagement letter) any relationship, rights or remedies under or by reason of the engagement letter or as a result of the services rendered by STRH under the engagement letter. Under such circumstances, no privity is created between STRH and the Company’s shareholders regarding STRH’s delivery of its opinion to the Special Committee and, consequently, you may not rely on STRH’s opinion to support any claims against STRH arising under applicable state law. The availability of “no privity” defenses to STRH and the question of whether such defenses are available under these circumstances would be resolved by a court of competent jurisdiction. In any event, the resolution of whether such defense is available to STRH would have no effect on (i) the rights and responsibilities of the Company’s Board or Special Committee under applicable state law or (ii) the rights and responsibilities of either STRH or the Company’s Board or Special Committee under federal securities laws.

36

Table of Contents

Furthermore, in STRH’s opinion, no opinion, counsel or interpretation is intended in matters that require legal, regulatory, accounting, insurance, tax or other similar professional advice. STRH assumed that such opinions, counsel or interpretations have been or will be obtained from appropriate professional sources. STRH relied, with the Special Committee’s consent, on the assessments by the Company and the Special Committee and their respective advisors as to all legal, regulatory, accounting, insurance and tax matters with respect to the Company and the Merger.

The following is a summary of the material financial analyses presented by STRH to the Special Committee at its meeting held on March 16, 2014, in connection with STRH’s opinion.

Some of the summaries of financial analyses below include information presented in tabular format. In order to fully understand STRH’s analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of STRH’s analyses.

Financial Analyses of the Company

Selected Public Companies Analysis . STRH reviewed financial and stock market information of the following selected publicly traded retail companies (the “ Selected Companies ”), which STRH considered most appropriate based on its professional judgment taking into account size, scale, services, end-market and other factors:

Selected Companies:

STRH reviewed, among other things, enterprise values of the Selected Companies (calculated as market value of the relevant company’s fully diluted common equity based on its closing stock price on March 13, 2014, plus preferred stock, plus, as of the relevant company’s most recently reported quarter end, short-term and long-term debt, less cash and cash equivalents, plus book value of non-controlling interests) as a multiple, to the extent information was publicly available, of estimated Adjusted EBITDA (defined as earnings before interest, taxes, depreciation, amortization, and other applicable adjustments, such as one-time costs or other non-recurring expenses) for fiscal year 2014, and estimated fiscal year 2015. Financial data for the Selected Companies was based on publicly available consensus research analysts’ estimates, public filings and other publicly available information. STRH then (i) calculated the mean and median of the applicable multiples for the Selected Companies and

37

Table of Contents

(ii) applied ranges of selected multiples derived from the Selected Companies of 5.0x to 7.0x in the case of fiscal year ended January 31, 2014 Adjusted EBITDA (which was $5.8 million) and 4.0x to 6.0x in the case of estimated fiscal year ending January 31, 2015 Adjusted EBITDA (which was $2.7 million). Estimated financial data for the Company was based on the Projections. This analysis (including deducting the Company’s net debt) indicated a negative implied per share reference range. This implied per share reference range for the Company, as compared to the $3.00 per share Merger Consideration is shown in the table below:

Selected Precedent Transactions Analysis . STRH reviewed financial information of the following selected transactions in the specialty retail industry announced between September 4, 2008 and the date of STRH’s opinion, which STRH considered most appropriate based on STRH’s professional judgment taking into account size, scale, market and other factors. Furthermore, STRH limited the analysis to those transactions where it was possible to calculate enterprise value to EBITDA multiples from publicly available information.

STRH reviewed, among other things, announced transaction values of the selected transactions as a multiple, to the extent information was publicly available, of Adjusted EBITDA for the latest twelve months (“ LTM ”). Financial data for the relevant transaction was based on publicly available information at the time of announcement of the relevant transaction. STRH then (i) calculated the mean, median, high and low of the multiples in such transactions and (ii) applied ranges of selected multiples derived from the selected transactions of 7.0x to 9.0x (based on LTM Adjusted EBITDA) to fiscal year ended January 31, 2014 Adjusted EBITDA of the Company. This analysis (including deducting the Company’s net debt) indicated a negative lower end of the implied per share reference range. This implied per share reference range for the Company, as compared to the $3.00 per share Merger Consideration, is shown in the table below:

38

Table of Contents

Discounted Cash Flow Analysis . STRH performed a discounted cash flow (“ DCF ”) analysis of the Company using the Projections to calculate the present value of the estimated future unlevered free cash flows projected to be generated by the Company. In performing the DCF analysis of the Company, STRH utilized a range of discount rates of 12.0% to 14.0%, taking into account the Company’s weighted average cost of capital, size and comparability to similarly sized companies, and STRH’s professional judgment, to calculate estimated present values as of January 31, 2014 (using the mid-year convention) of (i) the Company’s estimated after-tax unlevered free cash flows for the estimated fiscal years ending January 31, 2015 through January 31, 2019, and (ii) estimated terminal values derived by applying a range of multiples of 7.0x to 9.0x (taking into account the results of the selected transactions analysis and STRH’s professional judgment) to the Company’s estimated fiscal year ending January 31, 2019 Adjusted EBITDA. STRH did not take into account the Company’s net operating loss carryforwards because the Projections provided by the Company indicated the Company would not have taxable net income during the relevant periods. This analysis (including deducting the Company’s net debt) indicated a negative implied per share reference range. This implied per share reference range for the Company, as compared to the $3.00 per share Merger Consideration is shown in the table below: