AMARILLO, Texas, June 16, 2014 /PRNewswire/ -- Hastings Entertainment, Inc. (NASDAQ: HAST), a leading multimedia entertainment retailer ("Hastings"), today reported that the United States District Court for the Northern District of Texas, Amarillo Division, has issued an Order Extending Temporary Restraining Order After Hearing On Request For A Preliminary Injunction (the "Order") restricting the potential merger transaction involving Hastings and an affiliate of Mr. Joel Weinshanker. As Hastings first disclosed on March 17, 2014, Hastings entered into an Agreement and Plan of Merger (the "Merger Agreement") on such date with Draw Another Circle, LLC ("Parent") and Hendrix Acquisition Corp. ("Merger Sub"), which are each wholly-owned, directly or indirectly, by Mr. Weinshanker. Mr. Weinshanker is the President and sole shareholder of National Entertainment Collectibles Association, Inc., which holds approximately 12% of Hastings' outstanding shares ("NECA"). Pursuant to the Merger Agreement, Merger Sub will be merged with and into Hastings, with Hastings surviving the merger as a wholly-owned subsidiary of Parent, and each share of Hastings common stock held by a shareholder of Hastings (other than Mr. Weinshanker and his affiliates) will, upon completion of the merger, be converted into the right to receive a cash payment of $3.00 per share.
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 Hastings and are alleging, among other things, that the merger contemplated in the Merger Agreement provides for insufficient consideration to be paid to Hastings' shareholders in exchange for their shares of Hastings' common stock, that the officers and directors of Hastings 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 seeks to enjoin the merger or rescind the merger if it is consummated and compensatory damages in an unspecified amount.
On May 28, 2014, the plaintiffs filed a motion for expedited discovery and a motion for entry of a temporary restraining order to enjoin the proposed transaction from closing. On May 30, 2014, two days after the plaintiffs filed this motion, the Court issued its Order Granting Motion for Temporary Restraining Order and Setting Hearing on Request for a Preliminary Injunction (the "Initial Order") in response to this motion and set a hearing on the plaintiffs' request for preliminary injunction, which was held on June 12, 2014. The Initial Order restricted Hastings from, among other things, consummating the merger prior to the date of this hearing. At the hearing, the Court issued the Order, which extended the restrictions provided in the Initial Order until June 26, 2014, but the Court did not rule on the plaintiffs' motions for expedited discovery, for preliminary injunction or for leave to amend their complaint to allege disclosure violations under the federal securities laws. Under the terms of the Order, Hastings is restricted, among other things, from consummating the merger prior to June 26, 2014. However, Hastings is not prevented from distributing a proxy statement to its shareholders and soliciting proxies in favor of the merger, and Hastings intends to do so as soon as practicable.
Hastings believes that the lawsuit was improperly and prematurely filed under Texas law and that the claims alleged therein are factually incorrect and deficient as a matter of law. Hastings also believes that the grounds upon which the plaintiffs sought the Initial Order are insufficient as a matter of fact and law. Hastings intends to vigorously dispute these claims throughout the life of this litigation.IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC