Commitments and Contingencies

12 Months Ended

Jan. 31, 2014

Commitments and Contingencies

(16) Commitments and Contingencies

Revenue Sharing Agreements

The Company is obligated to pay certain studios minimum amounts associated with certain revenue-sharing agreements related to rental assets. As of January 31, 2014, such minimum future payments approximated $1.1 million, which are expected to be paid during fiscal 2014.

Legal Matters

We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our financial position, results of operations or cash flows.

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 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.