Exhibit 10.2

SEPARATION AGREEMENT

This Separation Agreement (this “Agreement”) is made as of March 17, 2014 by and
between Hastings Entertainment, Inc. (the “Company”) and John H. Marmaduke
(“Executive” or “you”). Capitalized terms used but not otherwise defined herein
shall have the meanings assigned to them in the Merger Agreement (as defined
below).

RECITALS

A. Concurrent with the execution of this Agreement, the Company is executing
that certain Agreement and Plan of Merger (the “Merger Agreement”), dated on our
about the date hereof, by and among Draw Another Circle, a Delaware limited
liability company (“Parent”), Hendrix Acquisition Corp., a Texas corporation
(“Merger Sub”), and the Company, which provides, among other things, that
Executive will retire from the Company pursuant to the terms of a separation
agreement;

B. Executive desires to voluntarily retire from the Company in exchange for the
consideration specified herein and in the Merger Agreement; and

C. The parties desire to settle all claims and issues that have, or could have
been raised, in relation to Executive’s employment with the Company and arising
out of or in any way related to the acts, transactions or occurrences between
Executive and the Company to date, including, but not limited to, Executive’s
retirement, on the terms set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the consummation of the
transactions referred to above, the Company and Executive agrees as follows:

AGREEMENT

1. Separation. Your last day of work with the Company and your employment
termination date will be the Closing Date of the Merger (the “Separation Date”).

2. Accrued Salary and Vacation. On the Separation Date, the Company will pay you
all accrued salary and all accrued and unused vacation earned through the
Separation Date, subject to standard payroll deductions and withholdings. You
will receive these payments regardless of whether or not you sign this
Agreement.

3. Severance Benefits. If you sign this Agreement within the forty-five (45)-day
consideration period, return it to the Company and do not revoke it, and
provided you otherwise fully comply with the terms of this Agreement, the
Company will provide you with a one-time cash payment totaling $1,500,000.00,
net of standard payroll deductions and withholdings (the “Severance Benefits”).
This amount will be paid on the Company’s first ordinary payroll date which
occurs at least eight (8) business days following the Effective Date; provided,
however, the Company must have received your executed countersignature to this
Agreement from you before the Severance Benefits will be paid.

4. Other Benefit Plan Participation. Your participation as an employee in the
Company’s group health insurance plans will end in accordance with the terms of
those plans. Thereafter, to the extent provided by the federal COBRA law or, if
applicable, state insurance

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laws, and by the Company’s current group health insurance policies, you will be
eligible to continue your group health insurance benefits at your own expense.
Later, you may be able to convert to an individual policy through the provider
of the Company’s health insurance, if you wish. Your participation in all other
Company benefit plans, including, without limitation, the Hastings
Entertainment, Inc. Associates’ 401(k) Plan, will end in accordance with the
terms of those plans (to the extent such plans are not terminated pursuant to
the terms of the Merger Agreement).

5. Termination of Prior Employment Agreements. In exchange for the payments and
other consideration paid to Executive pursuant to this Agreement and the Merger
Agreement, to which you would not otherwise be entitled, the Company and you
agree that your Employment Agreement, dated February 1, 2009, as amended from
time to time (the “Employment Agreement”), along with any other prior employment
agreements or contracts between Executive and the Company entered prior to the
date of the Merger Agreement, is hereby terminated and is of no further force or
effect; provided, however, your continuing obligations under Sections 7, 8, and
9 of the Employment Agreement not to use or disclose any confidential or
proprietary information of the Company and to refrain from certain solicitation
and competitive activities will continue after the Effective Date (as defined
below).

6. Other Compensation and Benefits. You acknowledge that, except as expressly
provided in this Agreement or the Merger Agreement, you are not entitled to and
will not receive any additional compensation, severance or benefits after the
Separation Date, including any compensation, severance or benefits under the
Employment Agreement. You further acknowledge that, other than the Merger
Consideration to be payable in exchange for the shares of Company Common Stock
held by you, directly or indirectly, you are not entitled to any additional
compensation with respect to any other equity awards or rights that you may
hold, including incentive or non-qualified stock options, or restricted stock or
restricted stock unit awards granted under any equity plan sponsored or
maintained by the Company, all of which awards are to be cancelled for no
consideration pursuant to the terms of the Merger Agreement. However, nothing in
this Agreement effects your right to receive benefits to which you are otherwise
entitled under the terms of any Company plan that provides health or pension
benefits and that is subject to the Employee Retirement Income Security Act of
1974, as amended (“ERISA”), including, without limitation, the Hastings
Entertainment, Inc. Associates’ 401(k) Plan, the Hastings Entertainment, Inc.
Associates’ Stock Ownership Plan (as amended, the “ASOP”) and the Hastings
Entertainment, Inc. Supplemental Executive Retirement Plan (as amended, the
“SERP”).

7. Expense Reimbursements. You agree that, within ten (10) days of the
Separation Date, you will submit your final documented expense reimbursement
statement reflecting all business expenses you incurred through the Separation
Date, if any, for which you seek reimbursement. The Company will reimburse you
for reasonable business expenses pursuant to its regular business practice.

8. Release by You. In exchange for the payments and other consideration under
this Agreement and the Merger Agreement, to which you would not otherwise be
entitled, and except as otherwise set forth in this Agreement, you hereby
generally and completely release, acquit and forever discharge the Company and
Merger Sub and their parents and subsidiaries, and their

 

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officers, directors, managers, partners, agents, servants, employees, attorneys,
shareholders, successors, assigns and affiliates (the “Releasees”), of and from
any and all claims, liabilities, demands, causes of action, costs, expenses,
attorneys fees, damages, indemnities and obligations of every kind and nature,
in law, equity, or otherwise, both known and unknown, suspected and unsuspected,
disclosed and undisclosed, arising out of or in any way related to agreements,
events, acts or conduct at any time prior to and including the execution date of
this Agreement, including but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with your
employment with the Company or the termination of that employment; claims or
demands related to salary, bonuses, commissions, stock, stock options
(including, without limitation, stock options cancelled or to be cancelled for
no consideration in connection with the Merger Agreement), or any other type of
ownership interest in the Company, vacation pay, fringe benefits, expense
reimbursements, severance pay, or any other form of compensation; claims
pursuant to any federal, state or local law, statute, or cause of action; tort
law; or contract law. The claims and causes of action you are releasing and
waiving in this Agreement include, but are not limited to, any and all claims
and causes of action that the Company, its parents and subsidiaries, and its and
their respective officers, directors, agents, servants, employees, attorneys,
shareholders, successors, assigns or affiliates:

 

  •   has violated its personnel policies, handbooks, contracts of employment,
or covenants of good faith and fair dealing;

 

  •   has discriminated against you on the basis of age, race, color, sex
(including sexual harassment), national origin, ancestry, disability, religion,
sexual orientation, marital status, parental status, source of income,
entitlement to benefits, any union activities or other protected category in
violation of any local, state or federal law, constitution, ordinance, or
regulation, including but not limited to: the Age Discrimination in Employment
Act, as amended (“ADEA”); Title VII of the Civil Rights Act of 1964, as amended;
42 U.S.C. § 1981, as amended; the Civil Rights Act of 1866; the Genetic
Information Non-Discrimination Act; Texas Human Rights Act, Texas Labor Code,
Chapter 21; the Worker Adjustment Retraining and Notification Act; the Equal Pay
Act; the Americans With Disabilities Act; the Family and Medical Leave Act; the
Occupational Safety and Health Act; the Immigration Reform and Control Act; the
Uniform Services Employment and Reemployment Rights Act of 1994, as amended;
Section 510 of the Employee Retirement Income Security Act; and the National
Labor Relations Act; and

 

  •   has violated any statute, public policy or common law (including, but not
limited to, claims for retaliatory discharge; negligent hiring, retention or
supervision; defamation; intentional or negligent infliction of emotional
distress and/or mental anguish; intentional interference with contract;
negligence; detrimental reliance; loss of consortium to you or any member of
your family and/or promissory estoppel).

Notwithstanding the foregoing, you are not releasing (1) any right of
indemnification you may have for any liabilities arising from your actions
within the course and scope of your employment with the Company or within the
course and scope of your role as a member of the Board of Directors and/or
officer of the Company, (2) your right to receive benefits to which you are
otherwise entitled under the terms of any Company plan that provides health or
pension

 

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benefits and that is subject to the ERISA and (3) your rights to receive
payments under this Agreement. Also excluded from waiver under this Agreement
are any of your rights or claims relating to the Merger Agreement, the Insider
Agreements and the Support Agreement. In addition, any claims which cannot be
waived by law are excluded from this Agreement. You are waiving, however, your
right to any monetary recovery should any governmental agency or entity, such as
the EEOC or the DOL, pursue any claims on your behalf. You acknowledge that you
are knowingly and voluntarily waiving and releasing any rights you may have
under the ADEA. You also acknowledge that (i) the consideration given to you in
exchange for the waiver and release in this Agreement is in addition to anything
of value to which you were already entitled, and (ii) that you have been paid
for all time worked, have received all the leave, leaves of absence and leave
benefits and protections for which you are eligible, and have not suffered any
on-the-job injury for which you have not already filed a claim. You further
acknowledge that you have been advised by this writing that: (a) your waiver and
release do not apply to any rights or claims that may arise after the execution
date of this Agreement; (b) you have been advised hereby that you have the right
to consult with an attorney prior to executing this Agreement; (c) you have
forty-five (45) days to consider this Agreement (although you may choose to
voluntarily execute this Agreement earlier, and, if you do, you will sign the
Consideration Period waiver below); (d) you have seven (7) days following your
execution of this Agreement to revoke the Agreement; and (e) this Agreement
shall not be effective until the date upon which the revocation period has
expired unexercised (the “Effective Date”), which shall be the eighth (8th) day
after this Agreement is executed by you. Pursuant to 29 U.S.C. § 626(f)(1)(H),
the Company provides disclosures concerning the availability of this severance
package in Exhibit A attached hereto.

9. Return of Company Property. Within ten (10) days of the Separation Date, you
agree to return to the Company all Company documents (and all copies thereof)
and other Company property then in existence that you have in your possession,
including, but not limited to, Company files, notes, drawings, records, business
plans and forecasts, financial information, specifications, computer-recorded
information, tangible property (including, but not limited to, computers),
credit cards, entry cards, identification badges and keys, and further, any
materials of any kind that contain or embody any proprietary or confidential
information of the Company (and all reproductions thereof) (collectively,
“Company Property”). Receipt of the Severance Benefits described in paragraph 3
of this Agreement is expressly conditioned upon return of all such Company
Property.

10. Confidentiality. The provisions of this Agreement will be held in strictest
confidence by you and will not be publicized or disclosed in any manner
whatsoever; provided, however, that: (a) you may disclose this Agreement in
confidence to your attorney, accountant, auditor, tax preparer, and financial
advisor and (b) you may disclose this Agreement insofar as such disclosure may
be required by law, including, without limitation, applicable U.S. securities
laws.

11. Proprietary Information and Post-Termination Obligations. Both during and
after your employment, you acknowledge (1) your continuing obligations under
Sections 7 and 9 of the Employment Agreement and Section 10 of this Agreement
not to use or disclose any confidential or proprietary information of the
Company and (2) to refrain from certain solicitation and competitive activities
pursuant to Section 8 of the Employment Agreement.

 

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12. Non-Disparagement. You agree not to disparage the Parent, the Company or the
Merger Sub, and their attorneys, directors, managers, partners, employees,
agents and affiliates, in any manner likely to be harmful to them or their
business, business reputation or personal reputation; provided, that you may
respond accurately and fully to any question, inquiry or request for information
when required by legal process.

13. No Admission. This Agreement does not constitute an admission by the Company
or Merger Sub, or their parents or affiliates, of any wrongful action or
violation of any federal, state, or local statute, or common law rights,
including those relating to the provisions of any law or statute concerning
employment actions, or of any other possible or claimed violation of law or
rights.

14. Cooperation after Termination. You agree that, for a period commencing on
the Separation Date and continuing for thirty (30) days following the Effective
Date, you will cooperate fully with the Company in all matters relating to the
transition of your work and responsibilities on behalf of the Company,
including, but not limited to, making yourself reasonably available during
regular business hours for the transition of any of your present, prior or
subsequent relationships and the orderly transfer of any work and institutional
knowledge to such other persons as may be designated by the Company.

15. Breach. You agree that upon any material breach by you of this Agreement you
will forfeit all amounts paid or owing to you under this Agreement. Further, you
acknowledge that it may be impossible to assess the damages caused by your
material violation of the terms of paragraphs 9, 10, 11, and 12 of this
Agreement and further agree that any threatened or actual material violation or
breach of those paragraphs of this Agreement will constitute immediate and
irreparable injury to the Company. You therefore agree that any such breach of
this Agreement is a material breach of this Agreement, and, in addition to any
and all other damages and remedies available to the Company upon your breach of
this Agreement, the Company shall be entitled to an injunction to prevent you
from violating or breaching this Agreement. You agree that if the Company is
successful in whole or part in any legal or equitable action against you under
this Agreement, you agree to pay all of the costs, including reasonable
attorneys’ fees, incurred by the Company in enforcing the terms of this
Agreement.

16. Miscellaneous. This Agreement, together with Sections 7, 8, and 9 of your
Employment Agreement, constitute the complete, final and exclusive embodiment of
the entire agreement between you and the Company with regard to this subject
matter. It is entered into without reliance on any promise or representation,
written or oral, other than those expressly contained herein, and it supersedes
any other such promises, warranties or representations. This Agreement may not
be modified or amended except in a writing signed by both you and a duly
authorized officer of the Company. The Severance Benefits payable under
Section 3 of this Agreement shall be reduced by any amounts received by you
under any other severance plan or similar arrangement, or, after the date
hereof, under any other plan, agreement or arrangement to which the Company or
the Executive is a party. This Agreement will bind the heirs, personal
representatives, successors and assigns of both you and the Company, and inure
to the benefit of both you and the Company, their heirs, successors and assigns.
If any provision of this Agreement is determined to be invalid or unenforceable,
in whole or in part, this determination will not affect any other provision of
this Agreement and the provision in question will be

 

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modified by the court so as to be rendered enforceable. This Agreement will be
deemed to have been entered into and will be construed and enforced in
accordance with the laws of the State of Texas as applied to contracts made and
performed entirely within the State of Texas. This Agreement may be executed in
any number of counterparts (including via .pdf or facsimile), each of which,
when executed, shall be deemed to be an original and all of which together shall
constitute one and the same document.

17. Jurisdiction; Venue. In any action or proceeding arising out of or relating
to this Agreement or any of the transactions contemplated by this Agreement:
(i) each of the parties irrevocably and unconditionally consents and submits to
the exclusive jurisdiction and venue of the state and federal courts located in
Potter County, Texas and irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of the venue
of any such action or proceeding in any such court or that any such action or
proceeding brought in any such court has been brought in an inconvenient forum;
(ii) if any such action is commenced in a state court, then, subject to
applicable Legal Requirements, any party may petition for the removal of such
action to any federal court located in the Northern District of Texas; and
(iii) each of the parties hereto irrevocably consents to service of process by
first class certified mail, return receipt requested, postage prepaid, to the
address at which such party is to receive notice in accordance with Section 2.2
of the Insider Agreement. The parties hereto agree that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
applicable Legal Requirements; provided, however, that nothing in the foregoing
shall restrict any party’s rights to seek any post-judgment relief regarding, or
any appeal from, such final trial court judgment.

[Signature Page to Follow]

 

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IN WITNESS WHEREOF, the parties have, by duly authorized persons, executed this
Separation Agreement, as of the date first above written.

 

HASTINGS ENTERTAINMENT, INC. By:  

/s/ Dan Crow

Name:  

Dan Crow

Title:  

Chief Financial Officer

 

EXECUTIVE

/s/    John H. Marmaduke        

John H. Marmaduke

 

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CONSIDERATION PERIOD

I, John H. Marmaduke, understand that I have the right to take at least 45 days
to consider whether to sign this Agreement, which I received on March 17, 2014.
If I elect to sign this Agreement before 45 days have passed, I understand I am
to sign and date below this paragraph to confirm that I knowingly and
voluntarily agree to waive the 45-day consideration period.

AGREED:

 

/s/ John H. Marmaduke

Signature

March 17, 2014

Date

 

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Exhibit A

ADEA DISCLOSURE

(UNDER TITLE 29 U.S. CODE SECTION 626(f)(1)(H))

 

Confidentiality Provision:

  The information contained in this document is private and confidential. You
may not disclose this information to anyone except your professional advisors.

The following chart was prepared as of March 17, 2014. It shows the employees by
job title in the decisional unit whose employment will be terminated on the
Separation Date and the factors used to determine who was eligible for the
severance package program. Employees who will be terminated will be eligible for
benefits based upon their execution of a waiver. These data are subject to
change and may be affected by future employment decisions.

Those receiving this disclosure will have forty-five (45) days to review the
terms and conditions of the severance package.

On the Separation Date, the following individuals at the executive level
(identified by job title and age) will voluntarily resign:

 

Job Title

  

Age

Chief Executive Officer

   66 (67 in May)

Vice President of Finance and Chief Financial Officer

   67

The employment of the following individuals at the executive level will not be
terminated on the Separation Date.

 

Job Title

   Age

President and Chief Operating Officer

   45

Vice President and Divisional Merchandise Manager

   50

The following criteria were used to select positions in which the employee is
eligible for the severance package program: voluntary resignation in connection
with a company merger.

 

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