<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MOVIE GALLERY, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
MOVIE GALLERY, INC.
739 W. MAIN STREET
DOTHAN, ALABAMA 36301
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JUNE 6, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Movie
Gallery, Inc. (the "Company") will be held at the Hotel Bel-Air, 701 Stone
Canyon Road, Los Angeles, California 90077 on Thursday, June 6, 1996 at 10:00
a.m. (California Time) for the following purposes:
(1) To elect members of the Board of Directors to serve until the next
annual meeting of stockholders;
(2) To approve an amendment to the Company's 1994 Stock Plan to increase
from 1,250,000 to 1,750,000 the number of shares available for grant;
(3) To approve an amendment to the Company's Certificate of Incorporation
to increase the authorized shares of Common Stock from 30,000,000 to
60,000,000; and
(4) To transact such other business as may properly come before the
meeting or any adjournments thereof.
These items are more fully described in the accompanying Proxy Statement. The
Board of Directors has fixed the close of business on April 18, 1996 as the
record date for the determination of stockholders entitled to notice of and to
vote at the meeting. Only stockholders at the close of business on the record
date are entitled to vote at the meeting.
Accompanying this Notice are a Proxy and Proxy Statement. IF YOU WILL NOT BE
ABLE TO ATTEND THE MEETING TO VOTE IN PERSON, PLEASE COMPLETE, SIGN AND DATE
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE. The Proxy may be revoked at any time prior to its exercise at the
meeting.
By Order of the Board of Directors,
/s/ S. PAGE TODD
S. Page Todd
Senior Vice President,
General Counsel and Secretary
Dothan, Alabama
May 10, 1996
<PAGE>
MOVIE GALLERY, INC.
739 W. MAIN STREET
DOTHAN, ALABAMA 36301
ANNUAL MEETING OF STOCKHOLDERS
JUNE 6, 1996
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to the stockholders of Movie Gallery, Inc.,
a Delaware corporation (the "Company"), in connection with the solicitation of
proxies by and on behalf of the Board of Directors of the Company. The proxies
solicited hereby are to be voted at the Annual Meeting of Stockholders of the
Company to be held on June 6, 1995, and at any and all adjournments thereof
(the "Annual Meeting").
A form of proxy is enclosed for your use. The shares represented by each
properly executed unrevoked proxy will be voted as directed by the stockholder
executing the proxy. If no direction is made, the shares represented by each
properly executed unrevoked proxy will be voted "FOR" (i) the election of
management's nominees for the Board of Directors; (ii) the amendment of the
Company's 1994 Stock Plan to increase from 1,250,000 to 1,750,000 the number of
shares available for grants; and (iii) the Amendment of the Company's
Certificate of Incorporation to increase the authorized shares of Common Stock
from 30,000,000 to 60,000,000. With respect to any other item of business that
may come before the Annual Meeting, the proxy holders will vote the proxy in
accordance with their best judgment.
Any proxy given may be revoked at any time prior to its exercise by filing
with S. Page Todd, Secretary of the Company, an instrument revoking such proxy
or by the filing of a duly executed proxy bearing a later date. Any stockholder
present at the meeting who has given a proxy may withdraw it and vote his or
her shares in person if such stockholder so desires.
It is contemplated that the solicitation of proxies will be made primarily by
mail. Should it, however, appear desirable to do so in order to ensure adequate
representation of shares at the Annual Meeting, officers, agents and employees
of the Company may communicate with stockholders, banks, brokerage houses and
others by telephone, telegraph, or in person to request that proxies be
furnished. All expenses incurred in connection with this solicitation will be
borne by the Company. In following-up the original solicitation of proxies by
mail, the Company may make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to the
beneficial owners of the shares eligible to vote at the Annual Meeting and will
reimburse them for their expenses in so doing. The Company has no present plans
to hire special employees or paid solicitors to assist in obtaining proxies,
but reserves the option of doing so if it should appear that a quorum otherwise
might not be obtained. This Proxy Statement and the accompanying form of proxy
are first being mailed to stockholders on or about May 13, 1996.
1
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only holders of record of the Company's voting securities at the close of
business on April 18, 1996 (the "Record Date") are entitled to notice of and to
vote at the Annual Meeting. As of the Record Date, the Company had issued and
outstanding 12,359,308 shares of the Company's Common Stock ("Common Stock"),
the holders of which are entitled to vote at the Annual Meeting. Each share of
Common Stock that was issued and outstanding as of the Record Date is entitled
to one vote at the Annual Meeting. The presence, in person or by proxy, of
stockholders entitled to cast at least a majority of the votes entitled to be
cast by all stockholders will constitute a quorum for the transaction of
business at the Annual Meeting.
Directors will be elected by a plurality of the votes cast. Only votes cast
for a nominee will be counted, except that each properly executed unrevoked
proxy will be voted for the six management nominees for the Board of Directors
in the absence of instructions to the contrary. Abstentions, broker non-votes
and instructions on a proxy to withhold authority to vote for one or more of
such nominees will result in the respective nominees receiving fewer votes.
Abstentions may be specified as to all proposals to be brought before the
Annual Meeting, other than the election of directors. Approval of each of the
proposals to be brought before the Annual Meeting (not including the election
of directors and the Amendment to the Certificate of Incorporation) will
require the affirmative vote of at least a majority in voting interest of the
stockholders present in person or by proxy at the Annual Meeting and entitled
to vote thereon. Approval of the proposed amendment to the Company's
Certificate of Incorporation to increase the authorized shares of Common Stock
will require the affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock. As to the proposals, if a stockholder
abstains from voting on a proposal it will have the effect of a negative vote
on that proposal, but if a broker indicates that it does not have authority to
vote certain shares, those votes will not be considered as shares present and
entitled to vote at the Annual Meeting with respect to that proposal and,
therefore, will have no effect on the outcome of the vote.
2
<PAGE>
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 18, 1996 by each person
known by the Company to own beneficially more than 5% of the outstanding shares
of the Company's Common Stock and as to the number of shares beneficially owned
by each director and by all directors and executive officers as a group. The
Company believes that the persons listed below have sole investment and voting
power with respect to the Common Stock they own.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF PERCENTAGE
COMMON OF
NAME AND ADDRESS(1) STOCK OUTSTANDING
------------------- --------- -----------
<S> <C> <C>
Joe Thomas Malugen(2)................................ 2,687,500 21.7%
H. Harrison Parrish(2)............................... 2,687,500 21.7
Chancellor Capital Management, Inc................... 967,200 7.8
1166 Avenue of the Americas
New York, New York 10036
FMR Capital Corp..................................... 956,600 7.7
82 Devonshire Street
Boston, Massachusetts 02109-3614
RCM Capital Management............................... 626,800 5.1
Four Embarcadero Center
San Francisco, California 94111-4189
William B. Snow...................................... 88,000(3) *
Sanford C. Sigoloff.................................. 40,000(4) *
Philip B. Smith...................................... 35,000(4) *
Joseph F. Troy....................................... 60,000(5) *
All executive officers and directors as a group (11
persons)............................................ 5,648,750(6) 45.7%
</TABLE>
- - --------
* Less than 1%
(1) The address for all persons listed is c/o the Company at 739 W. Main
Street, Dothan, Alabama 36301.
(2) Mr. Malugen is the Chairman of the Board and Chief Executive Officer of the
Company and Mr. Parrish is a Director and the President of the Company.
(3) Includes 45,000 shares which are not outstanding but are subject to
currently exercisable options and excludes 25,000 shares which are subject
to options that are not currently exercisable.
(4) Includes 35,000 shares which are not outstanding but are subject to
currently exercisable stock options.
(5) Represents shares which are not outstanding but are subject to currently
exercisable options.
(6) Includes 218,000 shares which are not outstanding but are subject to
currently exercisable options and excludes 232,000 shares which are subject
to options that are not currently exercisable.
3
<PAGE>
ELECTION OF DIRECTORS
NOMINEES
Directors are elected at each annual meeting of the stockholders and hold
office until their respective successors are elected and qualified. The Board
of Directors believes that the election to the Board of Directors of the
persons identified below, all of whom are currently serving as Directors of the
Company and have consented to continue to serve if elected, would be in the
best interests of the Company. The names of such nominees and certain
biographical information about them are set forth below:
JOE THOMAS MALUGEN, age 44, co-founded the Company in 1985 and since that
time, has been its Chairman of the Board and Chief Executive Officer. Prior to
the Company's initial public offering of Common Stock in August 1994, Mr.
Malugen had been a practicing attorney in the States of Alabama and Missouri
since 1978, but spent a majority of his time managing the operations of the
Company beginning in early 1992. Mr. Malugen received a B.S. degree in Business
Administration from the University of Missouri-Columbia, his J.D. from
Cumberland Law School, Sanford University and his LL.M. (in Taxation) from New
York University Law School.
H. HARRISON PARRISH, age 48, co-founded the Company in 1985 and since that
time, has been President and a Director of the Company. From December 1988
until January 1992, Mr. Parrish was Vice President of Deltacom, Inc., a
regional long distance telephone provider. Mr. Parrish received a B.A. degree
in Business Administration from the University of Alabama.
WILLIAM B. SNOW, age 64, was elected Vice Chairman of the Board and Chief
Financial Officer in July 1994. Mr. Snow was the Executive Vice President and
Chief Financial Officer and a Director of Consolidated Stores Corporation, a
publicly-held specialty retailer, from 1985 until he retired in June 1994. Mr.
Snow is a member of the Board of Directors of Action Industries, Inc., a
publicly-held company. Mr. Snow is a Certified Public Accountant, and he
received his Masters in Business Administration from the Kellogg Graduate
School of Management at Northwestern University and his Masters in Taxation
from DePaul University.
SANFORD C. SIGOLOFF, age 65, became a director of the Company in September
1994. Since 1989, Mr. Sigoloff has been Chairman of the Board, President and
Chief Executive Officer of Sigoloff & Associates, Inc., a management consulting
company. In August 1989, LJ Hooker Corporation, a client of Sigoloff &
Associates, Inc., appointed Mr. Sigoloff to act as its Chief Executive Officer
during its reorganization under Chapter 11 of the United States Bankruptcy
Code. From March 1982 until 1988, Mr. Sigoloff was Chairman of the Board,
President, and Chief Executive Officer of Wickes Companies, Inc., one of the
largest retailers in the United States. Mr. Sigoloff is a director of the
following publicly-held corporations: SunAmerica, Inc., Kaufman and Broad Home
Corporation, Wickes plc-London, England and K-tel International, Inc. In
addition, Mr. Sigoloff is an adjunct full professor at the John E. Anderson
Graduate School of Management at the University of California at Los Angeles.
PHILIP B. SMITH, age 60, became a director of the Company in September 1994.
Mr. Smith has been a Vice Chairman of the Board of Spencer Trask Securities
Incorporated since 1991. He was formerly a Managing Director of Prudential
Securities in its merchant bank. Mr. Smith is a founding General Partner of
Lawrence Venture Associates, a venture capital limited partnership
headquartered in New York City. From 1981 to 1984, he served as Executive Vice
President and Group Executive of the worldwide corporations group at Irving
Trust Company. Prior to joining Irving Trust Company, he was at Citibank for 15
years, where he founded Citicorp Venture Capital as President and Chief
Executive Officer. Since 1988 he has also been the managing general partner of
Private Equity Partnership, L.P. Mr. Smith is a director of StarPress, Inc.
(formerly Great Bear Technology Inc.) and DenAmerica Corp., (formerly American
Family Restaurants, Inc.), publicly-held companies. Mr. Smith is an adjunct
professor at Columbia University Graduate School of Business.
4
<PAGE>
JOSEPH F. TROY, age 57, became a director of the Company in September 1994.
Mr. Troy is the founder and has been a member of the law firm of Troy & Gould
Professional Corporation since May 1970. He is a director of Amerigon
Incorporated, a publicly-held company.
The shares of each properly executed unrevoked proxy will be voted FOR the
election of all of the above named nominees unless the stockholder executing
such proxy indicates that the proxy shall not be voted for all or any one of
the nominees. If for any reason any nominee should, prior to the Annual
Meeting, become unavailable for election as a Director, an event not now
anticipated, the proxies will be voted for such substitute nominee, if any, as
may be recommended by the Board of Directors. In no event, however, shall the
proxies be voted for a greater number of persons than the number of nominees
named.
MEETINGS; ATTENDANCE; COMMITTEES
The Board of Directors of the Company held nine meetings during the fiscal
year ended December 31, 1995. Each director during the past fiscal year
attended at least 75% of all meetings of the Board of Directors.
The Board of Directors of the Company has an Audit Committee. The members of
the Audit Committee currently are Messrs. Sigoloff, Smith and Troy. The Audit
Committee met three times during the last fiscal year. The duties of the Audit
Committee are to review and act or report to the Board of Directors with
respect to various audit and accounting matters, including the annual audits of
the Company (and their scope), the annual selection of the independent auditors
of the Company, the nature of the services to be performed by and the fees to
be paid to the independent auditors of the Company, and the rendering of
"fairness" determinations concerning transactions between the Company and its
directors and officers. The members of the Audit Committee do not receive any
meeting fees.
The Stock Option Committee consists of Messrs. Malugen and Parrish. The Stock
Option Committee administers the Company's 1994 Stock Plan. All Stock Option
Committee action was taken by unanimous written consent and no meetings were
held during 1995.
The Compensation Committee consists of Messrs. Sigoloff, Smith and Troy. The
Compensation Committee held no meetings during 1995.
The Board of Directors does not have a Nominating Committee.
5
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth the compensation for services in all
capacities to the Company for the nine months ended December 31, 1993 and the
years ended December 31, 1994, and 1995 for the Chief Executive Officer of the
Company and each of the other executive officers of the Company whose total
annual salary and bonus exceeded $100,000 (Messrs. Malugen, Parrish, Snow, Todd
and Lavoie are collectively referred to as the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
----------------- ------------
SHARES OF
PERIOD OTHER COMMON STOCK
NAME AND PRINCIPAL ENDED ANNUAL UNDERLYING ALL OTHER
POSITION DECEMBER 31, SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- - ------------------ ------------ -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Joe Thomas Malugen...... 1995 $200,000 $24,000(1) $ 94,000(2)
Chairman and Chief 1994 144,167 $ 31,500 1,250,000(2)
Executive Officer 1993 80,000 272,510 93,281(2)
H. Harrison Parrish..... 1995 200,000 24,000(1) 94,000(2)
President and Director 1994 132,762 28,036 1,250,000(2)
1993 80,000 332,500 93,281(2)
William B. Snow......... 1995 200,000 24,000(1) 10,000
Vice Chairman and
Chief Financial Officer
S. Page Todd............ 1995 100,500 15,800 25,000
Senior Vice President,
Secretary and General
Counsel
Steven M. Lavoie........ 1995 82,692 19,000 20,907(3) 35,000
Senior Vice President--
Strategic Development
</TABLE>
- - --------
(1) Automobile allowance
(2) S Corporation distributions
(3) Relocation allowance
Director Compensation. Members of the Board of Directors who are not officers
of the Company receive an annual fee of $12,000 and a fee of $1,000 for each
Board meeting that they attend and are also reimbursed for the travel expenses
incurred in attending such meetings. The Company has granted at the fair market
value of the Common Stock at the date of the grant, vested options to purchase
35,000 shares of Common Stock to each of Messrs. Sigoloff and Smith and vested
options to purchase 60,000 shares of Common Stock to Mr. Troy.
Employment Arrangements. The only Named Executives who have employment
agreements with the Company are Messrs. Malugen and Parrish, who entered into
two-year employment agreements, effective August 1994, which will be
automatically renewed annually unless notice is delivered by either party six
months prior to the end of the term. Under the terms of the agreements, Messrs.
Malugen and Parrish receive an annual salary of $200,000 and, beginning in
1995, became eligible to receive a bonus in an amount to be determined annually
by the Board of Directors. In the event of the death of either Mr. Malugen or
Mr. Parrish, his legal representative will be entitled to receive compensation
through the last day of the
6
<PAGE>
calendar month in which his death occurred and a $50,000 payment. If either Mr.
Malugen or Mr. Parrish becomes disabled such that he is unable to perform his
duties under his Employment Agreement, he shall be entitled to receive 100% of
his salary for a 90 day period. In addition to salary and bonus, the Company is
required to provide each of Messrs. Malugen and Parrish with a monthly car
allowance of $2,000.
Stock Options. The following tables set forth certain information with
respect to stock options granted by the Company to the Named Executives during
the year ended December 31, 1995, stock option exercises during that year and
the value of unexercised stock options at that year's end.
OPTION GRANT TABLE
OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK
PRICE APPRECIATION
FOR
INDIVIDUAL GRANTS OPTION TERM
------------------------------------------------ -------------------
% OF TOTAL
OPTIONS
NUMBER OF SHARES GRANTED TO
OF COMMON STOCK EMPLOYEES EXERCISE
UNDERLYING IN FISCAL PRICE EXPIRATION
NAME OPTIONS GRANTED YEAR ($/SH)(4) DATE 5% 10%
---- ---------------- ---------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
William B. Snow......... 10,000(1) 2.1% $24.44 8/15/2005 $153,689 $ 389,479
S. Page Todd............ 25,000(2) 5.3 35.06 7/2/2005 551,273 1,397,035
Steven M. Lavoie........ 35,000(3) 7.5 25.50 1/31/2005 561,288 1,422,415
</TABLE>
- - --------
(1) These options were granted "at market" and were fully vested on the date of
grant.
(2) These options were granted "at market" on the date of grant and first
become exercisable on the first anniversary of the grant date, with 25% of
the underlying shares becoming exercisable at that time, an additional 25%
of the option shares becoming exercisable on each successive anniversary
date, and full vesting on the fourth anniversary date. The options were
granted for a term of 10 years, subject to earlier termination in certain
events related to termination of employment.
(3) These options were granted "at market" on the date of grant and first
become exercisable on the first anniversary of the grant date, with 20% of
the underlying shares becoming exercisable at that time, an additional 20%
of the option shares becoming exercisable on each successive anniversary
date, and full vesting on the fifth anniversary date. The options were
granted for a term of 10 years, subject to earlier termination in certain
events related to termination of employment.
(4) The exercise price and tax withholding related to exercise may be paid by
delivery of already owned shares or by offset of the underlying shares,
subject to certain conditions. Under the terms of the Company's stock
incentive plan, the stock option committee retains discretion, subject to
plan limits, to modify the terms of outstanding options and to reprice the
options.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK VALUE OF
UNDERLYING UNEXERCISED IN-
UNEXERCISED THE-MONEY
OPTIONS AT OPTIONS AT
YEAR-END YEAR-END(A)
---------------- ----------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
William B. Snow......... -- -- 45,000/25,000 $629,370/412,500
S. Page Todd............ -- -- 20,000/55,000 261,870/290,610
Steven M. Lavoie........ -- -- 3,000/47,000 29,061/291,244
</TABLE>
- - --------
(A)Market value of underlying securities at year-end, minus the exercise price
of "in-the-money" options.
7
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
Sanford C. Sigoloff, Philip B. Smith and Joseph F. Troy served as members of
the Compensation Committee of the Company's Board of Directors for the year
ended December 31, 1995. Mr. Troy, who is a Director of the Company and also a
member of its Executive and Audit Committees is a member of the law firm of
Troy & Gould Professional Corporation ("Troy & Gould"). During the 12 months
ended December 31, 1995, the Company paid Troy & Gould $598,000 for legal
services rendered.
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that might incorporate by reference previous or future
filings, including this Proxy Statement, in whole or in part, the following
report and the Performance Graph on page 10 hereof shall not be incorporated by
reference into any of such filings.
JOINT REPORT OF THE BOARD OF DIRECTORS AND THE STOCK OPTION
COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Messrs. Malugen and Parrish have written employment agreements and these
agreements were entered into by the Company prior to its initial public
offering in August 1994. Neither Mr. Malugen nor Mr. Parrish were paid a bonus
under their employment agreements for the year ended December 31, 1995. They
are eligible to receive a bonus for the current fiscal year in an amount to be
determined by the Board of Directors.
Bonuses were paid to all of the executive officers of the Company for the
year ended December 31, 1995, except for Messrs. Malugen, Parrish and Snow, who
received no bonuses. The amount of these bonuses was determined on a quarterly
basis by Messrs. Malugen and Parrish based upon the performance of the Company
for each fiscal quarter, primarily sales and net income as compared to budget,
as well as a review of the performance of each executive officer. The payment
of bonuses and the general performance criteria were reviewed by the Board of
Directors, who delegated to Messrs. Malugen and Parrish the authority to fix
bonuses for each executive officer of the Company, other than themselves. In
April 1996, the Compensation Committee ratified the bonuses paid to executive
officers for the year ended December 31, 1995.
The base compensation for each of the executive officers was fixed at the
time of their employment by the Company or, as to Messrs. Malugen and Parish,
at the time of execution of their respective employment agreements. No
increases in base compensation have been approved. The Board of Directors or
the Compensation Committee will review the base compensation and bonus
arrangements for the current fiscal year with respect to each executive
officer.
The Company believes that equity ownership by executive officers provides
incentive to build stockholder value and align the interests of executive
officers with the interests of stockholders. Upon hiring executive officers and
other key employees, the Stock Option Committee will typically recommend stock
option grants to those persons under the Stock Option Plan, subject to
applicable vesting periods. Thereafter, the Stock Option Committee will
consider awarding grants, usually on an annual basis. The Stock Option
Committee believes that these additional annual grants will provide incentive
for executive officers to remain with the Company. Options will be granted at
the market price of the Company's Common Stock on the date of grant and,
consequently, will have value only if the price of the Company's Common Stock
increases over the exercise price. The size of the initial grant will usually
be determined based upon prior grants to other executive officers and key
employees. In determining the size of the periodic grants, the Stock Option
Committee will consider various factors, including the amount of any prior
option grants, the executive's or employee's performance during the current
fiscal year and his or her expected contributions during the succeeding fiscal
year.
8
<PAGE>
The foregoing report on executive compensation is provided by the following
directors:
Board of Directors Stock Option Committee
- - ------------------ ----------------------
Joe Thomas Malugen Joe Thomas Malugen
H. Harrison Parrish H. Harrison Parrish
William B. Snow
Sanford C. Sigoloff
Philip B. Smith
Joseph F. Troy
9
<PAGE>
COMPANY PERFORMANCE
The following graph sets forth a comparison of cumulative total returns for
the Company, the NASDAQ Market Value Index and a peer group index for the
period during which the Company's Common Stock has been registered under
Section 12 of the Exchange Act. The peer group index consists of all companies
(i) that have the same Standard Industrial Classification industry number as
the Company and (ii) whose securities have been registered under the Exchange
Act during the period covered by the performance graph.
Comparison of Cumulative Total Return
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Company/Index 8/2/94 12/29/95
- - ------------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Stock Market...... 100 105.63 104.43 113.84 130.22 145.90 147.7
Movie Gallery, Inc....... 100 138.33 173.33 179.17 233.75 285 203.3
Peer Index............... 100 109.21 109.40 108.30 118.71 130.78 125.1
</TABLE>
The graph assumes that the value of the investment in the Company's Common
Stock, the NASDAQ Market Index and the peer group of companies each was $100 on
August 2, 1994 and that all dividends were reinvested.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company purchases its signs from Ad Lite Signs, Inc. ("Ad Lite"). Joe
Thomas Malugen and H. Harrison Parrish, the Company's Chairman of the Board and
President respectively, hold 67% of the outstanding capital stock of Ad Lite
and continue to be stockholders of Ad Lite. During the 12 months ended December
31, 1995, payments to Ad Lite for signs purchased were $1,683,000. From time to
time, management compares the price and quality of the signs purchased from Ad
Lite with those offered by competitors and generally believes that Ad Lite
offers price, quality and service competitive with that offered by unaffiliated
third parties.
The Company leases approximately 6,500 square feet out of a total of 14,000
square feet of corporate office space from Messrs. Malugen and Parrish. On June
1, 1994, the Company entered into a three-year lease (with two two-year
options) with respect to such space, which provides for monthly rental payments
of $3,650. The terms of the lease were not negotiated at arm's length, but the
Company believes that they are fair and reasonable and are comparable to those
which could have been obtained from a nonaffiliated third party. For the year
ended December 31, 1995, the total amount of lease payments made by the Company
to Messrs. Malugen and Parrish was $43,800.
During the 12 months ended December 31, 1995, the Company paid Troy & Gould
$598,000 for legal services rendered. Joseph F. Troy, a Director of the Company
is a member of that law firm.
10
<PAGE>
During the 12 months ended December 31, 1995, the Company paid Todd & Sons
$74,345 for certain store supplies and promotional materials. In addition,
Sight & Sound, the Company's primarily supplier of videocassettes and video
games, paid Todd & Sons, at the direction of the Company, an aggregate of
$32,615 for promotional items using funds allocated to the Company by Sight &
Sound as cooperative advertising credits. The Company generally purchases
materials, and causes Sight & Sound to purchase materials, from Todd & Sons
only when its prices are equal to or less than prices available from
unaffiliated third parties, and often materials are purchased from Todd & Sons
only after competitive bidding. Todd & Sons is owned by the brothers of S. Page
Todd, a Senior Vice President and the Secretary and General Counsel of the
Company.
The Company and Messrs. Malugen and Parrish entered into a Tax
Indemnification Agreement with respect to the Company's status as an S
corporation prior to the Company's initial public offering in August 1994.
Pursuant to that agreement, the Company is obligated to indemnify each of them
for any federal or state income tax liability they may incur on any increase in
taxable income resulting from a final determination of any adjustment with
respect to the Company's income or deductions from April 1992 through the
termination of the Company's S corporation status in August 1994 (the "S
Period"). Pursuant to this agreement, the Company paid Messrs. Malugen and
Parrish an aggregate of $188,000 in April 1995 as a final S corporation
distribution with respect to their federal and state tax liability for
undistributed S corporation earnings through the termination date. In addition,
the Company is obligated to indemnify Messrs. Malugen and Parrish for any
federal and state income taxes they must pay as a result of receiving the
indemnification payment. If there is a final determination that the Company was
not an S corporation for all or any part of the S Period, each of Messrs.
Malugen and Parrish shall pay to the Company any federal or state income tax
refund actually received by them as a result of that determination. The
agreement requires Messrs. Malugen and Parrish to file a refund claim if
requested to do so by the Company.
The Company has entered into separate but identical indemnity agreements (the
"Indemnity Agreements") with each director of the Company (the "Indemnities").
The Indemnity Agreements provide that the Company will indemnify each
Indemnitee to the fullest extent authorized or permitted by law against payment
of and liability for any and all expenses actually and reasonably incurred by
the Indemnitee, including, but not limited to, judgments, fines, settlements
and expenses of defense, payable by reason of the fact that the Indemnitee is
or was a director and/or officer of the Company or is or was serving, at the
request of the Company, as a director, officer, employee or agent of another
corporation, provided it is determined that the Indemnitee acted in good faith
and in a manner that he reasonably believed to be in or not opposed to the best
interests of the Company and, in the case of a criminal proceeding, had no
reasonable cause to believe that his conduct was unlawful. The Indemnity
Agreements also provide that all costs and expenses incurred by the Indemnitee
in defending or investigating such claim shall be paid by the Company unless
the Company, independent legal counsel or the stockholders of the Company
determine that: (i) the Indemnitee did not act in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of
the Company; (ii) in the case of any criminal action or proceeding, the
Indemnitee had reasonable cause to believe his conduct was unlawful; or (iii)
the Indemnitee intentionally breached his duty to the Company or its
stockholders.
The Company believes that the terms of all transactions between the Company
and Messrs. Malugen and Parrish or any of their affiliates described above, are
no less favorable than terms that could have been obtained from third parties.
All future transactions between the Company and its officers or directors are
subject to the approval by a majority of the disinterested members of the Board
of Directors.
AMENDMENT TO THE COMPANY'S 1994 STOCK PLAN
TO INCREASE THE NUMBER OF SHARES COVERED BY THE PLAN
The Board of Directors has approved, and has voted to recommend to the
stockholders that they approve, an amendment to the Company's 1994 Stock Plan
(the "Plan") to increase the number of shares of Common Stock that may be
issued upon the exercise of options provided under the Plan from 1,250,000
shares to 1,750,000 shares. It is proposed that Section 4 of the Plan be
amended to provide as follows:
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<PAGE>
"4. STOCK SUBJECT TO PLAN. There shall be reserved for issuance under the
Plan 1,750,000 shares of Common Stock of the Company ("Stock") or the
number of shares of Stock, which, in accordance with the provisions of
Section 13 hereof, shall be substituted therefor. Such shares may be
treasury shares. If an option or stock appreciation right granted under the
Plan shall expire or terminate for any reason without having been exercised
in full, shares subject to the unexercised portion thereof shall again be
available for the purposes of the Plan."
The Board of Directors believes that its existing stock option plan has
played, and will continue to play, a major role in enabling the Company to
attract certain officers, directors and other key employees. Options granted to
such individuals provide them with long-term incentives that are consistent
with the Company's compensation policy of providing compensation that is
closely related to the performance of the Company. As of the date of this Proxy
Statement, all of the options available for grant under the Plan had been
granted. To allow the Company to continue to obtain the benefit of incentives
available under the Plan, the Company's Board of Directors has adopted and
recommended for submission to the stockholders for their approval a proposal to
increase the number of shares that may be issued upon the exercise of options
granted under the Plan. Pursuant to Section 16 of the Plan, this increase must
be approved by the affirmative vote of a majority of the shares of the
Company's Common Stock represented in person or by proxy and voting at the
Annual Meeting, assuming that a quorum is present.
The following table sets forth, with respect to the Named Executives, all
current executive officers as a group, all current non-employee directors as a
group and all nonexecutive officers as a group, the number of shares of Common
Stock subject to options granted under the Plan as of March 31, 1996 and the
average per-share exercise price of such options.
<TABLE>
<CAPTION>
OPTIONS GRANTED
--------------------------------
NUMBER OF AVERAGE
NAME OF INDIVIDUAL SHARES SUBJECT PER-SHARE
OR IDENTITY OF GROUP TO OPTIONS EXERCISE PRICE(1)
-------------------- -------------- -----------------
<S> <C> <C>
Joe Thomas Malugen, Chairman of the Board and
Chief Executive Officer...................... -0- -0-
H. Harrison Parrish, President................ -0- -0-
William B. Snow............................... 70,000 $15.62
S. Page Todd.................................. 75,000 24.65
Steven M. Lavoie.............................. 50,000 24.09
Executive Officer group (8 persons)........... 320,000 26.12
Non-employee director group (3 persons)....... 130,000 27.20
Non-executive officers and employee group (166
persons)..................................... 557,350 23.99
</TABLE>
- - --------
(1) These amounts are based on a weighted average exercise price that is
obtained by multiplying all options by their exercise price and then
dividing by the total number of options for such category. The closing
price of the Common Stock issuable upon the exercise of options under the
Plan as of April 15, 1996 was $27 1/8 per share.
The following is a summary of the Plan.
General. The committee administering the Plan has the authority to grant
either "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, nonstatutory stock options, stock
appreciation rights and other incentive grants. The Plan provides that options
may be granted thereunder to key employees, officers, directors or other
persons providing significant services to the Company.
Administration. The Plan provides that it shall be administered by a
committee established by the Board of Directors comprised of two or more
disinterested directors, as defined in Rule 16b-3 under the Exchange Act or any
successor rule thereto.
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<PAGE>
Terms of Grants. The terms of grants of options, stock appreciation rights
("SARs"), shares of restricted stock or stock bonuses under the Plan are
determined by the Stock Option Committee. Each grant of an option, SAR or
restricted stock is evidenced by a stock option agreement, stock appreciation
right agreement or restricted stock agreement. Grants are also subject to the
following terms and conditions:
(a) Stock Options. The term of each option and the manner in which it may
be exercised are determined by the Stock Option Committee; provided,
however, that no option may be exercisable more than ten years after the
date of grant or, in the case of an incentive stock option to an eligible
employee owning more than 10% of the Company's outstanding securities, no
more than five years. Payment for the shares purchased upon exercise of an
option may be in cash, or with the Stock Option Committee's consent, in
shares of the Company's Common Stock. The Plan provides that the aggregate
fair market value (determined at the time the option is granted) of the
Common Stock with respect to which incentive stock options are exercisable
for the first time by an optionee during any calendar year shall not exceed
$100,000.
(b) Terms of Stock Appreciation Rights. The Stock Option Committee may
grant SARs either alone or in conjunction with all or part of an option.
Upon the exercise of a SAR, a holder generally is entitled, without payment
to the Company, to receive from the Company in exchange therefor an amount
equal to the value of the excess of the fair market value on the date of
exercise of one share of Common Stock over its fair market value on the
date of grant (or, in the case of a SAR granted in connection with an
option, the excess of the fair market value of one share of Common Stock
over the option price per share under the option to which the SAR relates),
multiplied by the number of shares covered by the SAR or the option, or
portion thereof, that is surrendered. Payment by the Company upon exercise
of a SAR may be made in Common Stock valued at fair market value, in cash,
or partly in Common Stock and partly in cash, all as determined by the
Committee.
A SAR is exercisable only at the time or times established by the Committee.
If a SAR is granted in connection with an option, the following rules also
apply: (1) the SAR is exercisable only to the extent and on the same conditions
that the related option could be exercised; (2) upon exercise of the SAR, the
option or portion thereof to which the SAR relates terminates; and (3) upon
exercise of the option, the related SAR or portion thereof terminates.
(c) Terms of Restricted Stock and Stock Bonuses. The purchase price of
restricted shares of Common Stock offered for sale under the Plan, the
vesting schedule and all other terms, conditions and restrictions of the
issuance of restricted stock will be determined by the Stock Option
Committee, in its discretion, subject to the terms of the Plan. The
restrictions may include restrictions concerning transferability,
repurchase by the Company and forfeiture of the shares issued. The
restricted stock may be issued for such consideration (including promissory
notes and services) as determined by the Committee.
Upon sale and issuance of restricted stock or stock bonuses to an officer,
key employee or other person providing significant services to the Company, the
Company will issue certificates evidencing the stock but will retain possession
of the certificates until the shares have vested, at which time the
certificates representing the vested shares will be delivered to the issuee. In
the event the restricted stock is paid for by delivery of a promissory note,
however, all restricted stock generally will be required to be pledged to the
Company until the promissory note relating thereto is paid in full.
A person who receives restricted stock or a stock bonus will be entitled to
vote the stock and to receive any dividends or other distributions declared
with respect to the stock so long as he remains in the employ of or continues
to provide services to the Company; provided, however, that all dividends or
other distributions paid by the Company with respect to such shares of stock
shall be retained by the Company until the shares of Common Stock are no longer
subject to forfeiture or repurchase, at which time all accumulated amounts will
be paid to the recipient.
13
<PAGE>
(d) All Grants
(i) Termination of Employment. If the holder's employment terminates
for any reason other than death, disability or retirement, options and
SARs under the Plan may be exercised no later than 30 days after such
termination and may be exercised only to the extent the option or SAR
was exercisable as of the date of such termination. If the holder's
employment terminates because of the retirement or disability of the
holder, then options and SARs under the Plan may be exercised no later
than three months after such termination and may be exercised only to
the extent the options or SARs were exercisable at the date of such
retirement or disability. If a holder's employment terminates, any non-
vested portions of restricted stock awards or stock bonuses will be
repurchased by the Company at a price equal to the purchase price paid
therefor, subject to any applicable restrictions on the repurchase of
shares by the Company.
(ii) Death of Holder. If a holder should die while employed by the
Company, options and SARs may be exercised at any time within twelve
months after death, but only to the extent the options and SARs would
have been exercisable on the date of death.
(iii) Non-Transferability of Awards. Options and SARs are non-
transferable by the holder other than by will or the laws of descent
and distribution, or, except in the case of incentive stock options,
pursuant to a qualified domestic relations order defined under the
Internal Revenue Code of 1986 or Title I of the Employee Retirement
Income Security Act, and is exercisable during the holder's lifetime
only by such holder, or, in the event of death, by the holder's estate
or by a person who acquires the right to exercise the option or SARs by
bequest or inheritance.
Federal Income Tax Aspects. The following is a brief summary of certain of
the Federal income tax consequences of certain transactions under the Plan
based on Federal income tax laws in effect on January 1, 1996. This summary is
not intended to be exhaustive and does not describe state or local tax
consequences.
(a) Nonqualified Stock Options. In general, (i) no income will be
recognized by an optionee at the time a nonqualified stock option is
granted; (ii) at exercise, ordinary income will be recognized by the
optionee in an amount equal to the difference between the option price paid
for the shares and the fair market value of the shares, if unrestricted, on
the date of exercise; and (iii) at sale, appreciation (or depreciation)
after the date of exercise will be treated as either short-term or long-
term capital gain (or loss) depending on how long the shares have been
held.
(b) Incentive Stock Options. In general, no income will be recognized by
an optionee upon the grant or exercise of an incentive stock option
(although the difference between the value of the shares and the exercise
price is added to the tax base of the alternative minimum tax). If shares
of Common Stock are issued to the optionee pursuant to the exercise of an
incentive stock option, and if no disqualifying disposition of such shares
is made by such optionee within two years after the date of grant or within
one year after the issuance of such shares to the optionee, then upon the
sale of such shares, any amount realized in excess of the option price will
be taxed to the optionee as a long-term capital gain and any loss sustained
will be a long-term capital loss.
If shares of Common Stock acquired upon the exercise of an incentive stock
option are disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount equal to the excess (if any) of the fair
market value of such shares at the time of exercise (or, if less, the amount
realized on the disposition of such shares if a sale or exchange) over the
option price paid for such shares. Any further gain (or loss) realized by the
participant generally will be taxed as short-term or long-term capital gain (or
loss) depending on the holding period.
(c) Stock Appreciation Rights. There are no federal tax consequences to
the recipient of a SAR upon its grant. A holder exercising SARs will
generally recognize compensation income in an amount equal to the amount of
cash and/or the then fair market value of the shares of Common Stock
received upon exercise of the SAR in the tax year in which payment is made
in respect of the SAR and the Company will normally be entitled to a tax
deduction for an equivalent amount for the same year.
14
<PAGE>
(d) Restricted Stock and Stock Bonuses. Restricted stock and stock
bonuses generally will not be taxable to the recipient until they have
vested (i.e., the date when they are no longer subject to repurchase by the
Company or, if the recipient is potentially subject to liability under
Section 16(b) of the Exchange Act, when a sale would not subject the
shareholder to liability under Section 16(b), whichever is later). The tax
will be imposed at ordinary income rates on the difference between the fair
market value of the restricted stock on the date of vesting and its issue
price. Alternatively, the recipient may elect under Section 83(b) of the
Code to be taxed in the year he received the restricted stock. If the
recipient makes the Section 83(b) election, he will be taxed at ordinary
income rates on the difference between the fair market value of the
restricted stock on the date issued and its issue price, and no additional
tax will be imposed when the restricted stock vests. The Section 83(b)
election is irrevocable and must be made within 30 days of the issuance of
the restricted stock. Any subsequent increase or decrease in the fair
market value of the restricted stock will be taxed as a capital gain or
loss when the restricted stock is sold. In the event that a recipient of
restricted stock terminates employment during any vesting or other
restriction period and forfeits his shares, no deduction may be claimed and
taxes paid on award of the shares shall be forfeited. The Company generally
will be entitled to a deduction in the amount of the ordinary income
reportable by the recipient for the year in which it is reportable.
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO AUTHORIZE ADDITIONAL COMMON STOCK
The Company's Certificate of Incorporation (the "Certificate") presently
authorizes up to 30,000,000 shares of Common Stock, $.001 par value, and
2,000,000 shares of Preferred Stock, $0.10 par value. At the Record Date, there
were 12,359,308 shares of Common Stock issued and outstanding and 1,118,600
shares of Common Stock reserved for future issuance upon the exercise of
outstanding stock options. At the Record Date, there were no shares of
Preferred Stock issued or outstanding. After giving effect to the shares
already reserved for issuance, 16,522,092 shares of Common Stock and 2,000,000
shares of Preferred Stock are available for future issuance.
The Board of Directors has adopted a resolution proposing that the
Certificate be amended to increase the number of shares of Common Stock which
the Company is authorized to issue from 30,000,000 to 60,000,000. If approved
by stockholders, such additional authorized shares would be available for
issuance at the discretion of the Board of Directors, without further
stockholder approval (subject to applicable NASDAQ requirements and Delaware
law), to take advantage of future opportunities for equity financing, in
connection with acquisitions, in connection with split-ups of the Common Stock
and for other corporate purposes, without the delay and expense incident to the
holding of a special meeting of stockholders to consider any specific issuance.
The Board of Directors does not intend to issue any Common Stock or
securities convertible into Common Stock except on terms that the Board deems
to be in the best interests of the Company and its stockholders. Any future
issuance of Common Stock or securities convertible into Common Stock will be
subject to the rights of holders of outstanding shares of any Preferred Stock
which the Company may issue in the future. While the Company expects to issue
additional shares of its Common Stock in connection with certain pending
acquisitions, the Company's management has no arrangements, agreements,
understandings or plans at the present time for the issuance or use of the
additional shares of Common Stock to be authorized by the proposed amendment to
the Certificate.
The authorized but unissued shares of Common Stock could be used by incumbent
management or the Board of Directors to make more difficult a change in control
of the Company. Under certain circumstances such shares could be used to create
voting impediments or to frustrate persons seeking to effect a takeover or
otherwise gain control of the Company. For example, such shares could be
privately placed with purchasers who might side with the Board in opposing a
hostile takeover bid. However, this proposal to amend the Certificate is not in
response to any effort of which the Company is aware to accumulate the
Company's stock or obtain control of the Company.
15
<PAGE>
In addition, the increase in authorized Common Stock might be considered as
having the effect of discouraging an attempt by another person or entity,
through the acquisition of a substantial number of shares of the Common Stock,
to acquire control of the Company with a view to imposing a merger, sale of all
or any part of the Company's assets or a similar transaction that may not be in
the best interest of all of the stockholders, since the issuance of new shares
could be used to dilute the stock ownership of a person or entity seeking to
obtain control of the Company. For information with respect to the ownership of
shares (including shares issuable upon exercise of stock options) of the
Company's voting stock by directors and executive officers, see "Voting
Securities and Principal Holders Thereof" and "Compensation of Directors and
Executive Officers."
The text of the proposed amendment increasing the authorized Common Stock is
set forth below.
"Resolved, that the first paragraph of Article Fourth of the Company's
Certificate of Incorporation be amended to read in its entirety as follows:
FOURTH:
1. The Corporation is authorized to issue two classes of stock, to be
designated "Common Stock" and "Preferred Stock," respectively. The total
number of shares which the Corporation is authorized to issue is sixty-two
million (62,000,000) shares. The number of shares of Common Stock
authorized to be issued is sixty million (60,000,000), with a par value of
$0.001 per share. The number of shares of Preferred Stock authorized to be
issued is two million (2,000,000), with a par value of $0.10 per share."
Under the provisions of Delaware law, the affirmative vote of the holders of
a majority of the outstanding shares of the Company's Common Stock is required
to adopt the proposed amendment. The Board of Directors recommends a vote FOR
the proposal to increase the authorized Common Stock.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, as well as persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of beneficial ownership and reports of
changes in beneficial ownership of the Company's Common Stock. Directors,
executive officers and greater-than-ten-percent stockholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on a review of copies of reports filed with the SEC and
submitted to the Company since January 1, 1995 and on written representations
by certain directors and executive officers of the Company, the Company
believes that, with the exceptions described below, all of the Company's
directors and executive officers filed all required reports on a timely basis
during the past fiscal year. Craig D. Steeves and J. Steven Roy were late in
filing a Form 3, Arthur B. Griffin and John Roberts were late in filing a Form
4 and Steven M. Lavoie was late in filing a Form 5. In addition, William B.
Snow filed an amended Form 4 correcting an under-reporting of an open market
purchase.
INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended December 31,
1995 were Ernst & Young LLP. The Board of Directors of the Company has not yet
considered the selection of an auditor for the current fiscal year. It is
anticipated that Board will consider the selection and make a decision by June
30, 1996. A representative of Ernst & Young will be available at the Annual
Meeting to respond to appropriate questions or make any other statements such
representative deems appropriate.
16
<PAGE>
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders are advised that any stockholder proposal, including nominations
to the Board of Directors, intended for consideration at the 1997 Annual
Meeting must be received by the Company no later than February 10, 1997 to be
included in the proxy material for the 1997 Annual Meeting. It is recommended
that stockholders submitting proposals direct them to the Company, c/o S. Page
Todd, Secretary of the Company, and utilize certified mail, return-receipt
requested in order to ensure timely delivery.
OTHER MATTERS
The Board of Directors knows of no matter to come before the Annual Meeting
other than as specified herein. If other business should, however, be properly
brought before such meeting, the persons voting the proxies will vote them in
accordance with their best judgment.
THE STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, AND RETURN PROMPTLY THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
/s/ JOE THOMAS MALUGEN
Joe Thomas Malugen
Chairman of the Board
May 10, 1996
17
<PAGE>
MOVIE GALLERY, INC.
COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Common Stock of MOVIE GALLERY, INC. (the
"Company") hereby appoints JOE THOMAS MALUGEN, H. HARRISON PARRISH and WILLIAM
B. SNOW, and each of them, proxies of the undersigned, each with full power to
act without the other and with the power of substitutions, to represent the
undersigned at the Annual Meeting of Stockholders of the Company to be held at
the Bel Air Hotel, 701 Stone Canyon Road, Los Angeles, California 90077, on June
6, 1996 at 10:00 A.M. (Pacific Daylight time), and at any adjournments thereof,
and to vote all shares of Common Stock of the Company standing in the name of
the undersigned with all the powers the undersigned would possess if personally
present, in accordance with the instructions on the reverse hereof, and in their
discretion upon such other business as may properly come before the meeting.
The undersigned hereby revokes any other proxy to vote at such Annual Meeting
of Stockholders and hereby ratifies and confirms all that said proxies, and each
of them, may lawfully do by virtue hereof. The undersigned also acknowledges
receipt of the notice of Annual Meeting of Stockholders to be held June 6, 1996,
the Proxy Statement and the Annual report to Stockholders for the year ended
December 31, 1995 furnished herewith.
[X] Please mark votes as in this example.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS BELOW, AND WILL BE
VOTED IN FAVOR OF ANY MATTERS AS TO WHICH NO INSTRUCTIONS ARE INDICATED. PLEASE
MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
1. Election of Directors.
Nominees standing for election: Malugen, Parrish, Snow, Sigoloff, Smith and
Troy
[_] FOR [_] ABSTAIN [_]________________________
For all nominees except
as noted above
2. Proposal to amend the Company's 1994 Stock Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Proposal to amend the Company's Certificate of Incorporation.
[_] FOR [_] AGAINST [_] ABSTAIN
[_] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW.
[_] MARK HERE IF YOU PLAN TO ATTEND THE MEETING.
Signature:_______________________________
Date:____________________________________
Signature:_______________________________
Date:____________________________________
