<PAGE>
As filed with the Securities and Exchange Commission on May 28, 1996
Reg. No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
MOVIE GALLERY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 739 W. Main Street 63-1120122
(State or other jurisdiction of Dothan, Alabama 36301 (I.R.S. Employer
incorporation or organization) (334) 677-2108 Identification No.)
</TABLE>
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Page Todd
Movie Gallery, Inc.
739 W. Main Street
Dothan, Alabama 36301
(334) 677-2108
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With a copy to:
James C. Lockwood, Esq.
Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, California 90067
(310) 553-4441
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
_____________________
CALCULATION OF REGISTRATION FEE
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============================================================================================================
Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering price aggregate offering registration
securities to be registered registered per unit(1) price(1) fee
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, .001 par value... 28,777 shares 31.75 $913,670 $3,151
============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee and
based, pursuant to Rule 457(c), on the average of the high and low sale
prices of Registrant's Common Stock as reported on the Nasdaq Stock Market
on May 22, 1996.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 28, 1996
PROSPECTUS
MOVIE GALLERY, INC.
28,777 Shares of Common Stock
This Prospectus relates to the offer by certain stockholders named herein
(the "Selling Stockholders") for sale to the public from time to time of up to
28,777 shares of Common Stock, .001 par value (the "Common Stock"), of Movie
Gallery, Inc. (the "Company"). The shares of Common Stock being offered hereby
are referred to herein as the "Shares." The Company will not receive any
proceeds from the sale of the Common Stock offered hereby. See "Selling
Stockholders" and "Use of Proceeds."
The Common Stock is traded on The Nasdaq Stock Market under the symbol
"MOVI." As of May 22, 1996, the last sale price for the Common Stock as
reported on The Nasdaq Stock Market was $31-3/4.
This offering is not being underwritten. The Selling Stockholders have
advised the Company that they may sell, directly or through brokers, all or a
portion of the shares of Common Stock owned by each of them in negotiated
transactions or in transactions on The Nasdaq Stock Market or otherwise at
prices and terms prevailing at the time of sale. It is anticipated that usual
and customary brokerage fees will be paid by the Selling Stockholders. In
connection with such sales, the Selling Stockholders and any participating
broker or dealer may be deemed to be "underwriters" of the Shares within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
The Company has informed the Selling Stockholders that the anti-
manipulation provisions of Rules 10b-6 and 10b-7 under the Securities Exchange
Act of 1934 (the "Exchange Act") may apply to their sales of the Shares. The
Company also has advised the Selling Stockholders of the requirements for
delivery of this Prospectus in connection with any sale of the Shares.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN MATERIAL RISKS ASSOCIATED WITH AN INVESTMENT IN THE SHARES OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
Price to Proceeds to Selling
Public (1) Stockholders (2)
- --------------------------------------------------------------------------------
<S> <C> <C>
Per Share of Common Stock... $ $
Total....................... $
================================================================================
</TABLE>
(1) Based on the last reported sale price of the Common Stock on The Nasdaq
Stock Market on May __, 1996.
(2) All proceeds from the sale of the Shares offered hereby will be received by
the Selling Stockholders. The amount shown is without deduction for
brokerage fees which may be paid by the Selling Stockholders and for
offering expenses, estimated at $15,000, payable by the Company pursuant to
its agreements and understandings with the Selling Stockholders. See "Use
of Proceeds."
The date of this Prospectus is ________, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy or information statements, and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the following regional
offices: 7 World Trade Center, New York, New York 10048, and Northwestern
Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials also can be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Securities are traded on The Nasdaq National
Market and the Company's reports, proxy or information statements, and other
information filed with Nasdaq may be inspected at Nasdaq's offices at 1735 K
Street, N.W., Washington, D.C., 20006.
Additional information regarding the Company and the Shares offered hereby
is contained in the Registration Statement on Form S-3 of which this Prospectus
is a part (including all exhibits and amendments thereto, the "Registration
Statement"), filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). For further information pertaining to the
Company and the Common Stock, reference is made to the Registration Statement
and the exhibits thereto, which may be inspected and copied at the Commission's
public reference facilities at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been previously filed by the Company
(Commission File No. 0-24548) with the Commission under the Exchange Act are
incorporated in this Prospectus by reference: (a) the Company's Annual Report on
Form 10-K, Form 10-K/A and Form 10-K/A-2 for the year ended December 31, 1995;
(b) all reports filed by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act since December 31, 1995; and (c) the description of the Company's
Common Stock in the Company's Form 8-A Registration Statement.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part of this Prospectus from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in any other subsequently filed document which also is, or
is deemed to be, incorporated by reference herein) modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
On request, the Company will provide, without charge, to each person to
whom this Prospectus is delivered a copy of any or all of the documents
incorporated by reference (other than exhibits to such documents that are not
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Movie Gallery, Inc., 739 W. Main Street, Dothan,
Alabama 36301, Attention: Page Todd, or by telephone at (334) 677-2108.
2
<PAGE>
THE COMPANY
GENERAL
As of May 20, 1996, Movie Gallery, Inc. (the "Company") owned and operated
757 video specialty stores and had 136 franchisees and licensees in 18 states,
primarily in the Southeast and Midwest, that rent and sell videocassettes and
video games. Since the Company's initial public offering in August 1994, the
Company has grown from 97 stores to its present size through acquisitions and
new store openings. The Company believes it is among the three largest video
specialty retailers in the United States in terms of both revenue and number of
stores owned. For the year ended December 31, 1995, revenue was $123.1 million
and net income was $14.5 million, representing 219% and 182% increases in
revenue and net income, respectively, from the prior year.
The Company was incorporated in Delaware in June 1994 under the name Movie
Gallery, Inc. From March 1985 until the present time, substantially all of the
Company's operations have been conducted through M.G.A., Inc., an Alabama
corporation. The Company's executive offices are located at 739 W. Main Street,
Dothan, Alabama 36301, and its telephone number is (334) 677-2108.
RECENT DEVELOPMENTS
No material changes in the Company's affairs have occurred since December
31, 1995, which have not been disclosed in the Company's Annual Report on Form
10-K, Form 10-K/A and Form 10-K/A-2.
3
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus and the information
incorporated herein by reference, the following risk factors should be
considered carefully in evaluating the Company and its business before
purchasing the Shares offered by this Prospectus.
ABILITY TO SUSTAIN GROWTH AND MANAGE OPERATIONS
The Company's growth strategy includes the acquisition of existing video
specialty stores and the opening of new stores. Through May 20, 1996, the
Company has acquired 592 stores and opened 129 new stores since January 1, 1994,
and anticipates opening approximately 42 additional stores during the remainder
of 1996. In addition, the Company has closed 37 stores since January 1, 1994.
Execution of its growth strategy requires the Company's existing management
personnel to, among other things, (i) identify acquisition candidates who are
willing to sell at reasonable prices; (ii) consummate identified acquisitions;
(iii) identify new sites where the Company can successfully compete and
negotiate acceptable leases and implement cost-efficient development plans for
new stores; (iv) obtain financing for acquisitions and new store development;
(v) hire, train and assimilate store managers and other store personnel; (vi)
replace the purchasing and marketing systems of acquired stores with the systems
used by the Company; and (vii) integrate each store's management information
system into the Company's systems. The Company's rapid growth could strain the
ability of existing management to accomplish these tasks and lessen the
effectiveness of management with respect to existing operations. There is no
assurance that the Company will successfully open new stores or identify,
negotiate, finance, consummate or assimilate the acquisition of additional video
specialty stores in the future. Continued substantial growth could have a
material adverse effect on the Company's results of operations, while on the
other hand, the failure to maintain the Company's substantial growth rate could
have a material adverse effect on the price of the Company's Common Stock.
In addition to the management challenges presented by the growth noted
above and the continued implementation of the Company's growth strategy, future
growth will require significant capital. In the past, acquisitions and store
openings have been financed primarily with proceeds from the Company's previous
public offerings of Common Stock, bank debt, seller financing and internally
generated cash flow. The Company has a $60 million committed credit facility
which expires on April 30, 1997, of which $42.5 millions had been borrowed at
May 20, 1996. The Company may seek to raise additional capital through future
public or private sales of debt or equity securities. However, there can be no
assurance that the Company can obtain sufficient capital on reasonable terms to
implement its growth strategy. Further, the issuance of equity securities to
raise capital to acquire or open stores may have the effect of diluting the
interests of existing stockholders.
ACQUISITION RISKS
The Company's growth strategy involves the continued acquisition of a
substantial number of existing video specialty stores. This strategy includes
the following risks:
Competition for Acquisitions. Certain of the Company's competitors may seek
to acquire some of the same video specialty stores that the Company seeks to
acquire. Such competition for acquisitions would be likely to increase
acquisition prices and related costs and result in fewer acquisition
opportunities, which could have a material adverse effect on the Company's
growth. In addition, certain acquisitions may result in the Company being
required to file notifications with the Federal Trade Commission (the "FTC") and
the antitrust division of the Department of Justice (the "Division"). Such
acquisitions will not be able to be consummated until the requisite waiting
periods have terminated and there can be no assurance that the FTC or the
Division will not seek to enjoin such an acquisition as anti-competitive.
Misrepresentations and Breaches by Sellers. Typically, the Company's
acquisitions have been, and where possible in the future will be, asset
acquisitions, subject to certain stated liabilities such as store leases. Under
certain circumstances, the Company acquires all the stock of the to be acquired
entity and thereby the assets acquired are subject to all liabilities of that
entity, stated or otherwise. In completing each acquisition, whether a purchase
of assets or stock, the Company has relied, and will in future acquisitions
rely, upon certain representations, warranties
4
<PAGE>
and indemnities made by the sellers with respect to each of the acquisitions, as
well as its own due diligence investigations. There can be no assurance that
such representations and warranties will be true and correct or that the
Company's due diligence investigations will uncover all materially adverse facts
relating to the operations and financial condition of the acquired businesses.
In the event that the Company is required to pay for obligations not expressly
assumed, or which have not been disclosed by the seller, in connection with such
acquisitions, or in the event there are material misrepresentations, there can
be no assurance that it will be able to recoup the costs of paying such
obligations or recover its damages from the sellers.
Limited Knowledge and Operating History. Notwithstanding its own due
diligence investigations, management will have limited knowledge about the
specific operating histories, trends and customer buying patterns of the video
specialty stores that the Company acquires; moreover, certain stores may have
limited operating histories. Consequently, there is no assurance that the
Company will make acquisitions at favorable prices, that acquired stores will
perform as well as they have performed historically or that the Company will
have sufficient information to accurately analyze the markets in which it elects
to make acquisitions. Failure to pay reasonable prices for acquisitions or to
acquire profitable video specialty stores could have a material adverse effect
on the Company's results of operations.
Integration of Acquired Stores. The success of acquired video specialty
stores depends in large part on the Company's ability to integrate these stores
into the Company's purchasing, marketing and management information systems.
Failure to integrate the acquired stores successfully and on a timely basis
could have a material adverse effect on the Company's results of operations.
Certain recent acquisitions have involved stores owned and operated by
franchisees or licensees. The Company has assumed the seller's obligations as a
franchisor or licensor. The success of these acquisitions will be dependent, in
part, upon the manner in which the franchisees or licensees operate their
stores. There can be no assurance that these existing franchisees will have the
abilities necessary to successfully operate the franchised stores in a manner
consistent with the Company's standards. See "Business -- Franchise Agreements."
Amortization of Goodwill and Noncompetition Charges. The Company's
acquisitions generally involve the recording of a significant amount of goodwill
and deferred charges on its balance sheet, which are amortized over varying
periods of time up to 20 years. This amortization will reduce reported earnings.
At March 31, 1996, the Company had recorded $32.5 million in goodwill, net of
accumulated amortization, which will be amortized over 20 years. In addition,
the Company had recorded $11.7 million in deferred charges net of accumulated
amortization, primarily related to noncompetition agreements, substantially all
of which will be amortized over a period of three, five or ten years.
OPERATING RISKS
Limited Operating History. The Company began operating its first video
specialty store in 1985. Although the Company has been profitable for the last
five years, there is no assurance that it will be able to maintain its current
level of profitability. In addition, many of the Company's stores have a limited
operating history, and approximately 74% of the 757 stores operated at May 20,
1996, have been acquired or opened by the Company since January 1, 1994.
Competition. The video retail industry is highly competitive and there are
few barriers to entry. In 1994, there were approximately 27,400 video specialty
stores in the United States. The Company competes with many other video
specialty stores, including stores operated by regional and national chains, as
well as other businesses offering videocassettes and video games such as
supermarkets, pharmacies, convenience stores, bookstores, mass merchants, mail
order operations and other retailers. In addition, the Company competes with all
leisure-time activities, such as movie theaters, network and cable television,
direct broadcast satellite television, live theater, sporting events and family
entertainment centers. Approximately 25% of the Company's stores compete with
Entertainment, the dominant video specialty retailer in the United States, which
has significantly greater financial and marketing resources, market share and
name recognition than the Company.
5
<PAGE>
Technical Obsolescence. The Company competes with, among others, pay-per-
view cable television systems ("Pay-Per-View"), in which subscribers pay a fee
to see a movie that they select. Pay-Per-View presently offers only a limited
number of channels and movies in certain cable television markets; however,
recently developed technologies permit certain cable companies, direct broadcast
satellite companies (such as Direct TV), telephone companies and other
telecommunications companies to transmit a much greater number of movies to
homes throughout the United States at frequent intervals (often as frequently as
every five minutes) throughout the day, referred to as "Near Video-on-Demand"
("NVOD"). NVOD does not offer full interactivity or VCR functionality such as
allowing the consumer to control the playing of the movie, starting, stopping
and rewinding. Ultimately, further improvements in these technologies could lead
to the availability of a broad selection of movies to consumers on demand,
referred to as Video-on-Demand ("VOD"), at a price which may be competitive with
the price of videocassette rentals and with VCR functionality. Certain cable and
other telecommunications companies have tested and are continuing to test
limited versions of NVOD and VOD in various markets throughout the United States
and Europe. Changes in the manner in which movies are marketed, primarily
related to an earlier release of movie titles to NVOD and VOD distribution
channels, could substantially decrease the demand for videocassette rentals,
which would have a material adverse effect on the Company's business. Currently,
movie titles are released to the video specialty store market from 30 to 120
days before release to the Pay-Per-View (including NVOD and VOD) distribution
channels.
The Company anticipates that movies recorded on compact discs, the same
size as audio compact discs, will be introduced during late 1996. At that time,
playback machines which will play both audio and video compact discs will be
introduced. Because the cost to produce a video compact disc and a tape cassette
are expected to be similar, and, because of the ease of use and durability of
compact discs, it is anticipated that eventually video compact discs may begin
to replace videocassettes. The Company expects to offer video compact discs for
rental and sale once they are introduced commercially. In addition, the advent
of video compact discs may result in consumers purchasing more films than in the
past, which could have a materially adverse effect on the Company's rental
volume and, as a result, on its profit margins.
Dependence on a Supplier. The Company's continuing profitability depends in
part on its ability to acquire sufficient quantities of the latest and most
popular titles (videocassettes and video games) on a timely basis and at
favorable prices. During 1994, 1995 and to date in 1996, the Company has
purchased over 80% of its supply of videocassettes and video games from a single
distributor, Sight & Sound Distributors, Inc. ("Sight & Sound"). The current
contract with Sight & Sound expires on January 31, 1997. The Company receives a
substantial advertising allowance and marketing funds from Sight & Sound. While
the Company believes that it can readily obtain comparable quantities of titles
and terms from at least five other suppliers, the number of alternative
suppliers has diminished in recent years and the termination of the Company's
present relationship with Sight & Sound could adversely affect the Company's
results of operations until a suitable replacement is found. Also, there can be
no assurance that such replacement would provide service, support or payment
terms as favorable as those provided by Sight & Sound.
Quarterly Fluctuations. Future operating results may be affected by many
factors, including variations in the number and timing of store openings, the
timing of, and public acceptance of new release titles available for rental and
sale, the timing of the acquisition of existing video specialty stores, the
extent of competition, marketing programs, weather, special or unusual events,
such as the Olympics or a televised trial of significant public interest, and
other factors that may affect retailers in general. Any concentration of new
store openings and the related new store pre-opening costs near the end of a
fiscal quarter could have an adverse effect on the financial results for that
quarter.
Seasonality. The videocassette and video game rental portions of the
Company's business are somewhat seasonal, with revenues in April and May
generally being lower due in part to the change to Daylight Savings Time and
improved weather, and revenues in September and October generally being lower
due in part to the start of school, the football season and the new television
season. The seasonality of the Company's business could adversely affect its
financial results.
Pricing of Videocassettes. The price at which the Company sells or rents
videocassettes to its customers ultimately depends upon the pricing set by movie
studios. Accordingly, changes in the movie studios' pricing structure
6
<PAGE>
could result in a competitive disadvantage for the Company relative to other
sellers of movies, including, without limitation, Pay-Per-View (including NVOD
and VOD). Such a change could have a material adverse effect on the Company's
profitability. Recently, the movie studios have begun pricing more of their film
releases for sale to the consumer rather than rental, and to the extent that
such sales reduce the volume of rentals, the Company's profit margins will be
reduced.
INSTALLATION OF A NEW MANAGEMENT INFORMATION SYSTEM
In early 1994, anticipating the acquisition of addition stores, the Company
undertook to develop a more versatile and comprehensive point-of-sale system
("POS"). The new system, which had been installed in over 260 of the Company's
stores as of May 20, 1996, provides more complete information with respect to
store operations (including the rental history of titles and daily operations
for each store) which is telecommunicated to the corporate office on a daily
basis. In March 1996, the Company began the installation of an enhanced version
of the POS. The POS is installed in all developed stores prior to opening, and
the Company installs its POS in any acquired store that does not have an
established POS system which is compatible with the Company's POS as soon after
acquisition as practicable. Beginning July 1, 1996, the Company expects to begin
replacing POS systems in other acquired stores with the Company's enhanced
system. This process is expected to take up to 12 months to complete.
The Company's POS system records all rental and sale information upon
customer checkout using scanned bar code information, and updates the
information when the videocassettes and video games are returned and the fees
are paid. This POS system is tied to a management information system ("MIS") at
the corporate offices. Each night the POS system transmits store data into the
MIS and all data is processed, and reports are generated, which allow management
to effectively monitor store operations and inventory, as well as to review
rental history by title and location to assist in making purchasing decisions
with respect to new releases. The MIS also enables the Company to perform its
monthly physical inventory using bar code recognition, which is more efficient,
more accurate and less costly than a manual count.
In addition, the Company has installed a new financial reporting system
relating to the general ledger, accounts payable and payroll functions.
Additional system conversions related to revenue and inventory payable systems
are expected to take place during 1996.
There can be no assurance that the installation of these new systems and
the modifications of certain existing systems, which involves the restraining of
certain employees, will not cause significant description in operations and
materially and adversely effect the Company's results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends on the continued services of certain
key management personnel, including Joe Thomas Malugen and H. Harrison Parrish,
its Chairman of the Board and President, respectively. The loss of either one of
these individuals could have a material adverse effect on the Company's results
of operations. The Company has $1.0 million insurance policies on the lives of
each of Messrs. Malugen and Parrish and has entered into employment agreements
with each of them. The Company's continued growth and profitability also depend
on its ability to attract and retain other management personnel, including
qualified store managers.
CONTROL BY EXISTING STOCKHOLDERS
At May 20, 1996, two of the Company's existing stockholders, Joe Thomas
Malugen and H. Harrison Parrish, its Chairman of the Board and President,
respectively, owned approximately 42.7% of the Company's outstanding Common
Stock. As a result, these stockholders, if acting together, as a practical
matter, would be able to effectively control all matters requiring approval by
the stockholders of the Company, including the election of all members of the
board of directors. The voting power of these stockholders could prevent a
change in control of the Company.
7
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SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial number of shares of the Common Stock in the
public market following this offering, or the perception that the sale of a
substantial number of shares might occur, could have a material adverse effect
on the market price of the Common Stock. At the date of this Prospectus,
5,375,000 shares of Common Stock held by Messrs. Malugen and Parrish were
eligible for sale pursuant to Rule 144 under the Securities Act of 1933. Shares
issuable upon exercise of options granted prior to the Company's initial public
offering as well as shares issuable upon exercise of options which have been or,
in the near future, will be registered pursuant to a Form S-8 Registration
Statement, are freely tradeable, subject in certain cases to the limitations of
Rule 144.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares. The Company will pay the costs of this offering, which are estimated to
be $15,000.
SELLING STOCKHOLDERS
The following table sets forth, as of May 20, 1996, the number of shares of
Common Stock beneficially owned prior to this offering, the number of shares
offered hereby and the number of shares beneficially owned after this offering
(assuming the sale of all shares of Common Stock being offered hereby) by the
Selling Stockholders.
<TABLE>
<CAPTION>
Common Stock
Common Stock Beneficially
Beneficially Common Stock Owned After
Selling Owned Prior Being Completion
Stockholders to Offering Offered of Offering
- ----------------------- ------------ ------------ ------------
<S> <C> <C> <C>
David M. Kueber........ 16,605 16,605 0
Christopher Klapheke... 12,172 12,172 0
</TABLE>
____________________________
(1) These Selling Stockholders acquired their shares in connection with an
acquisition completed on October 1, 1995.
8
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby may be offered and sold from time
to time by the Selling Stockholders listed above. The Selling Stockholders will
act independently of the Company in making decisions with respect to the timing,
market, or otherwise at prices related to the then current market price or in
negotiated transactions.
The shares of Common Stock covered by this Prospectus may be sold by the
Selling Stockholders in one or more transactions on NASDAQ, or otherwise at
prices and at terms then prevailing or at prices related to the then current
market price, or in negotiated transactions. The shares of Common Stock may be
sold by one or more of the following: (a) a block trade in which the broker or
dealer so engaged will attempt to sell the shares of Common Stock as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus; and (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers.
Thus, the period of distribution of such shares of Common Stock may occur over
an extended period of time.
The Company is paying all of the other expenses of registering the
securities offered hereby under the Securities Act estimated to be $15,000 for
filing, legal, accounting and miscellaneous fees and expenses. In effecting
sales, broker-dealers engaged by the Selling Stockholders may arrange for other
broker-dealers to participate. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the Selling Stockholders in
connection with such sales. The Company will not receive any proceeds from any
sales of the Common Stock by the Selling Stockholders.
In offering the securities, the Selling Stockholders and any broker-dealers
and any other participating broker-dealers who execute sales for the Selling
Stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales, and any profits realized by the
Selling Stockholders and the compensation of such broker-dealer may be deemed to
be underwriting discounts and commissions.
The Company has advised the Selling Stockholders that during such time as
they may be engaged in a distribution of the Shares included herein they are
required to comply with Rules 10b-6 and 10b-7 under the Exchange Act (as those
Rules are described in more detail below) and, in connection therewith that they
may not engage in any stabilization activity, except as permitted under the
Exchange Act, are required to furnish each broker-dealer through which Common
Stock included herein may be offered copies of this Prospectus, and may not bid
for or purchase any securities of the Company or attempt to induce any person to
purchase any securities except as permitted under the Exchange Act.
Rule 10b-6 under the Exchange Act prohibits, with certain exceptions,
participants in a distribution from bidding for or purchasing, for an account in
which the participant has a beneficial interest, any of the securities that are
the subject of the distribution. Rule 10b-7 governs bids and purchases made in
order to stabilize the price of a security in connection with a distribution of
the security.
9
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 2,000,000 shares of Preferred Stock,
$0.10 par value, none of which are issued and outstanding, and 30,000,000 shares
of Common Stock, $0.001 par value, 12,583,994 of which were issued and
outstanding as of May 20, 1996.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Because holders
of Common Stock do not have cumulative voting rights, the holders of a majority
of the shares of Common Stock represented at a meeting can elect all of the
directors of the Company. See "Risk Factors-- Control by Existing Stockholders."
Subject to any preferences that may be applicable to any then outstanding
Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. In the event of a liquidation, dissolution or winding up of
the Company, holders of the Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of
any outstanding Preferred Stock. Holders of Common Stock have no preemptive
rights and no right to convert their Common Stock into any other securities. All
outstanding shares of Common Stock are, and all shares of Common Stock to be
outstanding upon completion of this offering will be, fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 2,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by stockholders. The issuance of Preferred Stock could adversely
affect the voting power of holders of Common Stock, and the likelihood that such
holders will receive dividend or liquidation payments and payments upon
liquidation and could have the effect of delaying, deferring or preventing a
change in control of the Company. The Company has no present plans to issue any
shares of Preferred Stock.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Delaware law"), an anti-takeover law. In general,
the statute prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
For purposes of Section 203, a "business combination" includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder, and an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the Company's voting stock.
The Company's Certificate of Incorporation also requires that any action
required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of the stockholders and may
not be effected by a consent in writing. In addition, special meetings of the
stockholders of the Company may be called only by the Board of Directors, the
Chairman of the Board or the Chief Executive Officer. These provisions may have
the effect of deterring hostile takeovers or delaying changes in control or
management of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock of the Company is
AmSouth Bank of Alabama, Birmingham, Alabama.
10
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by Troy & Gould Professional Corporation,
Los Angeles, California. Joseph F. Troy is a member of Troy & Gould Professional
Corporation and is a director of the Company and holds options to purchase
60,000 shares of Common Stock and other attorneys at that firm hold 3,000 shares
of Common Stock.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K, Form 10 K/A and Form 10K/A-2 for the year ended
December 31, 1995, have been so incorporated in reliance on the report of Ernst
& Young LLP, independent auditors, given upon the authority of such firm as
expects in accounting and auditing.
11
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or make any representations, other than those contained in this
Prospectus, in connection with the offering hereby, and, if given or made, such
information and representations must not be relied upon as having been
authorized by the Company or the Selling Stockholders. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities to any person in any State or other jurisdiction in which such offer
or solicitation is unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company or the facts herein set
forth since the date hereof.
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information......................... 3
Incorporation of Certain
Documents by Reference...................... 3
The Company................................... 4
Recent Developments........................... 5
Risk Factors.................................. 5
Use of Proceeds............................... 9
Selling Stockholders.......................... 10
Plan of Distribution.......................... 13
Description of Capital Stock.................. 14
Legal Matters................................. 17
Experts....................................... 17
</TABLE>
28,777 Shares of Common Stock
MOVIE GALLERY, INC.
____________
PROSPECTUS
____________
___________, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company estimates that expenses in connection with the distribution
described in this Registration Statement will be as follows. All expenses
incurred with respect to the distribution will be paid by the Company.
<TABLE>
<S> <C>
SEC registration fee................................ $ 3,151
Accounting fees and expenses........................ 5,000
Legal fees and expenses............................. 5,000
Miscellaneous....................................... 1,849
-------
Total.............................................. $15,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation and the Bylaws of the Company provide for
the indemnification of directors and officers to the fullest extent permitted by
the General Corporation Law of the State of Delaware (the "GCL").
Section 145 of the GCL authorizes indemnification when a person is made a
party to any proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or was serving as a
director, officer, employee or agent of another enterprise, at the request of
the corporation, and if such person acted in good faith and in a manner
reasonably believed by him or her to be in, or not opposed to, the best
interests of the corporation. With respect to any criminal proceeding, such
person must have had no reasonable cause to believe that his or her conduct was
unlawful. If it is determined that the conduct of such person meets these
standards, he or she may be indemnified for expenses incurred and amounts paid
in such proceeding if actually and reasonably incurred by him or her in
connection therewith.
If such a proceeding is brought by or on behalf of the corporation (i.e., a
derivative suit), such person may be indemnified against expenses actually and
reasonably incurred if he or she acted in good faith and in a manner reasonably
believed by him or her to be in, or not opposed to, the best interests of the
corporation. There can be no indemnification with respect to any matter as to
which such person is adjudged to be liable to the corporation; however, a court
may, even in such case, allow such indemnification to such person for such
expenses as the court deems proper. Where such person is successful in any such
proceeding, he or she is entitled to be indemnified against expenses actually
and reasonably incurred by him or her. In all other cases indemnification is
made by the corporation upon determination by it that indemnification of such
person is proper because such person has met the applicable standard of conduct.
The Company has entered into separate but identical indemnity agreements
(the "Indemnity Agreements") with each director and executive officer of the
Company (the "Indemnitees"). 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 charges, costs, expenses of investigation and expenses of
defense of legal actions, suits or proceedings payable by reason of the fact
that the Indemnitee is or was a director and/or officer of the Registrant or is
or was serving at the request of the Registrant as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, in connection with the defense or settlement of such proceedings,
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 Registrant 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
II-1
<PAGE>
claim shall be paid by the Company (and shall be paid by the Company in advance
of the final disposition thereof at the written request of the Indemnitee if the
Indemnitee undertakes to repay the Company for any costs or expenses so advanced
if it shall ultimately be determined by a court of competent jurisdiction in a
final, nonappealable adjudication that he is not entitled to indemnification
under the Indemnity Agreement) 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 or she 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 or her
conduct was unlawful; or (iii) the Indemnitee intentionally breached his or her
duty to the Company or its stockholders.
II-2
<PAGE>
ITEM 16. EXHIBITS
The following exhibits are filed as a part of this Registration Statement:
5 Opinion of Troy & Gould Professional Corporation.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Troy & Gould Professional Corporation (contained in
Exhibit 5).
24 Power of Attorney (contained in Part II).
ITEM 17. UNDERTAKINGS
(a) The undersigned Company hereby undertakes:
(1) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned Company hereby undertakes:
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dothan, State of Alabama on May __, 1996.
MOVIE GALLERY, INC.
By:
------------------------------------
Joe Thomas Malugen
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Joe Thomas Malugen and Page Todd, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Chairman and Chief Executive Officer May __, 1996
- --------------------- (Principal Executive Officer)
Joe Thomas Malugen
Vice Chairman of the Board May __, 1996
- --------------------- Board and Chief Financial
William B. Snow Officer (Principal Financial Officer)
Senior Vice President - and May __, 1996
- --------------------- Principal Accounting Officer
Steven Roy (Principal Financial and
Accounting Officer)
President and Director May __, 1996
- ---------------------
H. Harrison Parrish
Director May __, 1996
- ---------------------
Sanford Sigoloff
Director May __, 1996
- ---------------------
Philip B. Smith
Director May __, 1996
- ---------------------
Joseph F. Troy
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Number Description Sequential Page Number
- -------------- ----------- ----------------------
<S> <C> <C>
5 Opinion of Troy & Gould
Professional Corporation
23.1 Consent of Ernst & Young LLP
23.2 Consent of Troy & Gould
Professional Corporation (contained in
Exhibit 5.1)
24 Power of Attorney (contained in Part
II)
</TABLE>
II-5
<PAGE>
[Troy & Gould Professional Corporation Letterhead]
May 28, 1996
Movie Gallery, Inc.
739 W. Main Street
Dothan, Alabama 36301
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement") of Movie Gallery, Inc. (the "Company"), and the
exhibits filed in connection therewith, which you are filing with the Securities
and Exchange Commission (the "SEC") in connection with the registration under
the Securities Act of 1933, as amended (the "Securities Act"), of 28,777 shares
of the Company's Common Stock, par value $0.001 per share ("Common Stock").
For purposes of this opinion, we have examined such matters of law and
originals, or copies certified or otherwise identified to our satisfaction, of
such documents, corporate records and other instruments as we have deemed
necessary. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to originals of all documents submitted to us as certified,
photostatic or conformed copies, and the authenticity of originals of all such
latter documents. We have also assumed the due execution and delivery of all
documents where due execution and delivery are prerequisites to the
effectiveness thereof. We have relied upon certificates of public officials and
certificates of officers of the Company for the accuracy of material factual
matters contained therein which were not independently established.
Based on the foregoing examination, we are of the opinion that the shares
of Common Stock being offered pursuant to the
Exhibit 5
<PAGE>
Movie Gallery, Inc.
May 28, 1996
Page 2
Registration Statement are duly authorized, validly issued, fully paid and
nonassessable.
We consent to the use of our name under Part II, Item 5 of the Registration
Statement, and to the filing of this opinion as an exhibit to the Registration
Statement. By giving you this opinion and consent, we do not admit that we are
experts with respect to any part of the Registration Statement or Prospectus
within the meaning of the term "expert" as used in Section 11 of the Securities
Act of 1933, as amended, or the rules and regulations promulgated thereunder,
nor do we admit that we are in the category of persons whose consent is required
under Section 7 of said Act.
Very truly yours,
TROY & GOULD
Professional Corporation
Exhibit 5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333- ) pertaining to the registration of
28,777 shares of common stock of Movie Gallery, Inc. issued in connection with
an acquisition, and to the incorporation by reference therein of our report
dated February 21, 1996, with respect to the consolidated financial statements
of Movie Gallery, Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 1995, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Birmingham, Alabama
May 23, 1996
