SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 ss.240.14a-11(c) or ss.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):
|X| No fee required.
|_| 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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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|_| 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:
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4) Date Filed:
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1
<PAGE>
MOVIE GALLERY, INC.
739 W. Main Street
Dothan, Alabama 36301
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On Wednesday, June 3, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Movie Gallery, Inc. (the "Company") will be held at the Ritz-Carlton--Buckhead,
3434 Peachtree Road, NE, Atlanta, Georgia 30326 on Wednesday, June 3, 1998 at
10:00 a.m. (Eastern 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, as
amended, to increase from 2,250,000 to 2,600,000 the number of
shares available for grant; and
(3) 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 15,
1998 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 1, 1998
2
<PAGE>
MOVIE GALLERY, INC.
739 W. Main Street
Dothan, Alabama 36301
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On Wednesday, June 3, 1998
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 3, 1998, 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; and (ii) the amendment of
the Company's 1994 Stock Plan to increase from 2,250,000 to 2,600,000 the number
of shares available for grant. 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 1, 1998.
3
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only holders of record of the Company's voting securities at the close
of business on April 15, 1998 (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 13,420,685 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) 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. 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.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 15, 1998 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 (i) each director of the Company, (ii) the Chief Executive Officer and
each of the four other executive officers of the Company named in the Summary
Compensation Table under the heading "Compensation of Directors and Executive
Officers" (the "Named Executive Officers") and (iii) all directors and executive
officers as a group. The Company believes that, unless otherwise noted, the
persons listed below have sole investment and voting power with respect to the
Common Stock they own.
<TABLE>
<CAPTION>
Number of Percentage
Shares of of
Name and Address (1) Common Stock Outstanding
- --------------------- ------------ -----------
<S> <C> <C>
Joe Thomas Malugen (2) 2,690,400 20.0%
H. Harrison Parrish (3) 2,689,448 (4) 20.0
Strong Capital Management, Inc. 1,507,100 (5) 11.2
Richard S. Strong
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Dimensional Fund Advisors Inc. 942,600 (6) 7.0
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
William B. Snow 155,000 (7) 1.1
Joseph F. Troy 125,000 (8) *
Sanford C. Sigoloff 105,000 (9) *
Philip B. Smith 101,000 (9) *
(continued on next page)
4
<PAGE>
<CAPTION>
Number of Percentage
Shares of of
Name and Address (1) Common Stock Outstanding
- --------------------- ------------ -----------
<S> <C> <C>
S. Page Todd 95,474(10) *
J. Steven Roy 83,067(11) *
Steven M. Hamil 19,534(12) *
All executive officers and directors
as a group (14 persons) 6,209,312(13) 44.1%
- -------------------------------
<FN>
* Less than 1%.
(1) Unless otherwise noted, 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.
(3) Mr. Parrish is a Director and the President of the Company.
(4) Includes 18 shares held as custodian for his daughter and 260 shares held
by his spouse.
(5) Based upon the information in a Schedule 13G filed with the SEC on February
17, 1998.
(6) Based upon the information in a Schedule 13G filed with the SEC on February
10, 1998.
(7) Includes 135,000 shares that are not outstanding but are subject to
currently exercisable options.
(8) Represents shares that are not outstanding but are subject to currently
exercisable options.
(9) Includes 100,000 shares that are not outstanding but are subject to
currently exercisable stock options.
(10) Includes 89,834 shares that are not outstanding but are subject to
currently exercisable stock options (including those that become
exercisable within sixty days) and excludes 105,166 shares that are subject
to options that are not exercisable within sixty days.
(11) Includes 81,667 shares that are not outstanding but are subject to
currently exercisable stock options (including those that become
exercisable within sixty days) and excludes 103,333 shares that are subject
to options that are not exercisable within sixty days.
(12) Includes 18,334 shares that are not outstanding but are subject to
currently exercisable stock options (including those that become
exercisable within sixty days) and excludes 46,666 shares that are subject
to options that are not exercisable within sixty days.
(13) Includes 666,710 shares that are not outstanding but are subject to
currently exercisable options (including those that become exercisable
within sixty days) and excludes 629,290 shares that are subject to options
that are not exercisable within sixty days.
</FN>
</TABLE>
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 46, 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, Samford University and his LL.M. (in Taxation) from New
York University Law School.
H. Harrison Parrish, age 50, 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.
5
<PAGE>
William B. Snow, age 66, was elected Vice Chairman of the Board in
July 1994, and he served as Chief Financial Officer from July 1994 until May
1996. Mr. Snow entered into a two-year consulting agreement with the Company
commencing January 1, 1997. 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
director of the following publicly held companies: Homeland Stores, Inc. and
Lot$ Off Stores, Inc. 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 67, 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 companies: Digital Video Systems, Inc., Kaufman and
Broad Home Corporation and SunAmerica, 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 62, 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 the following
publicly held companies: Digital Video Systems, Inc. and KLS EnviroResources,
Inc. Mr. Smith is an adjunct professor at Columbia University Graduate School of
Business.
Joseph F. Troy, age 59, 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 Digital Video
Systems, Inc., 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 four meetings during the
fiscal year ended January 4, 1998. Each director during the past fiscal year
attended at least 75% of the total number of the Company's Board meetings held
and committee meetings on which such director served during the fiscal year
ended January 4, 1998.
The Board of Directors of the Company has an Audit Committee and a
Compensation Committee but does not have a Nominating Committee. The members of
the Audit Committee currently are Messrs. Sigoloff, Smith and Troy. The Audit
Committee met ten 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"
6
<PAGE>
determinations concerning transactions between the Company and its directors and
officers. Messrs. Sigoloff, Smith and Troy also form the Compensation Committee.
The Compensation Committee held two meetings during the fiscal year ended
January 4, 1998. The Compensation Committee's duties are set forth in the "Joint
Report of the Board of Directors and Compensation Committee on Executive
Compensation."
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 fiscal year ended January 4, 1998, January 5,
1997 and December 31, 1995 for the Chief Executive Officer of the Company and
the four highest paid executive officers of the Company whose total annual
salary and bonus exceeded $100,000 (collectively referred to as the "Named
Executives"):
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Compensation Awards
-------------------
Annual
Compensation
-----------------
Salary Bonus
------ -----
Shares of
Other Common Stock
Period Annual Underlying All Other
Name and Principal Position Ended Compensation Options Compensation
- --------------------------- ----------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joe Thomas Malugen January 4, 1998 $200,000 $ -- $ 25,617(1) -- $ 44,551(2)
Chairman and January 5, 1997 200,000 -- 24,000(1) -- --
Chief Executive Officer December 31, 1995 200,000 31,500 24,000(1) -- 94,000(3)
H. Harrison Parrish January 4, 1998 200,000 -- 27,617(1) -- 46,111(2)
President and Director January 5, 1997 200,000 -- 24,000(1) -- --
December 31, 1995 200,000 28,036 24,000(1) -- 94,000(3)
J. Steven Roy January 4, 1998 145,885 21,169 7,617(1) 110,000(4) --
Executive Vice President and January 5, 1997 122,885 28,525 5,500(1) 25,000(5) --
Chief Financial Officer December 31, 1995 57,692 8,650 7,581(6) 50,000(7) --
S. Page Todd January 4, 1998 121,923 14,977 7,537(1) 100,000(4) --
Senior Vice President, January 5, 1997 110,577 21,250 3,500(1) 20,000(5) --
Secretary and General Counsel December 31, 1995 100,500 15,800 -- 25,000(8) --
Steven M. Hamil (9) January 4, 1998 88,865 12,981 6,000(1) 40,000(4) --
Senior Vice President, January 5, 1997 42,500 18,000 33,691(10) 25,000(5) --
Controller and
Chief Accounting Officer
- ------------------------------
<FN>
(1) Automobile allowance
(2) Payments pursuant to Tax Indemnification Agreement with respect to
Company's status as an S Corporation prior to the initial public offering.
See "Certain Relationships and Related Transactions."
(3) S Corporation distributions
(4) Includes options granted under the Company's 1994 Stock Option Plan, as
amended, which become exercisable in three equal annual installments,
commencing on the date of grant.
(5) Includes options granted under the Company's 1994 Stock Option Plan, as
amended, which become exercisable in five equal annual installments,
commencing on the first anniversary of the date of grant.
(6) Includes $3,500 automobile allowance and $4,081 relocation allowance.
(7) Includes options granted under the Company's 1994 Stock Option Plan, as
amended, which become exercisable in five equal annual installments,
commencing on the date of grant.
(8) Includes options granted under the Company's 1994 Stock Option Plan, as
amended, which become exercisable in four equal annual installments,
commencing on the first anniversary of the date of grant.
(9) Mr. Hamil joined the Company in June 1996.
(10) Includes $3,000 automobile allowance and $30,691 relocation allowance.
</FN>
</TABLE>
7
<PAGE>
Director Compensation. Members of the Board of Directors who are not
officers of the Company receive an annual fee of $16,000 and receive fees of
$1,000 for each Board meeting and $500 for each committee meeting they attend.
The Company has granted, at or above the fair market value of the Common Stock
on the date of the grant, vested options to purchase 100,000 shares of Common
Stock to each of Messrs. Sigoloff and Smith, vested options to purchase 125,000
shares of Common Stock to Mr. Troy and vested options to purchase 135,000 shares
of Common Stock to Mr. Snow.
Employment and Consulting Arrangements. Messrs. Malugen and Parrish
have entered into two-year employment agreements with the Company, effective
August 1994, which are 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 calendar month in which his
death occurred as well as 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
$2,180.
Messrs. Roy, Todd and Hamil have entered into one-year employment
agreements with the Company, effective November 1997, which will be
automatically renewed annually unless notice is delivered by either party thirty
days prior to the end of the term. Under the terms of the agreements, Messrs.
Roy, Todd and Hamil receive an annual base salary subject to increase by the
Compensation Committee, currently $155,000, $130,000 and $115,000, respectively,
and are eligible for a bonus under the Company's bonus plan. The agreements also
provide for, among other things, an automobile allowance and other benefits
applicable to executive personnel. The employment agreements provide for
termination by the Company for cause at any time. In the event the Company
chooses to terminate the executive's employment for reasons other than for cause
or for disability, or in the event of the executive's resignation from the
Company upon constructive termination (i.e., removal of the executive from his
elected position or material change in the functions, duties or responsibilities
of the executive without his consent, in either event other than for cause or
voluntary termination, or material, non-voluntary reduction in base salary and
eligibility for bonus amounts), the executive would be entitled to an amount
equal to twelve months of base salary. In the event of a change in control, as
defined in the agreement, the executive would be entitled to receive an amount
equal to eighteen months of base salary. Based upon current annual base
salaries, Messrs. Roy, Todd and Hamil would receive approximately $232,500,
$195,000 and $172,500, respectively, in payments upon the occurrence of a change
in control.
Mr. Snow entered into a two-year consulting agreement with the Company,
effective January 1, 1997. Under the terms of Mr. Snow's agreement, he will
receive a consulting fee of $60,000 per year. In the event of his death or
permanent disability, the agreement shall immediately terminate.
8
<PAGE>
Stock Options. The following tables set forth certain information with
respect to stock options granted by the Company to the Named Executives during
the fiscal year ended January 4, 1998, stock option exercises during that year
and the value of unexercised stock options at that year's end.
<TABLE>
OPTION GRANT TABLE
Option Grants during the Fiscal Year ended January 4, 1998
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
----------------------------------------------------------- ----------------------
Number of
Shares of % of Total
Common Stock Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Granted Fiscal Year ($/Sh)(1) Date(2) 5% 10%
------------ ------------ --------- ---------- -------- --------
Name
- ----------------
<S> <C> <C> <C> <C> <C> <C>
J. Steven Roy 110,000(3) 8.76% $ 3.875 9/12/2007 $268,066 $679,333
S. Page Todd 100,000(3) 7.96 3.875 9/12/2007 243,697 617,575
Steven M. Hamil 40,000(3) 3.18 3.875 9/12/2007 97,479 247,030
<FN>
- ----------------
(1) 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 administrator of the stock option plan retains
discretion, subject to plan limits, to modify the terms of outstanding
options and to reprice the options.
(2) 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 or above market" on the date of grant and
become exercisable in three equal annual installments beginning on the date
of grant.
</FN>
</TABLE>
<TABLE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option Exercises in Last Fiscal Year
and Year-End Option Values
<CAPTION>
Number of
Shares of
Common Stock Value of
Underlying Unexercised
Shares Unexercised In-the-money
Acquired Options Options
On Value at Year-End at Year-End (1)
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- --------------- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
J. Steven Roy -- -- 71,667/113,333 $0/$0
S. Page Todd -- -- 89,834/105,166 0/0
Steven M. Hamil -- -- 18,334/46,666 0/0
- -------------------
<FN>
(1) Market value of underlying securities at year-end ($3.00), minus the
exercise price of "in-the-money" options.
</FN>
</TABLE>
9
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
Mr. Sigoloff, Mr. Smith and Mr. Troy served as members of the Compensation
Committee of the Company's Board of Directors for the fiscal year ended January
4, 1998. 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 fiscal year ended January
4, 1998, the Company paid Troy & Gould approximately $77,600 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 COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee ("Committee") of the Company is composed of
outside directors. The Committee reviews the compensation levels and benefits of
the Chief Executive Officer, the President and other executive officers of the
Company at least annually. The Committee attempts to establish compensation
structures which reward past performance and which serve to retain and provide
incentive to the executive officers. The primary components of the Company's
compensation structure are base salary, bonuses and stock option grants.
Base Salary. In determining the base salaries of executives, the Committee
considers a variety of factors, which include the overall financial performance
of the Company as well as the executive's performance, job responsibilities,
current and long-term value to the Company, length of service and
qualifications. These factors vary in importance and are not necessarily
weighted equally. Although much of the base salary determination is subjective,
the evaluations and recommendations of superiors provide necessary insight to
the Committee.
Bonus Plan. The Company's bonus plan ("Bonus Plan") is intended to
recognize and reward contributions to the Company. Since 1995, the Bonus Plan
provided for quarterly bonuses to certain employees, including Executive
Officers, based upon two factors, individual performance and Company performance
against plan. Bonuses were paid to all of the executive officers of the Company
for the fiscal year ended January 4, 1998, except for Messrs. Malugen and
Parrish. 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 Committee, which
delegated to Messrs. Malugen and Parrish the authority to fix bonuses for each
executive officer of the Company other than themselves. Beginning in 1998, the
Bonus Plan has been revised to an annual plan which provides for clearly defined
and quantifiable individual performance objectives. Individual performance
ratings are then subject to a Corporate Performance Multiplier based upon the
attainment of predetermined Company operating cash flow objectives.
Stock Option Grants. 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 administrator of the Stock
Option Plan (currently the entire Board of Directors and hereinafter "Plan
Administrator") will typically recommend stock option grants to those persons
under the Stock Option Plan, subject to applicable vesting periods. Thereafter,
the Plan Administrator will consider awarding grants, usually on an annual
10
<PAGE>
basis. The Board of Directors believes that these additional annual grants will
provide incentive for executive officers to remain with the Company. Options
will be granted at or above 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 Plan Administrator 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
following fiscal year. Over the past three years, due to a variety of factors,
the Company's Common Stock price dropped to a level which gave little value to
the majority of the existing stock options. In order to revitalize the
entrepreneurial spirit which was the genesis for the Company and in order to
retain employees, the Plan Administrator approved a repricing of certain of the
Company's currently outstanding stock options coupled with a 25% reduction in
the number of shares originally granted and a revised vesting schedule which
reduced the number of vested options by approximately 25%. The Directors and
Named Executives were excluded from this repricing.
Compensation of the Chief Executive Officer and President. The Committee
has reviewed and approved the annual salary of $200,000 for each of Messrs.
Malugen and Parrish. This annual salary was established pursuant to their
employment agreements which were entered into prior to the Company's initial
public offering in August 1994. Neither Mr. Malugen nor Mr. Parrish was paid a
bonus under their employment agreements for the fiscal year ended January 4,
1998. They are eligible to receive a bonus for the current fiscal year in an
amount to be determined by the Committee.
The Board of Directors and the Compensation Committee provide the foregoing
report on executive compensation for inclusion in the proxy statement:
Joe Thomas Malugen
H. Harrison Parrish
William B. Snow
Sanford C. Sigoloff
Philip B. Smith
Joseph F. Troy
11
<PAGE>
COMPANY PERFORMANCE
The following graph sets forth a comparison of cumulative total returns for
the Company's common stock, the Nasdaq Stock Market (U.S. Companies) and a peer
group selected by the Company for the period during which the Company's Common
Stock has been registered under Section 12 of the Exchange Act. The peer group
consists of companies whose primary business is the operation of video specialty
stores, specifically, Hollywood Entertainment Corporation; Moovies, Inc.; Video
Update, Inc. and West Coast Entertainment Corp. (collectively, "New Peer
Group"), each of which is listed on the Nasdaq National Market. The New Peer
Group consists of those companies against which the Company's performance is
generally compared in industry analyst reports. The Company believes that this
New Peer Group more accurately represents the Company's peers than did the peer
group used in prior years ("Old Peer Group"), which consisted 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. The returns for the New Peer
Group were weighted according to each issuer's market capitalization.
<TABLE>
Comparison of Cumulative Total Return
<CAPTION>
8/2/94 12/30/94 12/29/95 1/3/97 1/2/98 3/31/98
------ -------- -------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Movie Gallery, Inc. 100 173 203 88 20 51
Nasdaq U.S. Companies 100 104 148 185 225 261
Old Peer Group 100 109 125 150 195 228
New Peer Group 100 138 100 153 72 100
</TABLE>
The graph assumes that the value of the investment in the Company's Common
Stock, the Nasdaq Stock Market (U.S. Companies), the Old Peer Group and the New
Peer Group each was $100 on August 2, 1994 and that all dividends were
reinvested.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases approximately 6,500 square feet out of a total of 23,000
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 fiscal
year ended January 4, 1998, the total amount of lease payments made by the
Company to Messrs. Malugen and Parrish was $43,800.
During the fiscal year ended January 4, 1998, the Company paid Troy & Gould
approximately $77,600 for legal services rendered. Mr. Troy is a member of that
law firm.
12
<PAGE>
In connection with the acquisition of Home Vision Entertainment, Inc. in
June 1996, the Company acquired a debt obligation which requires payments to be
made to William Guerrette, Sr. in the amount of $20,000 per month until December
1, 2002. During the fiscal year ended January 4, 1998, loan payments to Mr.
Guerrette totaled $240,000. The outstanding balance of this obligation on
January 4, 1998, was $568,882.50. In April 1997, William Guerrette, Jr.,
formerly Executive Vice President and Chief Operating Officer of Home Vision
Entertainment, Inc., joined the Company as Vice President-Sales and in December
1997 was promoted to Senior Vice President-Sales.
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 $44,550 and $46,111, respectively, in the fiscal year ended January 4,
1998 as a final settlement of federal and state tax liability from the "S
Period" as a result of an Internal Revenue Service Examination which was
resolved in 1996.
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 described above are
no less favorable than terms that could have been obtained from third parties.
All transactions between the Company and its officers or directors are subject
to approval by a majority of the disinterested members of the Board of
Directors.
AMENDMENT TO THE COMPANY'S 1994 STOCK PLAN, AS AMENDED
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,
as amended (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
2,250,000 shares to 2,600,000 shares. It is proposed that Section 4 of the Plan
be amended to provide as follows:
"4. Stock Subject to Plan. There shall be reserved for issuance
under the Plan 2,600,000 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."
13
<PAGE>
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, approximately 200,000 options remained available for grant under the
Plan. 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 and employees as a group, the number of
shares of Common Stock subject to options granted under the Plan as of April 15,
1998 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 0 $ 0.00
H. Harrison Parrish 0 0.00
S. Page Todd 195,000 12.91
J. Steven Roy 185,000 12.20
Steven M. Hamil 65,000 7.77
Executive Officer group (10 persons) 836,000 8.10
William B. Snow 135,000 10.76
Non-employee director group (3 persons) 325,000 15.17
Non-executive officers and employee group (138 persons) 442,837 9.99
- --------------------------
<FN>
(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 upon the exercise of options under the Plan as of April 15,
1998 was $7.25 per share.
</FN>
</TABLE>
The following is a summary of the Plan.
General. The Plan Administrator 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
"Non-Employee Directors" of the Board, as defined in Rule 16b-3 under the
Exchange Act or any successor rule thereto, or by the full Board.
Terms of Grants. The Plan Administrator determines the terms of grants of
options, stock appreciation rights ("SARs"), shares of restricted stock or stock
bonuses under the Plan. 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:
14
<PAGE>
(a) Stock Options. The term of each option and the manner in which it
may be exercised are determined by the Plan Administrator; 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 Plan Administrator'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 Plan Administrator may
grant SARs either alone or in conjunction with all or part of an option. Upon
the exercise of an 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 an 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 an 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 Plan Administrator.
An SAR is exercisable only at the time or times established by the Plan
Administrator. If an 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 Plan Administrator, 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
Plan Administrator.
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.
(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.
15
<PAGE>
(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, 1998. 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. Legislation passed last year
reduces the maximum capital gains rate to 20% for shares held for more than
eighteen months. The Company will generally be entitled to a deduction equal to
the amount of ordinary income recognized by the optionee.
(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 at the
date of exercise is treated as income for purposes 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 any loss realized by the participant
generally will be taxed as short-term or long-term capital gain or loss
depending on the holding period. The Company will generally be entitled to a
deduction equal to the amount of ordinary income recognized by the optionee.
(c) Stock Appreciation Rights. There are no federal tax consequences to
the recipient of an 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. The
Company will normally be entitled to a tax deduction for an equivalent amount
for the same year.
(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
16
<PAGE>
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 for the income recognized by
reason of the Section 83(b) election. 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.
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 6, 1996, and on written representations
by certain directors and executive officers of the Company, the Company believes
that all of the Company's directors and executive officers filed all required
reports on a timely basis during the past fiscal year.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders are advised that any stockholder proposal, including
nominations to the Board of Directors, intended for consideration at the 1998
Annual Meeting must be received by the Company no later than January 1, 1999 to
be included in the proxy material for the 1999 Annual Meeting. It is recommended
that stockholders submitting proposals direct them to the Company, c/o S. Page
Todd, Secretary of the Company, 739 West Main Street, Dothan, AL 36301, 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/ J T Malugen
Joe Thomas Malugen
Chairman of the Board
May 1, 1998
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 Ritz-Carlton--Buckhead, 3434 Peachtree Road, NE, Atlanta, Georgia 30326 on
Wednesday, June 3, 1998 at 10:00 a.m. (Eastern 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 3, 1998, the Proxy Statement and the Annual Report to Stockholders for the
fiscal year ended January 4, 1998 furnished herewith.
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.
X Please mark votes as in this example.
- ----
1. Election of Directors. Nominees standing for election: Malugen, Parrish,
Snow, Sigoloff, Smith and Troy
___ FOR ___WITHHOLD AUTHORITY ___ _____________________________________
For all nominees except as noted above
2. Proposal to amend the Company's 1994 Stock Plan, as amended, to increase from
2,250,000 to 2,600,000 the number of shares available for grant.
___ FOR ___ AGAINST ___ ABSTAIN
___ MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW.
___ MARK HERE IF YOU PLAN TO ATTEND THE MEETING.
Signature:__________________________________
Signature:__________________________________
Date:_______________________________________
Please sign exactly as name appears below.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
