UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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 o | |
Check the appropriate box: | |
x | Preliminary Proxy Statement |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
o | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material Pursuant to §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. | |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |
| (1) | Title of each class of securities to which transaction applies: |
|
|
|
| (2) | Aggregate number of securities to which transaction applies: |
|
|
|
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
|
|
|
| (4) | Proposed maximum aggregate value of transaction: |
|
|
|
| (5) | Total fee paid: |
|
|
|
o | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |
| (1) | Amount Previously Paid: |
|
|
|
| (2) | Form, Schedule or Registration Statement No.: |
|
|
|
| (3) | Filing Party: |
|
|
|
| (4) | Date Filed: |
|
|
|
|
|
|
MOVIE GALLERY, INC.
900 West Main Street
Dothan, Alabama 36301
NOTICE OF 2007 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 7, 2007
NOTICE IS HEREBY GIVEN that the 2007 Annual Meeting of Stockholders of Movie Gallery, Inc. (the “Company”) will be held on Thursday, June 7, 2007, at 10:00 a.m. local time at the Atlanta Marriott Suites Midtown, 35 14th Street N.E., Atlanta, Georgia 30309 for the following purposes:
(1) To elect members of our Board of Directors to serve until the next annual meeting of stockholders;
(2) To approve an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock from 65,000,000 to 250,000,000 and the number of authorized shares of our preferred stock from 2,000,000 to 10,000,000;
(3) To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 6, 2008; and
(4) To transact any other business that may properly come before the annual meeting or any adjournments thereof.
These items of business are more fully described in the Proxy Statement accompanying this notice.
The Board of Directors has fixed the close of business on April 20, 2007 as the record date for the determination of the stockholders entitled to notice of and to vote at the annual meeting. Only stockholders at the close of business on the record date are entitled to vote at the annual meeting and any postponements or adjournments of the annual meeting.
| By Request of the Board of Directors, |
| |
| S. Page Todd |
| Executive Vice President, Secretary, General |
| Counsel and Chief Compliance Officer |
Dothan, Alabama
, 2007
YOUR VOTE IS IMPORTANT. Whether or not you expect to attend the annual meeting, you are urged to vote, date and sign the enclosed proxy and return it promptly in the enclosed postage paid envelope. You may revoke your proxy at any time prior to the annual meeting. If you attend the annual meeting, you may revoke your proxy and vote your shares in person.
| 1 |
| |
| 6 |
| |
| 6 |
| |
| 7 |
| |
| 11 |
| |
| 11 |
| |
| 12 |
| |
| 13 |
| |
| 15 |
| |
| 15 |
| |
| 16 |
| |
| 16 |
| |
| 18 |
| |
| 21 |
| |
| 21 |
| |
STOCKHOLDER PROPOSALS FOR 2008 ANNUAL MEETING OF STOCKHOLDERS |
| 21 |
|
| 21 |
| |
| 22 |
|
MOVIE GALLERY, INC.
900 West Main Street
Dothan, Alabama 36301
PROXY STATEMENT
FOR 2007 ANNUAL MEETING OF STOCKHOLDERS
This proxy statement and the accompanying proxy card are furnished in connection with the solicitation of proxies to be voted at our 2007 Annual Meeting of Stockholders, which we refer to as the annual meeting. Our annual meeting will be held on Thursday, June 7, 2007, at 10:00 a.m. local time at the Atlanta Marriott Suites Midtown, 35 14th Street N.E., Atlanta, Georgia 30309. This proxy statement and proxy card are first being mailed to our stockholders on or about , 2007.
What is the purpose of the annual meeting?
At our annual meeting, our stockholders will be asked to:
1. Elect Joe T. Malugen, H. Harrison Parrish, William B. Snow, John J. Jump and James C. Lockwood as members of our Board of Directors to serve until our next annual meeting;
2. Approve an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock from 65,000,000 to 250,000,000 and the number of authorized shares of our preferred stock from 2,000,000 to 10,000,000; and
3. Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 6, 2008.
Stockholders also will transact any other business that may properly come before the annual meeting. In addition, our management team and representatives of Ernst & Young LLP, our independent registered public accounting firm, will respond to any questions from our stockholders.
Why am I receiving this proxy statement and proxy card?
You are receiving this proxy statement and proxy card because you own shares of Movie Gallery, Inc. common stock. This proxy statement describes matters on which we would like you to vote at our annual meeting. It also provides information to you regarding these matters so that you can make an informed decision.
It is your legal designation of another person—referred to as a “proxy”—to vote the shares of our common stock that you own. The written document providing notice of the annual meeting and describing the matters to be considered and voted upon is called a “proxy statement.” The document used to designate a proxy to vote your shares of our common stock is called a “proxy” or a “proxy card.” Our
1
Board of Directors has designated two of our officers as proxies for the annual meeting. These officers are S. Page Todd, Executive Vice President, Secretary, General Counsel and Chief Compliance Officer and Jeffry B. Gordon, Senior Vice President—Legal, Deputy General Counsel and Assistant Secretary.
Our Board of Directors, which we sometimes refer to as the Board, is soliciting your proxy to vote your shares of Movie Gallery, Inc. common stock at the annual meeting on the proposals described in this proxy statement.
Holders of our common stock at the close of business on April 20, 2007, which we refer to as the record date, are entitled to receive notice of, and to vote at, the annual meeting and any adjournments or postponements of the annual meeting. Holders of our common stock as of the record date are entitled to one vote per share on each matter considered at the annual meeting. Shares may not be voted cumulatively, and dissenters’ rights are not applicable to the matters to be considered at the annual meeting.
What is the difference between a stockholder of record and a stockholder who holds common stock in “street name?”
If your shares are registered in your name, you are a stockholder of record. If your shares are registered in the name of your broker, bank or other nominee or fiduciary, your shares are held in “street name” and you are considered the beneficial owner of the shares. If your shares are held in street name, these proxy materials are being forwarded to you by your bank, brokerage firm or other nominee or fiduciary.
Who can attend the annual meeting?
All stockholders of Movie Gallery, Inc. as of the record date may attend the annual meeting. If you are a stockholder of record, please bring a form of photo identification to the meeting. If you wish to attend the meeting and your shares are held in street name, please bring to the meeting a statement from your broker, bank or other nominee or fiduciary evidencing your beneficial ownership of Movie Gallery, Inc. stock and a form of photo identification.
How many shares must be present to hold the annual meeting?
Shares are counted as present at the annual meeting if a stockholder either votes those shares in person at the annual meeting or has properly submitted a proxy in accordance with this proxy statement.
As of the record date, shares of our common stock were outstanding and entitled to vote at the annual meeting. The presence at the annual meeting, in person or by proxy, of the holders of a majority of the shares of our common stock entitled to vote will constitute a quorum. Properly marked abstentions and broker non-votes will be counted for purposes of establishing a quorum at the annual meeting.
What if a quorum is not present at the annual meeting?
If a quorum is not present at the annual meeting, a majority of the stockholders represented, in person or by proxy, at the meeting may vote to adjourn the meeting until a quorum is present. The time and place of the adjourned meeting will be announced at the time the adjournment is taken, and no other notice will be given, unless required by our Bylaws.
2
All stockholders who are entitled to vote on the matters that come before the annual meeting have the opportunity to do so whether or not they attend the meeting in person. If you are a stockholder of record and you wish to vote prior to the annual meeting or you are unable to attend the annual meeting, you can vote your shares by mail by simply marking your proxy card, dating and signing it, and returning it in the enclosed postage-paid envelope. If you hold your shares in street name through a broker, bank or other nominee or fiduciary, please refer to the information provided by the record holder for instructions on how to vote your shares.
If you are a stockholder of record and you attend the annual meeting, you may also deliver your completed proxy card in person. Additionally, we will pass out written ballots to stockholders of record who want to vote at the annual meeting. If you are a beneficial owner of shares, you must obtain a power of attorney or a legal proxy from the record holder to vote in person at the annual meeting.
What if I want to change my vote after I return my proxy?
You may revoke your proxy and change your vote at any time before the proxy is exercised at the annual meeting. You may do this by:
· sending written notice of revocation to: Movie Gallery, Inc., S. Page Todd, Corporate Secretary, 900 West Main Street, Dothan, Alabama, 36301;
· submitting a duly executed proxy with a later date; or
· voting your shares in person at the annual meeting.
Attendance at the annual meeting will not by itself revoke a proxy.
How may I vote for the nominees for election of directors, and how many votes must the nominees receive to be elected?
With respect to the election of directors, you may:
· vote FOR the election of the nominees for director for terms ending at the next annual meeting of stockholders;
· WITHHOLD AUTHORITY to vote for one or more of the nominees and vote FOR the remaining nominees; or
· WITHHOLD AUTHORITY to vote for all of the nominees.
The affirmative vote of a plurality of the shares of common stock cast at the annual meeting is required for the election of a director nominee as a director. This means that the five director nominees receiving the most votes will be elected. If you properly execute a proxy marked “withhold authority,” with respect to one or more nominees, your shares will not be voted with respect to the nominee or nominees indicated, but your shares will be counted for purposes of determining whether there is a quorum.
What happens if a nominee is unable to stand for election?
If a nominee is unable to stand for election, the Board may, by resolution, designate a substitute nominee. If the Board designates a substitute nominee, the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority to vote for the nominee for whom a substitute nominee has been designated.
3
How may I vote for the proposal to approve an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of common and preferred stock, and how many shares must the proposal receive to pass?
You may:
· vote FOR the proposal;
· vote AGAINST the proposal; or
· ABSTAIN from voting on the proposal.
The approval of the amendment to the Company’s Certificate of Incorporation requires the affirmative vote of a majority of the shares entitled to vote thereon. If you do not vote in person or by proxy, or if you return your proxy card, but abstain from voting on the proposal, this will have the same practical effect as a vote against the proposal.
How may I vote for the proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 6, 2008, and how many votes must the proposal receive to pass?
You may:
· vote FOR the proposal;
· vote AGAINST the proposal; or
· ABSTAIN from voting on the proposal.
The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm requires the affirmative vote of a majority of the shares present, in person or by proxy, at the annual meeting and entitled to vote. If you do not vote in person or by proxy, your shares will not be counted as present at the annual meeting and will have no effect on the proposal. If you return your proxy card, but abstain from voting on the proposal, this will have the same practical effect as a vote against the proposal.
How does the Board recommend that I vote at the annual meeting?
The Board recommends a vote:
· FOR the election of Joe T. Malugen, H. Harrison Parrish, William B. Snow, John J. Jump and James C. Lockwood to the Board of Directors;
· FOR the approval of the amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock from 65,000,000 to 250,000,000 and the number of authorized shares of our preferred stock from 2,000,000 to 10,000,000; and
· FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 6, 2008.
With respect to any other matters that are properly presented at the annual meeting for consideration, the persons named in the proxy will have the discretion to vote on those matters for you. As of the date of this proxy statement, we do not know of any other matters to be presented for a vote at the annual meeting.
4
What happens if I sign and return my proxy card but do not provide voting instructions?
If you return a signed proxy card but do not provide voting instructions, your shares will be voted in accordance with our Board’s recommendations on each of the proposals described in this proxy statement.
Will my shares be voted if I do not sign and return my proxy card?
If you are a stockholder of record and you do not sign and return your proxy card or attend the annual meeting and vote in person, your shares will not be voted and will not count in deciding the matters presented for stockholder consideration in this proxy statement.
If your shares are held in street name through a broker, bank or other nominee or fiduciary and you do not provide voting instructions to your broker, bank or other nominee or fiduciary before the annual meeting, it will be entitled to vote your shares with respect to “routine” matters, but it will not be permitted to vote your shares with respect to “non-routine” matters. In the case of a proposal on a non-routine matter, your shares will be considered “broker non-votes.” The election of directors and the ratification of the appointment of our independent registered public accounting firm are routine matters, and your failure to instruct your bank, broker or other nominee or fiduciary will have no impact on the outcome of these proposals. Because the approval of the amendment to the Movie Gallery, Inc. Certificate of Incorporation is a non-routine matter and requires the affirmative vote of a majority of the outstanding shares entitled to vote thereon, broker non-votes will have the same practical effect as a vote against the proposal.
Who bears the cost of this proxy solicitation?
We will pay the costs of soliciting proxies. Proxies may be solicited on our behalf by our directors, officers or employees in person or by telephone, mail or other means, for which no compensation will be paid other than their regular salary or usual compensation. We have no present plans to hire special employees or paid solicitors to assist in obtaining proxies, but we reserve the option to do so if it appears that we may not otherwise obtain a quorum at the annual meeting. Arrangements may also be made with banks, brokerage firms and other nominees and fiduciaries to forward proxy materials to the beneficial owners of shares eligible to vote at the annual meeting, and we will, upon request, reimburse them for their reasonable expenses in doing so.
5
PROPOSAL 1—ELECTION OF DIRECTORS
Currently, our Board consists of five directors. Our Board has determined that three of our directors are independent directors under requirements imposed by the Securities and Exchange Commission, or the SEC, and the Nasdaq Stock Market, or Nasdaq. Our Board may by resolution change the number of directors on the Board.
Directors are elected at each annual meeting of stockholders and hold office until their respective successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting, and shares may not be voted cumulatively.
The nominating committee of the Board has recommended the nomination of, and the Board of Directors has nominated, the individuals named below for election as directors at the annual meeting. Each of the director nominees is currently a member of the Board of Directors, and each director nominee has consented to serve as a director if elected at the annual meeting. There is no family relationship between any of the director nominees and any of our executive officers.
If, at any time prior to the annual meeting, any nominee for director should be unable to serve, or for good cause will not serve, as a director, then the shares represented by properly signed and returned proxy cards will be voted for a substitute nominee designated by the Board. The Board has no reason to believe that any substitute nominee or nominees will be required.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL 1, THE ELECTION OF THE NOMINEES FOR DIRECTOR, JOE T. MALUGEN, H. HARRISON PARRISH, JOHN J. JUMP, JAMES C. LOCKWOOD AND WILLIAM B. SNOW, AS OUR DIRECTORS TO SERVE UNTIL THE NEXT ANNUAL MEETING OF STOCKHOLDERS.
Information Relating to Director Nominees
The information below provides the names, ages, positions and information regarding the business experience and occupations of our director nominees as of April 20, 2007.
Name |
|
|
| Age |
| Position |
Joe T. Malugen |
| 55 |
| Chairman of the Board, President and Chief Executive Officer | ||
H. Harrison Parrish |
| 59 |
| Vice Chairman of the Board and Senior Vice President—Concessions | ||
John J. Jump(1)(2)(3)(4) |
| 55 |
| Director | ||
James C. Lockwood(1)(2)(3) |
| 69 |
| Director | ||
William B. Snow(1)(2)(3) |
| 75 |
| Director |
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Nominating Committee
Mr. Malugen co-founded Movie Gallery in 1985 and has been our Chairman of the Board and Chief Executive Officer since that time. Mr. Malugen was appointed President effective January 4, 2002. Prior to our initial public offering 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 Movie Gallery beginning in early 1992. Mr. Malugen received a B.S. degree in Business Administration from the
6
University of Missouri—Columbia, his J.D. from Cumberland School of Law, Samford University and his LL.M. (in Taxation) from New York University School of Law.
Mr. Parrish co-founded Movie Gallery in 1985 and has served as a director since that time. He was elected Vice Chairman of the Board in June 2002. Mr. Parrish served as President of Movie Gallery from 1985 until his resignation on January 4, 2002, at which time Mr. Parrish assumed the position of Senior Vice President—Concessions. Mr. Parrish received a B.A. degree in Business Administration from The University of Alabama.
Mr. Jump became a director of Movie Gallery in June 2003. Since July 2006, he has served as a Manager for Accent Marketing, Inc. Mr. Jump was a Managing Partner for Foodservice Equipment Brokers of MO., Inc. from July 2004 until July 2006. He served as Business Manager, Operations for Convergys Corporation from August 2002 until July 2004. Mr. Jump served as Chairman of the Board of Directors of Video Update, Inc. from May 2001 until December 2001, and he served as its interim Chief Executive Officer from November 2001 until December 2001. Mr. Jump served as Executive Vice President, Sales and Marketing of Sight and Sound Distributors, Inc., a home video distribution company, from 1985 to 2000. Mr. Jump received a B.A. degree in Psychology from the University of Missouri at St. Louis.
Mr. Lockwood became a director of Movie Gallery in June 2004. He served as Vice President, General Counsel and Secretary of Keystone Automotive Industries, Inc., a publicly held distributor of aftermarket collision replacement parts from 1997 to February 2007 when he resigned as an officer. From 1985 until 1997, Mr. Lockwood was a member of the law firm of Troy and Gould. Mr. Lockwood was an investment banker with Montgomery Securities from 1984 to 1985. Mr. Lockwood received a B.S. degree in Chemical Engineering from the Georgia Institute of Technology and his J.D. from the University of Michigan.
Mr. Snow became a director of Movie Gallery in July 1994. He served as Vice Chairman of the Board from July 1994 until June 2002, and served as Chief Financial Officer from July 1994 until May 1996. 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 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.
Meetings of the Board
Our directors are expected to attend all meetings of the Board of Directors and committees on which they serve. Our Board held eighteen meetings during the fiscal year ended December 31, 2006. All of our directors attended at least 75% of the aggregate number of all applicable Board and committee meetings during fiscal 2006. Our directors are also expected to attend our annual meeting of stockholders, and all of our directors attended the 2006 annual meeting.
Committees of the Board
Our Board of Directors has three standing committees—the Compensation Committee, the Audit Committee and the Nominating Committee. The Compensation Committee, Audit Committee and the Nominating Committee were established prior to fiscal 2006. Membership and principal responsibilities of the Board committees are described below.
7
Compensation Committee. During the fiscal year ended December 31, 2006, our Compensation Committee met nine times and was comprised of the following members:
Members |
| |
John J. Jump (Chairman) | ||
James C. Lockwood | ||
William B. Snow |
Each of the members of our Compensation Committee meets the definition of independence established by Nasdaq. We have adopted a Compensation Committee Charter, a copy of which is posted on our website at www.moviegallery.com. A description of the Compensation Committee’s processes and procedures for the consideration and determination of executive compensation is set forth below under “Executive Compensation—Compensation Discussion and Analysis.”
Audit Committee. During the fiscal year ended December 31, 2006, our Audit Committee met fourteen times and was comprised of the following members:
Members |
| |
William B. Snow (Chairman) | ||
John J. Jump | ||
James C. Lockwood |
Our Board has affirmatively determined that each member of our Audit Committee is financially literate and that Mr. Snow qualifies as an “audit committee financial expert” within the meaning of SEC rules and regulations. As of the date of this proxy statement, all three members of our Audit Committee are, and effective immediately following our annual meeting we expect that each member will be, independent directors as defined by Rule 10A-3(b)(1) of the Securities Exchange Act of 1934 and by Rule 4200(a)(15) of the National Association of Securities Dealers, or NASD, Marketplace Rules.
Our Board of Directors has adopted an Audit Committee Charter, a copy of which is posted on our website at www.moviegallery.com. The Audit Committee’s responsibilities are set forth in the below “Report of the Audit Committee.”
Nominating Committee. During the fiscal year ended December 31, 2006, our Nominating Committee met once and was comprised of the following members:
Members |
| |
James C. Lockwood (Chairman) | ||
John J. Jump | ||
William B. Snow |
As of the date of this proxy statement, each member of our Nominating Committee is, and effective immediately following our annual meeting we expect that each member will be, independent as defined by the NASD Marketplace Rules.
Our Board of Directors has adopted a Nominating Committee Charter, a copy of which is posted on our website at www.moviegallery.com. Our Nominating Committee Charter defines the committee’s principal duties and responsibilities, which include, among other things:
· periodically reviewing and making recommendations to our Board of Directors regarding appropriate size and composition of the Board of Directors and committees;
· identifying individuals qualified to serve on our Board of Directors;
· establishing and recommending to our Board of Directors a policy and procedures for receiving recommendations from stockholders for director candidates;
8
· considering suggestions for membership on the Board of Directors submitted by stockholders;
· recommending a slate of director nominees for consideration by our Board of Directors and recommending director candidates to fill vacancies; and
· assessing annually the adequacy of the Nominating Committee charter.
Director Nominations
Our Board of Directors believes that directors should have the highest professional and personal ethics and values, consistent with our longstanding values and standards. They should have broad experience at the policy-making level in business, government, education, technology or public interest. They should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other Boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties. Each director must represent the interests of all stockholders.
For our 2007 Annual Meeting, the Nominating Committee has recommended the current members of our Board of Directors to draw on their experience with the Company. Our Nominating Committee utilizes a variety of methods for identifying and evaluating nominees for director. In the future, the Nominating Committee will periodically assess the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominating Committee will consider various potential candidates for director. Candidates may come to the attention of the Nominating Committee through current Board members, professional search firms, stockholders or other persons. These candidates will be evaluated at meetings of the Nominating Committee, and may be considered at any point during the year. As described below, the Nominating Committee will consider stockholder nominations for candidates for the Board. If any materials are provided by a stockholder in connection with the nomination of a director candidate, the materials will be forwarded to the entire Nominating Committee. The Nominating Committee will also review materials provided by professional search firms or other parties in connection with a nominee who is not proposed by a stockholder.
Subject to the advance notice, information and other requirements set forth in our Bylaws, the Nominating Committee will consider stockholder nominations for candidates for membership on the Board of Directors. In evaluating such nominations, the Nominating Committee seeks to achieve a balance of knowledge, experience and capability on the Board. Any stockholder nominations proposed for consideration by the Nominating Committee should include the proposed nominee’s name, age, business and residence addresses, principal occupation or employment, number and class of shares of our stock held beneficially or of record by the proposed nominee, and the proposed nominee’s qualifications for Board membership. In addition, the stockholder submitting the nomination must provide his or her name and address, number and class of shares of our stock held beneficially or of record by the stockholder, a description of any arrangements or understandings between the stockholder and the proposed nominee or other persons pursuant to which the nomination is made, and a statement that the stockholder intends to appear in person or by proxy at the meeting to nominate the proposed nominee. Stockholder nominations should be addressed to:
| Nominating Committee |
| c/o S. Page Todd |
| Corporate Secretary |
| Movie Gallery, Inc. |
| 900 West Main Street |
| Dothan, Alabama 36301 |
9
We must receive any stockholder nominations for director at our principal executive offices no later than 120 calendar days prior to the anniversary of the date we mailed proxy statements to our stockholders in connection with the previous year’s annual meeting.
Director Compensation
[to be included in Definitive Proxy Statement]
Director Independence
NASD Marketplace rules require that our Board shall have at all times a majority of independent directors, as such term is defined by the NASD Marketplace Rules. Our Board has affirmatively determined that Messrs. Jump, Lockwood and Snow, encompassing three of our five directors, are independent. As of the date of this proxy statement, our Compensation Committee, Audit Committee and Nominating Committee are comprised solely of independent directors.
Executive Sessions of Non-Management Directors
Our non-management directors meet without management present, which we refer to as meetings in “executive session,” at certain regularly scheduled Board meetings, as well as periodically by telephone. Mr. Jump, who is our lead independent director, presides over executive sessions of the non-management directors.
Stockholder Communications with the Board
Any stockholder who wishes to communicate directly with all directors or specified directors may do so by writing to:
| Movie Gallery, Inc. |
| c/o S. Page Todd |
| Corporate Secretary |
| 900 West Main Street |
| Dothan, Alabama 36301 |
All communications will be compiled by our corporate secretary and forwarded to the entire Board of Directors or the directors specified by the stockholder.
Code of Ethics
Our Board has adopted a Code of Business Conduct and Ethics applicable to the Company’s Chief Executive Officer, Chief Financial Officer and all other directors, officers and employees of the Company. Our Code of Business Conduct and Ethics embodies our commitment to conduct business in accordance with the highest ethical standards and all applicable laws, rules and regulations. Our Code of Business Conduct and Ethics is available to any stockholder who makes a written request to the Corporate Secretary at the address listed above and on our website at www.moviegallery.com.
10
[to be included in Definitive Proxy Statement]
Certain Relationships and Related Transactions
Air Conditioning Associates, Inc., or ACA, is owned by the father-in-law and brother-in-law of Mr. Malugen, our Chairman of the Board, President and Chief Executive Officer. ACA administers the repair and maintenance function for the Company’s store base and corporate offices in addition to providing HVAC materials and related services. On January 9, 2007, we entered into a contract with ACA to provide these services following a “request for proposal” process supervised by our Audit Committee. We have achieved overall cost savings under this management agreement and have improved our system for managing company-wide repair and maintenance needs. During the fiscal year ended December 31, 2006, we paid ACA approximately $500,529. We had no outstanding accounts payable to ACA as of December 31, 2006.
J. Todd, Inc., d/b/a Todd & Sons, which we refer to as Todd & Sons, is owned by the brother of Mr. Todd, our Executive Vice President, Secretary, General Counsel and Chief Compliance Officer. Todd & Sons supplies the Company with certain clothing and promotional items on an as needed basis. We have no minimum purchase requirements or contractual obligations with Todd & Sons. During the fiscal year ended December 31, 2006, we paid Todd & Sons $202,679. We had $2,924 in outstanding accounts payable to Todd & Sons as of December 31, 2006.
We lease from MEL, LLC approximately 3,500 square feet of retail space in a shopping center in Dothan, Alabama for one of our Movie Gallery stores. Mr. Malugen, our Chairman of the Board, President and Chief Executive Officer, holds a one-third interest in MEL. The initial lease term commenced in February 2003 and is five years with three, three-year renewal options. The lease payments required under the initial five-year term of the lease total approximately $144,000. During the fiscal year ended December 31, 2006, we paid MEL approximately $30,741 for lease payments.
We have entered into separate but identical indemnity agreements, which we refer to as the Indemnity Agreements, with each of our directors. These agreements provide that we 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 of the Company or is or was serving, at our request, 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 us, unless we, independent legal counsel or stockholders 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 us or our stockholders.
We believe that the terms of all transactions described above are no less favorable than terms that could have been obtained from third parties.
11
Our Board of Directors has adopted a written related party transactions policy, which provides that all transactions between us and our officers or directors are subject to approval by the Audit Committee of the Board of Directors. When evaluating a related party transaction, the Audit Committee considers, among other factors,
· the identity of the related party and the nature of their affiliation with the Company;
· the nature and amount of the proposed transaction;
· whether the terms of the transaction are more or less favorable than terms available from third parties on an arms-length basis; and
· the anticipated impact on our financial statements and disclosures.
Equity Compensation Plan Information
The following table sets forth information about our equity compensation plans as of December 31, 2006. We do not have any equity compensation plans that have not been approved by our stockholders.
Plan Category |
|
|
| (a) |
| (b) |
| (c) |
| |||||||
Equity Compensation Plans Approved by Stockholders |
|
| 779,820 |
|
|
| $ | 14.47 |
|
|
| 3,124,913 | (1) |
| ||
Equity Compensation Plans not Approved by Stockholders |
|
| — |
|
|
| — |
|
|
| — |
|
| |||
Total |
|
| 779,820 |
|
|
| $ | 14.47 |
|
|
| 3,124,913 |
|
|
(1) Reflects shares available for issuance under the Movie Gallery, Inc. 2003 Stock Plan pursuant to the grant or exercise of stock options, stock appreciation rights and restricted stock.
12
PROPOSAL 2—APPROVAL OF THE AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMMON STOCK AND PREFERRED STOCK
On April 12, 2007, the Board of Directors adopted resolutions approving and authorizing an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and preferred stock, par value $0.10 per share (the “Preferred Stock”) Our Board of Directors further directed that the amendment be submitted to a vote of the stockholders at the Annual Meeting. The Board has determined that it is in the best interests of the Company and the stockholders and unanimously recommends approval by the stockholders.
We are asking stockholders to approve an amendment to the first paragraph of Article Fourth of the Company’s Certificate of Incorporation, which would increase the number of authorized shares of Common Stock from 65,000,000 to 250,000,000 and the number of authorized shares of Preferred Stock from 2,000,000 to 10,000,000. The amendment would read in its entirety as follows:
1. The Corporation is authorized to issue two classes of stock, to be designated “Common Stock” and “Preferred Stock,” respectively. The total number of shares which the Corporation is authorized to issue is two hundred sixty million (260,000,000) shares. The number of shares of Common Stock authorized to be issued is two hundred fifty million (250,000,000), with a par value of $0.001 per share. The number of shares of Preferred Stock authorized to be issued is ten million (10,000,000), with a par value of $0.10 per share.
The amendment to the Company’s Certificate of Incorporation requires the affirmative vote of a majority of the outstanding shares entitled to vote on the amendment. On this proposal, abstentions are treated as being entitled to vote and will have the same effect as votes against ratification. Because the approval of the amendment to is a non-routine matter and requires the affirmative vote of a majority of the outstanding shares entitled to vote thereon, broker non-votes will have the same practical effect as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL 2, THE APPROVAL OF THE AMENDMENT TO THE MOVIE GALLERY, INC. CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK.
Of the 65,000,000 currently authorized shares of Common Stock, shares were issued and outstanding as of April 20, 2007. In addition, as of April 20, 2007, the Company had reserved up to shares of Common Stock for issuance under the Company’s equity compensation plans and equity awards. Only shares were unissued (or held in treasury) and unreserved on April 20, 2007. The Board of Directors has proposed this amendment to ensure that the Company has sufficient shares available for general corporate purposes including equity financings, acquisitions, establishing strategic relationships with corporate partners, providing equity incentives to employees, and payments of stock dividends, stock splits or other recapitalizations. The Company considers from time to time acquisitions, equity financings, strategic relationships and other transactions as market conditions warrant or other opportunities arise. Without an increase in the shares of Common Stock and Preferred Stock authorized for issuance, the Company might not be able to consummate any such transaction in a timely manner. The increase in the number of authorized shares of Preferred Stock is also intended to ensure that an appropriate number of shares are available for issuance pursuant to the exercise of rights to purchase Series A Junior Participating Preferred Stock under our Shareholder Rights Plan.
13
If the stockholders approve the proposed amendment, the additional authorized shares of Common Stock would be available for issuance without further action by the stockholders, except as required by applicable law, regulatory agencies or Nasdaq rules. Under current Nasdaq rules, stockholders must approve certain significant issuances of stock, including the establishment of certain stock option or purchase plans, issuances resulting in a change of control, issuances in connection with the acquisition of the stock or assets of another company resulting in a 20% or more increase in the Company’s outstanding shares or voting power, and the sale of stock equal to 20% or more of the Company’s outstanding shares or voting power at a discount from market prices. Therefore, even if stockholders approve the proposed amendment, the Board of Directors will not be able to cause the Company to issue shares of Common Stock in any of the circumstances specified in the Nasdaq rules without obtaining further approval from the stockholders. The types of transactions that would not require further stockholder approval include stock splits, stock dividends and public or private offerings of stock that do not exceed the thresholds established by the Nasdaq rules.
The increase in the number of authorized shares of Common Stock pursuant to this proposal would have no dilutive effect upon the proportionate ownership or voting power of the Company’s present stockholders. However, holders of Common Stock are not entitled to preemptive rights with respect to the issuance of additional shares of Common Stock. Accordingly, to the extent that shares are subsequently issued to persons other than the Company’s current stockholders or in proportions other than the current proportion, the issuance of additional shares of Common Stock could have a substantial dilutive effect on the Company’s current stockholders.
Because there are currently no shares of our Preferred Stock issued and outstanding, the amendment will have no dilutive effect upon the proportionate ownership or voting power of the Company’s present stockholders. However, holders of Common Stock are not entitled to preemptive rights with respect to the issuance of additional shares of Preferred Stock. Accordingly, to the extent that shares are subsequently issued to persons other than the Company’s current stockholders or in proportions other than the current proportion, the issuance of additional shares of Preferred Stock could have a substantial dilutive effect on the Company’s current stockholders.
If approved by the stockholders, the increase in the number of authorized shares will become effective upon the filing with the Secretary of State of the State of Delaware of an amendment to the Company’s Certificate of Incorporation setting forth the proposed amendment to Article Fourth. In accordance with Delaware law, the Board of Directors may, in its discretion, abandon the proposed amendment to Article Fourth, notwithstanding the approval of the amendment by the stockholders, if the Board determines that it is advisable and in the Company’s best interest not to proceed with the proposed amendment.
14
PROPOSAL 3—RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE FISCAL YEAR ENDING JANUARY 6, 2008
The Audit Committee of the Board of Directors has approved Ernst & Young LLP as the Company’s independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending January 6, 2008. Ernst & Young LLP has audited our financial statements and also provided certain accounting services for the fiscal year ended December 31, 2006.
Representatives of Ernst & Young LLP will be present at the annual meeting. They will have an opportunity to make a statement if they desire and will be available to respond to appropriate questions of our stockholders.
We are asking stockholders to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm. Although we are not required to seek stockholder approval for the ratification of our independent registered public accounting firm, we are submitting the proposal to our stockholders as a matter of good corporate practice. If our stockholders do not ratify the appointment of Ernst & Young LLP, the Audit Committee will investigate the reasons for stockholder rejection and will reconsider the appointment of Ernst & Young LLP as our independent registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm, subject to ratification by the Board, at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.
The affirmative vote of a majority of the shares present, in person or by proxy, at the annual meeting and entitled to vote is required for approval of the ratification of Ernst & Young LLP. On this proposal, abstentions are treated as being entitled to vote and will have the same effect as votes against ratification.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL 3, THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
The following table presents fees for professional audit services rendered by Ernst & Young LLP for the audit of our financial statements for the years ended December 31, 2006 and January 1, 2006, and fees for other services rendered by Ernst & Young LLP during those periods.
|
| Fiscal Year Ended |
| ||||||||||
Type of Fees |
|
|
| December 31, 2006 |
| January 1, 2006 |
| ||||||
Audit Fees(1) |
|
| $ | 3,715,559 |
|
|
| $ | 4,522,307 |
|
| ||
Audit-Related Fees(2) |
|
| 42,498 |
|
|
| 61,086 |
|
| ||||
Tax Fees(3) |
|
| 57,000 |
|
|
| 154,293 |
|
| ||||
All Other Fees(4) |
|
| 1,500 |
|
|
| — |
|
| ||||
Total |
|
| $ | 3,816,557 |
|
|
| $ | 4,737,686 |
|
| ||
(1) Audit Fees—These are fees for professional services performed by Ernst & Young LLP for the audit of our annual consolidated financial statements, the audits of management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting and the required reviews of our financial statements included in our quarterly reports on Form 10-Q.
(2) Audit-Related Fees—These are fees billed to us for assurance and related services that traditionally are performed by independent auditors, such as due diligence related to acquisitions and dispositions and attestation services that are not required by statute or regulation, performed by Ernst & Young
15
LLP for fiscal 2006 and fiscal 2005, that are reasonably related to the performance of the audit or review of our financial statements. Audit-related fees for fiscal 2006 related to due diligence in connection with potential transactions and consultations in connection with preparing responses to SEC comment letters. Audit-related fees for fiscal 2005 related to due diligence in connection with our acquisition of Hollywood Entertainment Corporation.
(3) Tax Fees—These are fees for professional services performed by Ernst & Young LLP related to tax compliance, tax advice and tax planning. Fiscal 2006 and fiscal 2005 tax fees were for tax advice and consultations on structure related to our acquisition of Hollywood Entertainment Corporation.
(4) All Other Fees—For fiscal 2006, other fees consisted of subscriptions to on-line accounting resource materials provided by Ernst & Young LLP. Ernst & Young LLP did not provide any other services for fiscal 2005.
Our Audit Committee has reviewed the services rendered and the fees billed by Ernst & Young LLP for fiscal 2006. The Audit Committee has determined that the services rendered and the fees billed for fiscal 2006 that were not related to the audit of our financial statements are compatible with the independence of Ernst & Young LLP as our independent registered public accounting firm.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee pre-approves all audit and non-audit services performed by our independent registered public accounting firm, including those audit and non-audit services performed in fiscal 2006. Under the Audit Committee policy, advance approval is required of all audit, audit-related, tax services, and other services performed by the independent auditor. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the Audit Committee must approve the permitted service before the independent auditor is engaged to perform it.
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, or the Securities Exchange Act of 1934, as amended, that might incorporate by reference previous or future filings, including this Proxy Statement, in whole or in part, the following report shall not be incorporated by reference into any of such filings.
The Audit Committee of the Company is composed entirely of independent directors in compliance with the audit committee independence requirements adopted by the SEC and Nasdaq. The primary function of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities relating to (1) the quality and integrity of the financial reports of the Company, (2) the independent registered public accounting firm’s qualifications and independence, (3) the performance of the Company’s internal audit function, and (4) the compliance by the Company with legal and regulatory requirements.
The Audit Committee operates under a written charter adopted by the Board of Directors, a copy of which is posted on the Company’s website at www.moviegallery.com. The members of the Audit Committee are William B. Snow, James C. Lockwood and John J. Jump.
The Audit Committee Members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent registered public accounting firm. The Audit Committee serves a Board-level oversight role, in which it provides advice, counsel and direction to management and the independent registered public accounting firm on the basis of the information it receives, discussions with management and the auditors, and the experience of the Audit Committee’s members in business, financial and accounting matters. Management has the primary
16
responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed with management the audited financial statements in the Annual Report on Form 10-K, with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles in the United States, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Committee under generally accepted auditing standards. The Audit Committee met privately with the independent auditors and discussed issues deemed significant by the independent auditors, including those required by Statements on Auditing Standards No. 61 and No. 90 (Audit Committee Communications). In addition, the Committee received and reviewed the written disclosures and letter from the independent auditors and has discussed with the independent auditors the auditors’ independence from management and the Company, as required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and considered the compatibility of non-audit services with the auditors’ independence.
In reliance on these reviews and discussions, and the report of the independent auditors, the Audit Committee has recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, for filing with the Securities and Exchange Commission.
The Audit Committee provides the foregoing report for inclusion in the proxy statement:
William B. Snow, Chairman
James C. Lockwood
John J. Jump
17
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our common stock, as of April 20, 2007, by the following individuals or groups:
· Each of our directors;
· Each of our named executive officers;
· All of our directors and executive officers as a group; and
· Each person, or group of affiliated persons, who we know beneficially owns more than 5% of our outstanding common stock.
Except as indicated by footnote, and except for community property laws where applicable, we believe, based on information provided to us, that the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Beneficial ownership is determined in accordance with the rules of the SEC. The percentage of beneficial ownership is based on shares of common stock deemed outstanding as of April 20, 2007.
Name and Address(1) |
|
|
| Number of |
| Percent |
| ||
Directors and Executive Officers: |
|
|
|
|
|
|
| ||
Joe T. Malugen(3) |
| 3,725,356 |
|
| — | % |
| ||
H. Harrison Parrish(4) |
| 1,024,715 |
|
| — |
|
| ||
Jeffrey S. Stubbs(5) |
| 103,322 |
|
|
| * |
| ||
S. Page Todd(6) |
| 223,040 |
|
|
| * |
| ||
Thomas D. Johnson(7) |
| 55,000 |
|
| — |
|
| ||
Mark D. Moreland |
| — |
|
|
| * |
| ||
Timothy R. Price |
| — |
|
| — |
|
| ||
Keith A. Cousins(8) |
| 61,250 |
|
| — |
|
| ||
John J. Jump(9) |
| 36,333 |
|
|
| * |
| ||
James C. Lockwood(10) |
| 36,333 |
|
|
| * |
| ||
William B. Snow(11) |
| 58,833 |
|
|
| * |
| ||
All Directors and Executive Officers as a group (13 persons)(12) |
| 5,435,333 |
|
|
|
|
| ||
Others: |
|
|
|
|
|
|
| ||
Avenue Capital Management II GenPar, LLC |
| 1,995,500 |
|
| — |
|
| ||
LaGrange Capital Partners, L.P. |
|
|
|
|
|
|
| ||
LaGrange Capital Partners Offshore Fund, Ltd. |
|
|
|
|
|
|
| ||
LaGrange Capital Administration, L.L.C. |
|
|
|
|
|
|
| ||
Frank LaGrange Johnson (14) |
| 2,141,213 |
|
| — |
|
| ||
Schultze Master Fund, Ltd. |
| 4,268,314 |
|
| — |
|
|
* Less than 1%.
(1) Unless otherwise specified, the address of each beneficial owner listed in the table above is c/o Movie Gallery, Inc., 900 West Main Street, Dothan, Alabama 36301.
18
(2) Beneficial ownership is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 and generally includes voting and investment power with respect to securities, subject to community property laws, where applicable. Shares issued to the identified person pursuant to options exercisable within 60 days of April 20, 2007 are deemed to be outstanding and to be beneficially owned by the person holding such options for the purpose of computing the percentage ownership of such person and the percentage of all directors and executive officers as a group, but are not treated as outstanding for computing the percentage ownership of any other person.
(3) Includes 62,500 shares of restricted stock over which Mr. Malugen currently has sole voting power.
(4) Includes 20,834 shares of restricted stock over which Mr. Parrish currently has sole voting power.
(5) Includes 59,750 shares subject to options currently exercisable or exercisable within 60 days of April 20, 2007. Includes 30,000 shares of restricted stock over which Mr. Stubbs currently has sole voting power.
(6) Includes 1,215 shares held as custodian for Mr. Todd’s daughter and 149,750 shares subject to options currently exercisable or exercisable within 60 days of April 20, 2007. Includes 30,000 shares of restricted stock over which Mr. Todd currently has sole voting power.
(7) Includes 18,750 shares subject to options currently exercisable or exercisable within 60 days of April 20, 2007. Includes 27,500 shares of restricted stock over which Mr. Johnson currently has sole voting power.
(8) Includes 20,000 shares subject to options currently exercisable or exercisable within 60 days of April 20, 2007. Includes 30,000 shares of restricted stock over which Mr. Cousins currently has sole voting power.
(9) Includes 20,000 shares subject to options currently exercisable or exercisable within 60 days of April 20, 2007. Includes 10,000 shares of restricted stock over which Mr. Jump currently has sole voting power.
(10) Includes 20,000 shares subject to options currently exercisable or exercisable within 60 days of April 20, 2007. Includes 10,000 shares of restricted stock over which Mr. Lockwood currently has sole voting power.
(11) Includes 20,000 shares subject to options currently exercisable or exercisable within 60 days of April 20, 2007. Includes 10,000 shares of restricted stock over which Mr. Snow currently has sole voting power.
(12) Includes shares described in the notes above as applicable, including an aggregate of 350,750 shares subject to options currently exercisable or exercisable within 60 days of April 20, 2007 and an aggregate of 285,834 shares of restricted stock over which the director or executive officer currently has sole voting power.
(13) The business address of Avenue Capital Management II, L.P. (“Avenue Capital”) is 535 Madison Avenue, 15th Floor, New York, NY 10022. The number of shares reported is based upon a Schedule 13G jointly filed with the SEC on March 5, 2007 by Avenue Capital, Avenue Capital Management II GenPar, LLC (“GenPar”) and Marc Lasry. Avenue Capital is an investment adviser registered under section 203 of the Investment Advisers Act of 1940. GenPar is the general partner of Avenue Capital; Mr. Lasry is the managing member of GenPar. Avenue Capital, GenPar and Mr. Lasry share voting and dispositive power with respect to all the shares.
(14) The business address of LaGrange Capital Partners, L.P. (“LCP”), LaGrange Capital Partners Offshore Fund, Ltd. (“LCPOF”), LaGrange Capital Administration, L.L.C. (“LCA”) and Frank LaGrange Johnson is 1270 Avenue of the Americas, Suite 2200, New York, New York 10020. The
19
number of shares reported is based upon a Schedule 13G jointly filed with the SEC on February 14, 2007 by LCP, LCPOF, LCA and Mr. Johnson. Mr. Johnson is the sole member of the general partner of LCP and the sole member of LCA. LCA is the investment manager of LCPOF. Consists of 1,544,275 shares over which LCP has shared voting and dispositive power, 583,938 shares over which LCPOF has shared voting and dispositive power, 2,128,213 shares over which LCA has shared voting and dispositive power and 13,000 shares over which Mr. Johnson has sole voting and dispositive power.
(15) The business address of Schultze Master Fund, Ltd. is c/o SS&C Fund Services, N.V., Curacao, The Netherlands, Antilles, and the business address of Schultze Asset Management, LLC is 3000 Westchester Avenue, Purchase, New York 10577. The number of shares reported is based upon a Schedule 13D jointly filed with the SEC on April 26, 2006 by Schultze Master Fund, Ltd., Schultze Asset Management, LLC and George J. Schultze. Schultze Asset Management, LLC is an investment manager for Schultze Master Fund, Ltd. Mr. Schultze is the Managing Member of Schultze Asset Management, LLC. Except for Schultze Master Fund, Ltd., each of the foregoing has shared voting and dispositive power with respect to all of the shares. Schultze Master Fund, Ltd. has shared voting and dispositive power over 4,010,286 shares.
20
As of the date of this proxy statement, we know of no other business that will be presented for consideration at the annual meeting in addition to those items referred to above. If any other matter is properly brought before the annual meeting for action by our stockholders, proxies will be voted in accordance with the best judgment of the proxy holder.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors and persons who own more than ten percent of our common stock to file certain reports with respect to their beneficial ownership of our common stock. Officers, directors and ten percent beneficial owners are also required by rules promulgated by the SEC to furnish us with copies of all Section 16(a) forms they file.
Based solely upon a review of copies of reports filed with the SEC and submitted to us since January 1, 2006, and on written representations by certain of our directors and executive officers, we believe that except for the failure to file timely a report of a disposition by Mr. Malugen in connection with the settlement of a forward sale contract due to administrative oversight, all of our directors, executive officers and ten percent beneficial owners filed all required reports on a timely basis during fiscal 2006.
STOCKHOLDER PROPOSALS FOR 2008 ANNUAL MEETING OF STOCKHOLDERS
A stockholder interested in submitting a proposal for inclusion in our proxy materials for the 2008 annual meeting of stockholders may do so by following the procedures prescribed in SEC Rule 14a-8. To present a proposal at the 2008 annual meeting of stockholders or to include a proposal in the proxy statement, a stockholder must deliver the proposal to Movie Gallery, Inc., S. Page Todd, Corporate Secretary, 900 West Main Street, Dothan, Alabama 36301 not later than January 4, 2008, if the proposal is submitted for inclusion in our proxy materials for that meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934.
Stockholders intending to present business at our 2008 annual meeting, but not intending to have the proposal included in our proxy materials pursuant to Rule 14a-8, must comply with the requirements set forth in our Bylaws. To bring business before an annual meeting, our Bylaws require, among other things, that the stockholder submit written notice thereof complying with the Bylaws to our Corporate Secretary not less than 120 days prior to the anniversary of the date of our proxy statement for the preceding year’s annual meeting. Therefore, we must receive notice of a stockholder proposal submitted other than pursuant to Rule 14a-8 no later than January 4, 2008. If the notice is received after January 4, 2008, it will be considered untimely and under our Bylaws, may not be presented at the annual meeting.
Any stockholder wishing to submit a nominee for director must comply with the procedures for such a nomination set forth in our Bylaws. These requirements are separate from and in addition to the SEC’s requirements that a stockholder must meet in order to have a stockholder proposal included in our proxy statement.
HOUSEHOLDING OF PROXY MATERIAL
The SEC has adopted rules that permit companies and intermediaries, such as brokers, to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. Some brokers household proxy materials, delivering a single proxy statement to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they or we will be householding
21
materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one copy, please notify your broker if your shares are held in a brokerage account, or notify us if you hold registered shares. You can notify us by sending a written request to Movie Gallery, Inc., S. Page Todd, Corporate Secretary, 900 West Main Street, Dothan, Alabama 36301.
A copy of our 2006 Annual Report on Form 10-K accompanies this Proxy Statement. You may also obtain a copy of our 2006 Form 10-K without charge by writing to:
Movie Gallery, Inc.
Attn: Investor Relations
900 Main Street
Dothan, Alabama 36301
We will furnish to you at no charge any exhibit to the 2006 Annual Report on Form 10-K that you specifically request. Our 2006 Annual Report on Form 10-K is also available by accessing the investor relations section of our website at www.moviegallery.com or by accessing the Securities and Exchange Commission’s EDGAR database at www.sec.gov. We are not incorporating the information on our website into this proxy statement, and our website and the information appearing on our website are not included in, and are not part of, this proxy statement.
| By Order of the Board of Directors |
| |
| Joe T. Malugen |
Dothan, Alabama
, 2007
22
MOVIE GALLERY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock of MOVIE GALLERY, INC. (the “Company”) hereby appoints S. PAGE TODD and JEFFRY B. GORDON, 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 Atlanta Marriott Suites Midtown, 35 14th Street N.E., Atlanta, Georgia 30309 on Thursday, June 7, 2007, 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 7, 2007, the Proxy Statement and the Annual Report on Form 10-K for the fiscal year ended December 31, 2006, furnished herewith.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS ON THE REVERSE HEREOF, 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, Jump, Lockwood and Snow | |||||
|
|
| ||||
| o FOR | o WITHHOLD AUTHORITY | o |
|
| |
|
|
|
| For all nominees except as noted above |
| |
|
|
|
|
|
| |
2. | Proposal to approve an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock from 65,000,000 to 250,000,000 and the number of authorized shares of preferred stock from 2,000,000 to 10,000,000 |
| ||||
|
|
| ||||
| o FOR | o AGAINST | o ABSTAIN |
| ||
|
| |||||
3. | Proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm | |||||
|
|
| ||||
| o FOR | o AGAINST | o ABSTAIN |
| ||
|
| |||||
| o MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW. | |||||
|
| |||||
| o MARK HERE IF YOU PLAN TO ATTEND THE MEETING. | |||||
|
|
| Signature: |
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| |
|
|
| Signature: |
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| |
|
|
| Date: |
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| |
|
|
| Please sign exactly as name appears below. When shares are held jointly, all joint owners must 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. |
| ||
|
|
|
|
|
| |
|
|
|
|
|
| |
|
|
| New Address: |
| ||
|
|
|
|
|
| |
|
|
|
|
| ||