EMPLOYMENT AGREEMENT

Exhibit 10.5

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (hereinafter referred to as “Agreement”) is entered into as of May 20, 2008, by and between CLARENCE J. GABRIEL, JR. (hereinafter referred to as “Executive”) and MOVIE GALLERY, INC., a Delaware corporation, (hereinafter referred to as the “Company”).

1. Duties and Scope of Employment.

(a) Position. For the term of his employment under this Agreement, the Company agrees to employ Executive in the position of President and Chief Executive Officer. Executive shall report directly to the Company’s Board of Directors (the “Board”).

(b) Obligations to the Company. During the term of his employment with the Company, Executive shall devote his best efforts, talents and skills, and substantially all of his time and attention to furthering the Company’s success, and follow and abide by all Company policies, rules, and procedures. Unless he obtains prior consent from the Board, Executive shall not serve as an employee, officer, or director of, or as a consultant or advisor to, any other for-profit or not-for-profit entity, or in any similar capacity.

(c) No Conflicting Obligations. Executive represents and warrants to the Company that he is under no obligations or commitments, whether contractual or otherwise, that are inconsistent with his obligations under this Agreement. Executive represents and warrants that he will not use or disclose, in connection with his employment by the Company, any trade secrets or other proprietary information or intellectual property in which Executive or any other person has any right, title or interest and that, his employment by the Company as contemplated by this Agreement will not infringe or violate the rights of any other person or entity. Executive represents and warrants to the Company that he has returned all property and confidential information belonging to any prior employers.

(d) Commencement Date. Executive shall commence full-time employment with the Company on May 21, 2008 (hereinafter referred to as the “Commencement Date”).

2. Term of Employment.

(a) At-Will Employment. The term of Executive’s employment with the Company shall be from the Commencement Date until the date when Executive’s employment terminates pursuant to Section 2(b) below. Executive’s employment with the Company shall be “at will,” which means that either Executive or the Company may terminate Executive’s employment at any time, for any or no reason.

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Exhibit 10.5

(b) Termination. The Company may terminate Executive’s employment at any time and for any or no reason, by giving Executive thirty (30) days advance notice of termination of employment in writing (unless the termination is for Cause in which case Executive’s termination of employment may be effected by the Company immediately pursuant to Section 9(d)). Executive may terminate his employment at any time, for any or no reason, by giving the Company sixty (60) days advance notice in writing. Executive’s employment shall terminate automatically in the event of his death or Permanent Disability as defined in Section 9(a) herein.

(c) Termination of Agreement. This Agreement shall terminate when all obligations of the parties hereunder have been satisfied. The termination of this Agreement shall not limit or otherwise affect any of Executive’s obligations under Sections 10 and 11.

3. Compensation.

(a) Salary. The Company shall pay Executive as compensation for his services an annual base salary in the amount of Five Hundred Thousand Dollars ($500,000), less applicable taxes and withholdings (“Base Salary”), payable in accordance with the Company’s standard payroll practices and procedures.

(b) Annual Bonus. For each calendar year in which Executive achieves his target performance goals as set by the Board, Executive shall earn and be paid a bonus (the “Annual Bonus”) equal to 100% of Base Salary. The amount of the Annual Bonus shall be determined based on the achievement of performance goals established by the Board. The Annual Bonus may be adjusted down from 100% for objectives not achieved. The performance goals shall be determined by the Board no later than ninety (90) calendar days after the first day of each calendar year. The Annual Bonus for each calendar year shall be paid no later than March 15^th following the calendar year to which the Annual Bonus applies.

4. Equity.

(a) Stock Option Grant. The Company shall grant Executive an option (the “Option”) to purchase shares of the Company’s common stock equal to one percent (1%) of 23,366,498 (the common stock of the Company outstanding on May 21, 2008), under the Company’s 2008 Omnibus Equity Incentive Plan, as it may be amended from time to time (the “Plan”). The date on which any Option or Additional Option (defined below) is granted shall be the “Grant Date”. The Grant Date of the Option shall be as soon as practical after the Commencement Date (the “Option Grant Date”). The per share exercise price of the Option will be the Fair Market Value of a share of common stock on the Option Grant Date. “Fair

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Exhibit 10.5

Market Value” shall have the meaning given to it under the Plan. The Executive shall vest in the Option over three (3) years in equal installments of one-third ( ¹/3) of the Option on each of the first three anniversaries of the Option Grant Date. The Option shall be subject to the terms of the Plan and the option agreement pursuant to which the Option shall be granted to Executive, and execution and delivery of such option agreement shall be a condition of the grant of the Option.

(b) Executive shall be entitled to receive an additional option (the “Additional Option”) to purchase shares of common stock in the Company at an exercise price per share at the greater of (i) the Fair Market Value on the Option Grant Date, or (ii) the Fair Market Value on the Grant Date of any such Additional Option, if the Company exceeds its 2009 business plan in effect as of the date of this Agreement (the “2009 Business Plan”) as follows:

More than $75 million and up to $100 million over 2009 Business Plan EBITDA: An Additional Option to purchase one percent (1%) of 23,366,498 (the common stock of the Company outstanding on May 21, 2008).

More than $100 million and up to $125 million over 2009 Business Plan EBITDA: An Additional Option to purchase two percent (2%) of 23,366,498 (the common stock of the Company outstanding on May 21, 2008).

More than $125 million and up to $150 million over 2009 Business Plan EBITDA: An Additional Option to purchase three percent (3%) of 23,366,498 (the common stock of the Company outstanding on May 21, 2008).

More than $150 million over 2009 Business Plan EBITDA: An Additional Option to purchase four percent (4%) of 23,366,498 (the common stock of the Company outstanding on May 21, 2008).

The Grant Date of any Additional Option shall be as soon as practical after the achievement of performance criteria related to the 2009 Business Plan EBITDA described above are determined by the Board. The Executive shall vest in the Additional Option over three (3) years in equal installments of one-third ( ¹/3) of the Additional Option on each of the first three anniversaries of the Grant Date of the Additional Option. The Additional Option shall be subject to the terms of the Plan and the option agreement pursuant to which the Additional Option shall be granted to Executive, and execution and delivery of such option agreement shall be a condition of the grant of the Additional Option. If there is a Change of Control in 2009 or soon thereafter prior to the Grant Date of the Additional Option, and the Executive is employed by the Company, and the Company is on target to achieve the performance goals in the 2009 Business Plan (as determined by the Board by looking at the twelve (12) months immediately preceding the date of the Change

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Exhibit 10.5

of Control), then the Executive shall vest in the proportion of the applicable percentage of the Additional Option based on achievement of performance goals in accordance with the following schedule:

(c) Change of Control. In the event of a Change of Control during Executive’s employment, Executive shall immediately and fully vest in his Option and in any Additional Option granted to him. “Change of Control” means the consummation and completion of any fundamental transaction by which a change in control of the Company occurs as follows: (i) consummation and completion of a sale of all the equity securities of the Company to an unrelated entity, (ii) consummation and completion of a sale of substantially all the assets of the Company to an unrelated entity, or (iii) consummation and completion of a merger, consolidation or reorganization with an unrelated business organization where less than forty percent (40%) of the voting power and economic interest of the Company or the surviving entity or the parent of either, are retained by the shareholders of the Company immediately prior to such merger, consolidation or reorganization.

5. Executive Benefits. During the term of his employment, Executive shall be eligible to participate in benefit programs available to senior executives of the Company in accordance with the terms of such programs in effect from time to time. During the term of his employment, either through a benefit program sponsored by the Company or through an individual arrangement with an insurance company, the Company shall provide Executive with supplemental life insurance coverage of two (2) times Base Salary. During the term of his employment, the Company shall provide Executive with the use of a Company car in accordance with the terms of its policies as in effect from time to time. During the term of his employment, the Company shall provide financial planning assistance to Executive on an annual basis in accordance with the terms of its policies as in effect from time to time. The costs and expenses incurred by Executive in calendar year 2008, in the preparation and negotiation of this Agreement shall be reimbursed to Executive by the Company in an amount not to exceed $7,500 within thirty (30) calendar days after the applicable invoices are presented to the Company, provided that such invoices are presented to the Company no later than sixty (60) calendar days after execution of this Agreement by both parties.

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Exhibit 10.5

6. Business Expenses. During the term of his employment, the Company shall reimburse Executive reasonable and necessary business expenses incurred by Executive in the performance of his duties subject to all applicable Company policies regarding business expense reimbursement.

7. Moving Expenses. The Company shall reimburse reasonable moving expenses that Executive incurs in moving his household goods to his new residence near his place of employment, the costs of up to two house-hunting trips for Executive, the costs of temporary housing for Executive for up to six (6) months, the closing costs and real estate commissions incurred in selling Executive’s current residence, any financial loss incurred from the sale of Executive’s current residence, and the closing costs for the purchase of a new residence near his place of employment; provided that such reimbursements in total shall not exceed $250,000. Any moving expenses incurred on or before the earlier of April 30, 2010 or Executive’s employment termination date, shall be reimbursed to Executive on May 31, 2010; provided that appropriate documentation evidencing that such moving expenses were incurred is submitted to the Company by May 15, 2010.

8. Taxes and Applicable Withholdings. All payments made under this Agreement shall be subject to reduction to reflect taxes and other amounts required to be withheld by law.

9. Termination Benefits.

(a) Termination by Reason of Death or Permanent Disability. Executive’s employment hereunder shall automatically terminate in the event of Executive’s death or Permanent Disability (as d