EQUITY MARKETING INC, DEF 14A, 1996-06-13

EQUITY MARKETING INC
DEF 14A, 1996-06-13
GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES)

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<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant /X/

Filed by a Party other than the Registrant / /

Check the appropriate box:

<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
/X/ Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12

</TABLE>
EQUITY MARKETING, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.

/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

----------------------------------------------------------------------

(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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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE> 2

EQUITY MARKETING, INC.

June 7, 1996

Dear Stockholder:

We cordially invite you to attend our 1996 Annual Meeting of Stockholders
to be held at 10:00 a.m. on Tuesday, July 16, 1996 at the Regent Beverly
Wilshire Hotel, 9500 Wilshire Boulevard, Beverly Hills, California 90212.
Enclosed are the Notice of Annual Meeting, Proxy Statement and a Proxy Card
relating to the Annual Meeting which we urge you to read carefully. Also
enclosed is the Company's 1995 Annual Report to Stockholders. Whether or not you
expect to attend the Annual Meeting, please sign and date the enclosed Proxy
Card and return it as promptly as possible to ensure that your shares will be
voted. Because mail delays occur frequently, it is important that the enclosed
Proxy Card be returned well in advance of the meeting.

ON BEHALF OF YOUR BOARD
OF DIRECTORS

/s/ Stephen P. Robeck
-------------------------------
STEPHEN P. ROBECK
Chairman and Co-Chief Executive
Officer

/s/ Donald A. Kurz
--------------------------------
DONALD A. KURZ
President and Co-Chief Executive
Officer
<PAGE> 3

EQUITY MARKETING, INC.
131 SOUTH RODEO DRIVE, BEVERLY HILLS, CALIFORNIA 90212

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD JULY 16, 1996

TO THE STOCKHOLDERS OF
EQUITY MARKETING, INC.

Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Equity Marketing, Inc., a Delaware corporation (the "Company"),
will be held at the Regent Beverly Wilshire Hotel, 9500 Wilshire Boulevard,
Beverly Hills, California 90212, on Tuesday, July 16, 1996, beginning at 10:00
a.m., local time. The Annual Meeting will be held for the following purposes:

1. To elect five members of the Board of Directors, each to hold office
until the 1997 Annual Meeting and until his successor is elected and
qualified;

2. To ratify the selection of Arthur Andersen LLP as the Company's
independent auditor;

3. To approve an amendment to the Equity Marketing, Inc. Stock Option Plan
to permit additional grants and issuances thereunder;

4. To approve an amendment to the Equity Marketing, Inc. Non-Employee
Director Stock Option Plan to permit additional grants and issuances
thereunder;

5. To transact such other business as may properly come before the meeting
or any postponements or adjournments thereof.

The Board of Directors has fixed June 5, 1996 as the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any postponements or adjournments thereof, and only stockholders of
record at the close of business on that date are entitled to such notice and to
vote at the Annual Meeting. A list of stockholders entitled to vote at the
Annual Meeting will be available at the Annual Meeting and at the offices of the
Company for ten (10) days prior to the Annual Meeting.

We hope that you will use this opportunity to take an active part in the
affairs of the Company by voting on the business to come before the Annual
Meeting, either by executing and returning the enclosed Proxy Card or by casting
your vote in person at the Annual Meeting.

STOCKHOLDERS UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A STAMPED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. IF A STOCKHOLDER RECEIVES MORE THAN
ONE PROXY CARD BECAUSE HE OR SHE OWNS SHARES REGISTERED IN DIFFERENT NAMES OR
ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Merrill M. Kraines
----------------------------------
MERRILL M. KRAINES
Secretary

Beverly Hills, California
June 5, 1996

2
<PAGE> 4

EQUITY MARKETING, INC.
131 SOUTH RODEO DRIVE
BEVERLY HILLS, CALIFORNIA 90212
(310) 887-4300

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

JULY 16, 1996

INTRODUCTION

This proxy statement is furnished to the stockholders by the Board of
Directors of Equity Marketing, Inc., a Delaware corporation (the "Company"), for
solicitation of proxies for use at the Annual Meeting of Stockholders to be held
at the Regent Beverly Wilshire Hotel, 9500 Wilshire Boulevard, Beverly Hills,
California 90212, on Tuesday, July 16, 1996, at 10:00 a.m., local time, and at
any and all adjournments thereof.

The expense of this solicitation of proxies will be borne by the Company.
Solicitations will be made only by use of the mail except that, if deemed
desirable, officers and regular employees of the Company may solicit proxies by
telephone, telegraph or personal calls. Brokerage houses, custodians, nominees
and fiduciaries will be requested to forward the proxy soliciting material to
the beneficial owners of the stock held of record by such persons and the
Company will reimburse them for their reasonable expenses incurred in this
connection.

The Company's Annual Report to Stockholders, including financial statements
for the fiscal year ended December 31, 1995, accompanies but does not constitute
part of this proxy statement.

The purpose of the meeting and the matters to be acted upon are set forth
in the attached Notice of Annual Meeting. As of the date of this proxy
statement, the Board of Directors knows of no other business which will be
presented for consideration at the meeting. A stockholder giving a proxy
pursuant to the present solicitation may revoke it at any time before it is
exercised by submitting a duly executed proxy bearing a later date or by
delivering to the Secretary of the Company a written notice of revocation prior
to the Annual Meeting. No proxy will be used if the stockholder is personally
present at the meeting and informs the Company that such stockholder wishes to
vote the shares in person. Subject to such revocation, all shares represented by
a properly executed proxy received prior to or at the meeting will be voted by
the proxy holders whose names are set forth in the accompanying proxy in
accordance with the instructions on the proxy. If no instruction is specified
with respect to a matter to be acted upon, the shares represented by the proxy
will be voted "FOR" the election of the nominees for director set forth herein,
"FOR" the proposal to ratify the appointment of Arthur Andersen LLP as the
independent auditor of the Company for the fiscal year ending December 31, 1996,
"FOR" the approval of an amendment to the Equity Marketing, Inc. Stock Option
Plan and "FOR" the approval of an amendment to the Equity Marketing, Inc.
Non-Employee Director Stock Option Plan. If any other business shall properly
come before the meeting, votes will be cast pursuant to said proxies in respect
of any such other business in accordance with the judgment of the persons acting
under said proxies.

It is anticipated that the mailing to stockholders of this proxy statement
and the enclosed proxy will commence on or about June 11, 1996.

OUTSTANDING SECURITIES AND VOTING RIGHTS

Only stockholders of record at the close of business on June 5, 1996 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting of
stockholders and any adjournments thereof. At that date there were 5,588,512
outstanding shares of common stock, par value $.001 per share, of the Company
("Common
<PAGE> 5

Stock"), excluding shares held by the Company as treasury stock. There was no
beneficial owner (as defined under the rules of the Securities and Exchange
Commission) of more than 5% of the Common Stock known to the Company at June 5,
1996, other than as set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" below.

The holders of a majority of the outstanding shares of Common Stock,
present in person or by proxy, will constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum. "Broker non-votes" are shares held by brokers
or nominees which are present in person or represented by proxy, but which are
not voted on a particular matter because instructions have not been received
from the beneficial owner. Under applicable Delaware law, the effect of the
broker non-votes on a particular matter depends on whether the matter is one as
to which the broker or nominee has discretionary voting authority. The effect of
broker non-votes on the specific items to be brought before the Annual Meeting
of Stockholders is discussed under each item. The affirmative vote of a majority
of all shares represented and voting at the meeting is required for approval of
Proposal No. 1, Proposal No. 2, Proposal No. 3 and Proposal No. 4.

As of the Record Date, Stephen P. Robeck and Donald A. Kurz, who are both
executive officers and directors of the Company, possessed the power to vote
approximately 57% of the outstanding Common Stock. Accordingly, the affirmative
vote of Messrs. Robeck and Kurz alone is sufficient to adopt Proposal No. 1,
Proposal No. 2, Proposal No. 3 and Proposal No. 4. The Company has been advised
that Messrs. Robeck and Kurz intend to vote all of the shares beneficially owned
by them "FOR" the proposals.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as to the shares of Common Stock
owned as of June 5, 1996 by (i) each person known to the Company to be the
beneficial owner of more than 5% of the Common Stock; (ii) each director; (iii)
each executive officer named in the Summary Compensation Table herein; and (iv)
all directors and executive officers of the Company as a group. Unless otherwise
indicated in the footnotes following the table, (i) the persons as to whom the
information is given had sole voting and investment power over the shares of
Common Stock shown as beneficially owned by them, subject to community property
laws where applicable; and (ii) the business address of each such person is c/o
Equity Marketing, Inc., 131 S. Rodeo Drive, Beverly Hills, California 90212.

<TABLE>
<CAPTION>
PERCENT
NUMBER OF SHARES COMMON STOCK
BENEFICIALLY BENEFICIALLY
OWNED(1) OWNED(1)
---------------- ------------
<S> <C> <C>
Stephen P. Robeck............................. 1,583,750 28.3
Donald A. Kurz................................ 1,583,750 28.3
Bruce Raben(2)................................ 124,140 2.2
Gary Trumbo(5)................................ 52,856 *
Kim Thomsen(5)................................ 48,568 *
Lawrence Elins(3)............................. 45,050 *
Merrill M. Kraines(4)......................... 35,000 *
Kenneth M. Fisher(5).......................... 36,000 *
All Executive Officers and Directors as a
Group (fourteen persons)(1)................. 3,547,542 63.5
</TABLE>

- ---------------

* Less than one percent.

(1) Includes, in accordance with Rule 13d-3(d)(1)(i) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), 3,189,550 shares of Common Stock
outstanding as of June 5, 1996 and to the extent set forth in the next
sentence only, includes shares issuable upon the exercise of options within
60 days of such date under the Company's Stock Option Plan and under the
Company's Non-Employee Directors Stock Option Plan held by the persons
included in the table. For the purpose of computing the percentage of
outstanding shares beneficially owned by a particular person, any securities
not outstanding which are

2
<PAGE> 6

subject to options, warrants, rights or conversion privileges exercisable by
that person within 60 days of June 5, 1996, have been deemed to be
outstanding, but have not been deemed outstanding for the purpose of
computing the percentage of the class beneficially owned by any other
person.

(2) Includes 82,140 shares issuable upon exercise of options under the Company's
Stock Option Plan, 30,000 shares issuable upon the exercise of options under
the Company's Non-Employee Directors Stock Option Plan and 12,000 shares of
the Company's common stock which are beneficially owned. The business
address of Mr. Raben is CIBC Wood Gundy 1999 Avenue of the Stars, Suite
1910, Los Angeles, California 90067.

(3) Includes 35,000 shares issuable upon exercise of options under the Company's
Non-Employee Directors Stock Option Plan and 10,050 shares of the Company's
common stock which are beneficially owned. The business address of Mr. Elins
is Elins Enterprises, 15260 Ventura Blvd., Suite 1020, Sherman Oaks,
California 91403.

(4) Represents 35,000 shares issuable upon exercise of options under the
Company's Non-Employee Directors Stock Option Plan. The business address of
Mr. Kraines is Fulbright & Jaworski L.L.P., 666 Fifth Ave., New York, New
York 10103.

(5) Includes shares issuable upon exercise within 60 days of June 5, 1996 of
options under the Company's Employee Stock Option Plan.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION
OF THE NOMINEES LISTED BELOW

The following table and the footnotes thereto set forth the names and ages
of the Directors, the principal occupation or employment of each of them during
the past five years and at present, the name and principal business of the
corporation or other organization, if any, in which such occupation or
employment is or was carried on, directorships of other public companies or
investment companies held by them and the period during which the Directors have
served in that capacity with the Company. The number of shares of Common Stock
of the Company beneficially owned by each of them as of June 5, 1996 is given in
the table appearing under the caption "Security Ownership of Certain Beneficial
Owners and Management." The nominees named below have consented to being named
herein and to serve if elected.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ ---- -----------------------------------
<S> <C> <C>
Stephen P. Robeck 47 Chairman, Co-Chief Executive
Officer and Director
Donald A. Kurz 40 Director President, Co-Chief
Executive Officer and Director
Lawrence Elins 48 Director
Merrill M. Kraines 40 Director and Secretary
Bruce Raben 42 Director
</TABLE>

Directors hold office until their term of office expires and their
successors are elected and qualified. Executive officers serve at the discretion
of the Board of Directors.

BACKGROUNDS OF DIRECTORS

Stephen P. Robeck has been a senior executive of the Company and its
predecessor business since 1985. He became a director of the Company in 1989 and
was elected Chairman and Co-Chief Executive Officer in September 1991. Between
1987 and September 1991, Mr. Robeck served as Chief Operating Officer of the
Company. Mr. Robeck received a BA in Philosophy from Lake Forest College.

3
<PAGE> 7

Donald A. Kurz joined the Company as Executive Vice President and was
elected a director in September 1990, and was elected President and Co-Chief
Executive Officer in September 1991. Prior to joining the Company, Mr. Kurz was
a management consultant for seven years with the general management consulting
division of Towers Perrin, where he was a Vice President (Senior Partner) and,
most recently, Manager of the New York office. Mr. Kurz received his BA from The
Johns Hopkins University and his MBA from the Columbia University Graduate
School of Business.

Lawrence Elins became a director of the Company in April 1994. Until 1988
he was employed by Applause, Inc. where he served as President. Since 1988 Mr.
Elins has been President of Elins Enterprises, a Financial and Real Estate
Investment Company. Mr. Elins received his BA from California State University
Northridge.

Merrill M. Kraines was elected secretary of the Company in April 1993 and a
director of the Company in March 1994. Mr. Kraines has been a partner of
Fulbright & Jaworski L.L.P., counsel to the Company, or its predecessor firm
Reavis & McGrath, since January 1987, having originally joined such firm in
1979. Mr. Kraines received his BA from Dartmouth College and his J.D. from the
Columbia University School of Law.

Bruce Raben became a director of the Company in January 1993. From 1990
through 1995, Mr. Raben was an Executive Vice President of Jeffries & Company,
Inc., an investment banking firm. In 1996 Mr. Raben joined CIBC Wood Gundy, an
investment banking firm, as a Managing Director. Mr. Raben is also a director of
Terex Corp. and Optical Security, Inc. Mr. Raben received a BA from Vassar
College and an MBA from the Columbia University Graduate School of Business.

During 1995, the Board of Directors met nine times and acted six times by
unanimous written consent. Each director participated in more than seventy-five
percent of the Board of Directors actions and written consents and attended more
than 75 percent of the meetings of Board committees on which he served.

COMMITTEES OF THE BOARD

Audit Committee -- The Board has a standing Audit Committee that reviews
the audit and control functions of the Company, the Company's accounting
principles, policies and practices and financial reporting, the scope of the
audit conducted by the Company's independent auditors, the fees and all
non-audit services of the independent auditors and the independent auditors'
opinion and letter of comment to management (if any) and management's response
thereto. The Audit Committee met twice in 1995. At the date of this Proxy
Statement the Audit Committee was comprised of Messrs. Elins, Kraines and Raben.

Compensation Committee -- The Board has a Compensation Committee whose
members at the date of this Proxy Statement were Messrs. Elins, Kraines and
Raben. The Compensation Committee is authorized to review and recommend to the
Board the salaries, bonuses and perquisites for the Company's executive officers
and to administer the Company's Stock Option Plan. The Compensation Committee
also reviews and recommends to the Board any new compensation or retirement
plans. During 1995, the Compensation Committee met twice and acted once by
unanimous written consent.

DIRECTOR COMPENSATION

Standard Compensation -- Directors who are not employees of the Company or
its subsidiaries ("Non-employee directors") receive $20,000 per year. Directors
who are employees of the Company or its subsidiaries serve as directors without
compensation.

Stock Options -- Non-employee directors receive additional compensation in
the form of stock options granted automatically under the Non-Employee Directors
Stock Option Plan. Upon their initial election to the Board of Directors,
Non-employee directors automatically receive options to purchase 25,000 shares
of Common Stock and are automatically granted an option to purchase 10,000
shares of Common Stock on each anniversary of the initial election at the fair
market value of the Company's Common Stock on such date, provided the
non-employee director is still a member of the Board on such date. See the
proposed amendment

4
<PAGE> 8

to the Non-Employee Directors Stock Option Plan discussed on page 13 of this
Proxy Statement under the heading Proposal No 4.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Donald A. Kurz, President and Co-Chief Executive Officer and a director of
the Company, is indebted to the Company pursuant to promissory notes dated
September 27, 1991 in an aggregate original principal amount of $106,667 bearing
interest at an annual rate of 8.41%. These notes were issued in connection with
the acquisition of the Company's Common Stock by Mr. Kurz. The notes are subject
to Loan Forgiveness Agreements dated September 27, 1991 pursuant to which the
notes are being forgiven at 10% per year, provided that Mr. Kurz remains
employed with the Company. The highest amount of principal and interest
outstanding under these notes during 1995 was $105,167. At December 31, 1995 the
outstanding balance on the notes was $64,000.

Kenneth M. Fisher, Senior Vice President, Chief Financial Officer and
Treasurer is indebted to the Company pursuant to a promissory note dated April
21, 1995 in an original principal amount of $125,000. This note was issued in
connection with Mr. Fisher's purchase of his primary residence following the
Company's relocation to Los Angeles, California. The note is secured by Mr.
Fisher's primary residence with interest accruing at the prime rate plus one
percent (9.5% at December 31, 1995). Principal and interest are payable in
twelve equal quarterly installments beginning July, 1997. The highest amount of
principle and interest outstanding during 1995 on this note was $133,425. At
December 31, 1995, the outstanding balance on the note was $125,000.

5
<PAGE> 9

EXECUTIVE COMPENSATION AND RELATED MATTERS

The following table sets forth the cash compensation (including cash
bonuses) paid or accrued by the Company for its fiscal years ended December 31,
1994 and 1995 to its Co-Chief Executive Officers and its four most highly
compensated officers other than the Chief Executive Officers at December 31,
1995.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS COMPENSATION
- ------------------------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephen P. Robeck 1995 $ 275,000 $200,000 -- $ 81,959(1)
Chairman, Co-Chief Executive Officer 1994 $ 250,000 $ 50,000 -- $ 56,153(1)
Donald A. Kurz 1995 $ 275,000 $200,000 -- $ 91,977(2)
President, Co-Chief Executive 1994 $ 250,000 $ 50,000 -- $ 83,674(2)
Officer
Kenneth M. Fisher 1995 $ 150,000 $ 57,000 -- $ 24,658(3)
Senior Vice President Finance and 1994 $ 120,000 $ 47,000 100,000 $ 33,000(3)
Administration, Chief Financial Officer &
Treasurer
Kim Thomsen 1995 $ 150,000 $ 75,000 20,000 $ 23,667(4)
Senior Vice President, Creative 1994 $ 120,000 $ 40,000 -- $ 10,000(4)
Director
Gary Trumbo 1995 $ 150,000 -- -- $113,231(5)
Senior Vice President Equity Toys 1994 $ 150,000 $ 10,000 17,860 $ 67,719(5)
Alvaro (David) Valdez 1995 $ 110,000 $ 30,000 50,000 $ 2,351(6)
Vice President, Operations 1994 -- -- -- --(6)
</TABLE>

- ---------------

(1) Consists of payments relating to an automobile allowance, premiums on term
life insurance, matching payments pursuant to the Company's 401(K) Plan,
deferred compensation of $34,363 in 1995 and payments in connection with the
Company's relocation to Los Angeles, California of $37,333 in 1994 and
$20,833 in 1995.

(2) Consists of payments relating to an automobile allowance, premiums on term
life insurance, matching payments pursuant to the Company's 401(K) Plan,
loan forgiveness of $10,667 in 1994 and 1995, deferred compensation of
$34,363 in 1995 and payments in connection with the Company's relocation to
Los Angeles, California of $53,833 in 1994 and $20,833 in 1995.

(3) Consists of payments in connection with an automobile allowance, matching
payments pursuant to the Company's 401(K) Plan and payments in connection
with the Company's relocation to Los Angeles, California of $28,000 in 1994
and $12,500 in 1995.

(4) Consists of payments in connection with an automobile allowance and payments
in connection with the Company's relocation to Los Angeles, California of
$10,000 in 1994 and $11,667 in 1995.

(5) Consists of payments in connection with an automobile allowance and
commissions of $56,719 in 1994 and $102,011 in 1995.

(6) Consists of payments in connection with an automobile allowance.

EMPLOYMENT AGREEMENTS

Messrs. Robeck and Kurz are parties to three year employment agreements
with the Company, expiring on February 2, 1997. Messrs. Robeck and Kurz were
entitled to receive annual base salaries of $250,000 in 1994 and $275,000 in
1995 and are entitled to receive an increase of at least 10% in 1996 and have
agreed not to compete with the company during the term of the employment
agreements and for one year thereafter. Additionally, during such employment,
Messrs. Robeck and Kurz are entitled to receive a discretionary bonus based on
the recommendations of the Compensation Committee.

6
<PAGE> 10

Kenneth Fisher has an employment agreement with the Company, expiring on
February 15, 1997. Mr. Fisher is entitled to receive an annual base salary of
$120,000 in 1994 and $150,000 in 1995 and 1996. Additionally, during such
employment Mr. Fisher is entitled to receive a discretionary bonus based on the
recommendation of the Compensation Committee.

Gary Trumbo is party to a two year employment agreement with the Company,
expiring on December 31, 1997. Mr. Trumbo is entitled to receive an annual base
salary plus incentives of a minimum of $200,000.

Alvaro Valdez is party to a two year employment agreement with the Company
which expires August 1, 1997. Under the agreement, Mr. Valdez is entitled to a
base salary of $125,000 per year and a discretionary bonus based on the
recommendation of the Compensation Committee.

STOCK OPTIONS

The following table sets forth information with respect to grants of
options ("Options") to purchase Common Stock under the Company's Stock Option
Plan to the executive officers named in the Summary Compensation Table during
the fiscal year ended December 31, 1995.

OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATE OF STOCK
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SH)(1) DATE 5% 10%
- --------------------- ---------- -------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kim Thomsen.......... 20,000 17% $ 12.25 2005 $162,000 $ 403,000
David Valdez......... 50,000 43% $ 7.00 2005 $668,000 $1,271,000
</TABLE>

- ---------------

(1) All options were granted at market value on the date of grant.

(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on option exercises are dependent upon other factors,
including the future performance of the Common Stock and overall stock
market conditions.

AGGREGATED OPTION EXERCISES DURING FISCAL 1995 AND FISCAL YEAR-END OPTION VALUES

The following table sets forth with respect to the named Executive Officers
in the summary compensation table information with respect to options exercised,
unexercised options and year-end option values in each case with respect to
options to purchase shares of the Company's Common Stock.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN THE MONEY OPTIONS
SHARES VALUE DECEMBER 31, 1995(#) AT DECEMBER 31, 1995*
ACQUIRED ON REALIZED ---------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- -------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald A. Kurz................ -- -- -- -- -- --
Stephen P. Robeck............. -- -- -- -- -- --
Kenneth M. Fisher............. -- -- 20,000 80,000 $ 138,000 $ 552,000
Kim Thomsen................... -- -- 73,926 69,284 $ 900,419 $ 600,279
Gary Trumbo................... -- -- 36,428 63,572 $ 244,000 $ 442,000
David Valdez.................. -- -- -- 50,000 -- $ 275,000
</TABLE>

- ---------------

* Represents the difference between the last sale price of the Common Stock on
December 31, 1995 and the exercise price of the option multiplied by the
applicable number of options.

7
<PAGE> 11

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee of the Board of Directors are
Lawrence Elins, Merrill M. Kraines and Bruce Raben. Mr. Kraines also serves as
Secretary of the Company. No other member of the Board of Directors or the
Compensation Committee has any interlocking relationship with any other
corporation that requires disclosure under this heading.

OTHER MATTERS

During the fiscal year ended December 31, 1995 and during the current
fiscal year the law firm of Fulbright & Jaworski L.L.P., in which Mr. Kraines is
a partner, has performed legal services for the Company.

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The Compensation Committee (the "Committee") of the Board of Directors held
meetings in February and December of 1995 and acted once by unanimous written
consent in August 1995. It is the Committee's responsibility to determine and
administer the Company's executive compensation programs and make appropriate
recommendations concerning matters of executive compensation. Set forth below
are the principal factors underlying the Committee's philosophy used in setting
compensation for fiscal 1995.

Compensation Philosophy -- At the direction of the Board of Directors, the
Committee endeavors to ensure that the compensation programs for executive
officers of the Company are competitive and consistent in order to attract and
retain key executives critical to the Company's long-term success. The Committee
believes that the Company's overall financial performance should be an important
factor in the total compensation of executive officers. At the executive officer
level, the Committee has a policy that a significant proportion of potential
total compensation should consist of variable, performance-based components,
such as stock options and bonuses, which can increase or decrease to reflect
changes in corporate and individual performance. These incentive compensation
programs are intended to reinforce management's commitment to the enhancement of
profitability and stockholder value.

The Committee takes into account various qualitative and quantitative
indicators of corporate and individual performance in determining the level and
composition of compensation for the Company's Co-Chief Executive Officers and
other executive officers. In implementing the Company's executive compensation
objectives, the Committee has designed an executive compensation program
consisting of base salary, annual incentive compensation, stock options and
other employment benefits.

The Committee seeks to maintain levels of compensation that are competitive
with similar companies in the Company's industry. For comparison purposes, in
the summer and fall of 1995, the Committee, together with the Company's Co-CEO's
and with the assistance and advice of an independent executive compensation
consultant, conducted a detailed analysis of employee compensation. The analysis
compared the levels and composition of compensation for the Company's executive
officers to other companies in the Company's industry.

Base Salary represents the fixed component of the executive compensation
program. The Company's philosophy regarding base salaries is to maintain
salaries for the aggregate group of executive officers at approximately the
competitive industry average. Periodic increases in base salary relate to
individual contributions evaluated against established objectives, and the
industry's annual competitive pay practices. Based on proxy data, the
compensation analysis and the advice of the independent compensation consultant,
the Committee has determined that base salaries for 1995 for the Company's
executive officers were generally within the competitive industry average.

Annual Incentive Compensation. The Company's executive officers are
eligible for annual incentive compensation consisting primarily of cash bonuses
based on the attainment of corporate earnings goals, as well as divisional and
individual performance objectives. While performance against financial
objectives is the primary measurement for executive officers' annual incentive
compensation, non-financial performance also affects pay. The Committee
considers such corporate performance measures as net income, earnings per

8
<PAGE> 12

common and common equivalent share, return on average common stockholders'
equity, sales growth and expense management in making compensation decisions.
The Committee also appreciates the importance of achievements that may be
difficult to quantify, and accordingly recognizes qualitative factors, such as
successful supervision of major corporate projects, demonstrated leadership
ability and contributions to industry and community development. The amount of
each annual incentive award is determined by the Committee.

Stock Options. The Committee strongly believes that the pay program should
provide employees with an opportunity to increase their equity ownership and
potentially gain financially from Company stock price increases. By this
approach, the best interests of stockholders, executives and employees will be
closely aligned. Therefore, executives and other employees are eligible to
receive stock options, giving them the right to purchase shares of Common Stock
of the Company at a specified price in the future. The Committee believes that
the use of stock options as the basis for long-term incentive compensation meets
the Committee's compensation strategy and business needs of the Company by
achieving increased value for stockholders and retaining key employees.

The Company granted options to purchase a total of 100,000 shares of the
Company's Common Stock to its executive officers in 1995 including 27,132 which
are subject to stockholder approval (see Proposal No. 3 for a discussion of the
proposed amendment to the Company's Employee Stock Option Plan). In approving
grants and awards under the Plan, the quantitative and qualitative factors and
industry comparisons outlined above are considered. The number of options
previously awarded to and held by executive officers was an important factor in
determining the size of current option grants.

Other Employment Benefits. The Company provides health and welfare benefits
to executives and employee's similar to those provided by similar companies in
the Company's industry. The Company also provides a 401(K) plan in which all
employees are eligible and maintains a supplemental deferred compensation plan
for certain executive officers and a restricted stock plan for certain employees
who are not executive officers.

To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to the Company and to the executives of various payments and
benefits. Some types of compensation payments and their deductibility depend
upon the timing of an executive's vesting or exercise of previously granted
rights. Further, interpretations of and changes in the tax laws and other
factors beyond the Committee's control also affect the deductibility of
compensation. The Committee will consider various alternatives to preserve the
deductibility of compensation payments and benefits to the extent reasonably
practicable and to the extent consistent with its other compensation objectives.

Co-Chief Executive Officer Compensation. The Committee is responsible for
evaluating and establishing the compensation paid to Donald A. Kurz and Stephen
P. Robeck, the Company's Co-Chief Executive Officers. The 1995 base salaries for
Mr. Kurz and Mr. Robeck were based upon the individual employment agreements
between each of Mr. Kurz and Mr. Robeck and the Company which were executed at
the time of the Company's initial public offering on February 2, 1994. In
evaluating the incentive compensation to be paid to the two Co-Chief Executive
Officers, the Committee applied the principles and procedures for evaluating
performance against corporate and individual objectives outlined above. The
Committee determined that the Company had exceeded the earnings goals originally
established by the Board of Directors for 1995. Based on these results and the
Committee's conclusion that both Mr. Kurz and Mr. Robeck had exerted substantial
continuing efforts on behalf of the Company in achieving significant revenue
growth and further diversification of the Company's lines of business, the
Committee awarded Mr. Kurz and Mr. Robeck each a bonus of $200,000 for the year
ended December 31, 1995 and gave Mr. Kurz and Mr. Robeck each a deferred
compensation contribution of $34,363. No stock options were granted to Mr. Kurz
or Mr. Robeck in 1994 or 1995.

9
<PAGE> 13

In December 1995, the Committee approved bonuses and granted options to
certain of its executive officers and certain employees. In each case, the
Committee's decision was based upon the principles and procedures outlined
above.

COMPENSATION COMMITTEE
Lawrence Elins
Merrill M. Kraines
Bruce Raben

The Report of the Compensation Committee on Executive Compensation shall
not be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the Securities Act of
1993 or under the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such acts.

10
<PAGE> 14

STOCKHOLDER RETURN PERFORMANCE PRESENTATION

Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the S & P 500 Index, and the Russell 1000 Consumer
Discretionary Economic Sector ("Russell 1000") index for the period commencing
February 2, 1994 (the effective date of the registration statement for the
initial public offering of the Company's Common Stock) and ended December 31,
1995. The data represented below assumes $100 invested in each of the Company's
Common Stock on February 2, 1994 and the S & P 500 index and the Russell 1000
index on January 1, 1994. The stock performance graph shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.

<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) The Company S & P 500 Russell 1000
<S> <C> <C> <C>
1/1/94 100 100 100
12/31/94 83.00 98.46 97.29
12/31/95 207.50 132.04 130.80
</TABLE>

Comparison of cumulative return among the Company, the S & P 500 Index and the
Russell 1000 Index.

<TABLE>
<CAPTION>
MEASUREMENT PERIOD THE COMPANY S & P 500 RUSSELL 1000
<S> <C> <C> <C>
--------------------------------------------------------------------------------------
January 1, 1994 - December 31, 1994 $ 83.00* $ 98.46 $ 97.29
--------------------------------------------------------------------------------------
January 1, 1995 - December 31, 1995 $ 207.50 $ 132.04 $ 130.80
--------------------------------------------------------------------------------------
</TABLE>

* The 1994 data for the Company begins February 2, 1994, the date of the
Company's initial public offering.

COMPLIANCE WITH SECTION 16(B) OF THE EXCHANGE ACT

Under the securities laws of the United States, the Company's directors,
its executive (and certain other) officers, and any persons holding more than
ten percent of the Common Stock are required to report their ownership of the
Common Stock and any changes in that ownership to the Securities and Exchange
Commission ("Commission") and the NASDAQ Stock Market. Specific due dates for
these reports have been established and the Company is required to report in
this proxy statement any failure to file by these dates during the fiscal year
ended December 31, 1995. All of these filing requirements were satisfied by its
directors, officers and ten percent holders. In making these statements, the
Company has relied on the written representations of its directors, officers and
its ten percent holders and copies of the reports that they have filed with the
Commission.

11
<PAGE> 15

PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR

Upon recommendation by the Audit Committee, the Board of Directors has
appointed Arthur Andersen LLP as the Company's independent auditor for the year
ending December 31, 1996. Representatives of that firm will be present at the
Annual Meeting to respond to appropriate questions and will be given an
opportunity to make a statement if they so desire.

Stockholders are being asked to ratify the appointment of Arthur Andersen
LLP as the Company's independent auditor for the year ending December 31, 1996.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE PROPOSAL.

PROPOSAL NO. 3

AMENDMENT TO THE EQUITY MARKETING, INC. STOCK OPTION PLAN

On December 7, 1995, the Board of Directors unanimously adopted, subject to
stockholder approval, an amendment to the Equity Marketing, Inc. Stock Option
Plan (the "Employee Plan") which would increase the aggregate number of shares
of Common Stock which may be issued thereunder from 740,000 to 1,040,000 shares,
all of which would be available for the grant of either incentive stock options
("ISO's"), as defined in Section 422 of the Internal Revenue Code of 1986 (the
"Code"), or options which do not qualify as incentive stock options
("non-ISO's"). The primary features of the Employee Plan are summarized below.
The full text of the Employee Plan and the proposed amendment thereto are set
forth in Appendix A to this Proxy Statement and the following discussion is
qualified by reference thereto.

The Board of Directors believes that approval of the amendment will serve
the best interests of the Company and its stockholders by permitting the Company
to continue to utilize stock options as a means to attract and retain key
employees and consultants who are in a position to contribute materially to the
successful conduct of the business and affairs of the Company and, in addition,
to stimulate in such individuals an increased desire to render greater service
to the Company and its subsidiaries. In addition, the availability of shares for
grant under the Employee Plan is important in that it provides the Company an
alternate or additional means of compensating key employees and consultants.

The Employee Plan is administered by the Compensation Committee (the
"Committee") appointed by the Board of Directors, which has the authority to
select optionees, designate the number of shares to be covered by each option
and, subject to certain restrictions, specify other terms of the options. The
Committee presently consists of Messrs. Elins, Kraines and Raben, all of whom
are directors of the Company. Options may be granted by the Committee from time
to time through December 31, 2001, the termination date of the Employee Plan, to
present and future officers and employees of the Company or a subsidiary of the
Company (a "Subsidiary"), within the meaning of Section 424(f) of the Code, and
to consultants of the Company or a Subsidiary who are not employees. All
Employees are eligible to participate in the Employee Plan. As of June 5, 1996,
11 employees were participating in the Employee Plan.

The Employee Plan, as currently in effect, permits the granting of options
to purchase up to an aggregate of 740,000 shares of Common Stock of the Company.
Under the Employee Plan, the Company may grant ISO's and non-ISO's. Under the
Employee Plan, the exercise price of shares covered by an incentive stock option
may not be less than 100% of the fair market value (as defined in the Employee
Plan) of the Common Stock on the date of grant (110% in the case of a grant to
an employee who owns stock possessing more than 10% of the combined voting power
of all classes of stock of the Company or any subsidiary entitled to vote (a
"10% Stockholder")). The exercise price of shares covered by a non-ISO may not
be less than the par value of the Common Stock at the date of grant. The
Compensation Committee has the discretion to determine the period required for
full exercisability of stock options. The Employee Plan also provides that the
options will become immediately exercisable upon an Exchange Transaction. For
purposes thereof, an Exchange Transaction is deemed to occur if there occurs a
merger (other than a merger of the Company in which the holders of Common Stock
immediately prior to the merger have the same proportionate ownership of

12
<PAGE> 16

Common Stock in the surviving corporation immediately after the merger),
consolidation, acquisition of property or stock, separation, reorganization
(other than a mere reincorporation or the creation of a holding company),
liquidation of the Company or any other similar transaction or event so
designated by the Board in its sole discretion, as a result of which the
stockholders of the Company receive cash, stock or other property in exchange
for or in connection with their shares of Common Stock.

Options granted under the Employee Plan have a term of ten years (five
years in the case of an incentive stock option granted to a more than 10%
stockholder). The Employee Plan terminates on December 31, 2001. Any option
outstanding after December 31, 2001, will remain in effect until it is
exercised, terminates or expires in accordance with its terms. The Employee Plan
also provides that, if an optionee ceases to be employed by or to perform
services for the Company for any reason other than death or disability, then
each outstanding option granted to him or her under the Plan will terminate on
the date of such termination of employment or service, or, if the optionee's
employment is terminated by the Company without cause, three months after such
date. If an optionee's employment or service is terminated by reason of the
optionee's death or disability (or of the optionee's employment or service is
terminated by reason of his or her disability and the optionee dies one year
after such termination of employment or service), then each outstanding option
granted to the optionee under the Plan will terminate on the date one year after
the date of such termination of employment or service (or one year after the
later death of a disabled optionee) or, if earlier, the date specified in the
option agreement.

As of June 5, 1996, options to purchase an aggregate of 767,132 shares were
granted under the Employee Plan including 27,132 which were subject to
stockholder approval to current executive officers of the Company. As of June 5,
1996, no shares remained available for future option grants under the Employee
Plan. As of June 5, 1996, all current executive officers as a group were granted
options to purchase 433,210 shares of Common Stock pursuant to the Employee
Plan. All employees who are not executive officers, as a group, were granted
options to purchase 75,000 shares of Common Stock pursuant to the Employee Plan.
As of June 5, 1996, options to purchase 176,782 shares of Common Stock had been
exercised. Bruce Raben, a current director of the Company, holds options to
purchase 82,140 shares of Common Stock pursuant to the Employee Plan that were
granted to him in 1992. Mr. Raben is not eligible for any future option grants
under the Employee Plan.

See "Certain Federal Income Tax Considerations" for a brief description of
the income tax consequences associated with options granted under the Employee
Plan.

VOTE REQUIRED

The affirmative vote of holders of a majority of the shares of Common Stock
issued, outstanding and entitled to vote, present or represented at the meeting,
a quorum being present, is required for the adoption of this proposal. Broker
non-votes with respect to this matter will be treated as neither a vote "for" or
a vote "against" the matter, although they will be counted in determining if a
quorum is present. However, abstentions will be considered in determining the
number of votes required to attain a majority of the shares present or
represented at the meeting and entitled to vote. Accordingly, an abstention from
voting by a stockholder present in person or by proxy at the meeting has the
same legal effect as a vote "against" the matter because it represents a share
present or represented at the meeting and entitled to vote, thereby increasing
the number of affirmative votes to approve this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE PROPOSAL.

PROPOSAL NO. 4

AMENDMENT TO THE EQUITY MARKETING, INC. NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN

On December 7, 1995, the Board of Directors unanimously adopted, subject to
stockholder approval, an amendment to the Equity Marketing, Inc. Non-Employee
Director Stock Option Plan (the "Director Plan") which would increase the
aggregate number of shares of Common Stock which may be issued thereunder

13
<PAGE> 17

from 150,000 to 190,000 shares, all of which would be available for the grant of
stock options to non-employee members of the Company's Board of Directors (the
"Board"). The Board of Directors believes that the continued growth and success
of the Company will depend, in part, upon the ability of the Company to attract
and retain to its Board of Directors knowledgeable persons who, through their
efforts and expertise, can make a significant contribution to the success of the
Company's business and to provide incentive for such directors to work for the
best interests of the Company and its stockholders through ownership of its
Common Stock. In assessing the recommendation of the Board to adopt this
proposal, stockholders should consider that the non-employee directors will
derive a future benefit from the proposed increase in the aggregate number of
shares that may be issued pursuant to the Director Plan and thus, they may be
viewed to have a conflict of interest.

The primary features of the Director Plan are summarized below. The full
text of the Director Plan and the proposed amendment thereto are set forth in
Appendix B to this Proxy Statement and the following discussion is qualified by
reference thereto.

The Director Plan constitutes a "formula plan" within the meaning and for
the purposes of Rule 16b-3 issued by the Securities and Exchange Commission
under Section 16 of the Securities Exchange Act of 1934. The Director Plan, as
currently in effect, permits the granting of options to purchase up to an
aggregate of 150,000 shares of Common Stock of the Company. The number of shares
which may be issued under the Director Plan is subject to adjustment to reflect
any increase or decrease in the number of shares of Common Stock resulting from
a stock split, stock dividend or other similar transaction. The Director Plan
provides for an automatic grant of an option to purchase 25,000 shares of common
stock upon the initial election of a non-employee to the Board. Additional
grants of options to purchase 10,000 shares of Common Stock are automatically
granted on each non-employee director's anniversary of his or her initial
appointment to the Board provided the non-employee director is still a member of
the Board on such date. All options are granted at the fair market value of the
Company's Common Stock on the date of each grant. The Director Plan is
administered by the Board, which, subject to the provisions of the Director Plan
and applicable laws, has the authority to interpret the provisions of the
Director Plan and option agreements made under the Director Plan, and to
supervise the administration of the Director Plan.

Options granted under the Director Plan become fully exercisable six months
after the date the options are granted. The Director Plan also provides that the
options will become immediately exercisable upon a "Change in Control of the
Company". A "Change on Control of the Company" shall be deemed to occur if (1)
there shall be consummated (a) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of the Company's Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's Common Stock immediately prior to the merger have the
same proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (b) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (2) the stockholders of the
Company shall approve any plan or proposal for liquidation or dissolution of the
Company, or (3) any person (as such term is used in Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), shall
become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange
Act) of 40% or more of the Company's outstanding Common Stock other than
pursuant to a plan or arrangement entered into by such person and the Company,
or (4) during any period of two consecutive years, individuals who at the
beginning of such period constitute the entire Board of Directors shall cease
for any reason to constitute a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.

Options granted under the Director Plan have a term of ten years from the
date the option is granted. The Director Plan terminates on August 23, 2003. Any
option outstanding after August 23, 2003, will remain in effect until it is
exercised, terminates or expires in accordance with its terms.

14
<PAGE> 18

As of June 5, 1996, options to purchase an aggregate of 120,000 shares were
granted under the Director Plan to the Company's current non-employee directors
and there were 30,000 shares available for issuance under the Director Plan.

See "Certain Federal Income Tax Considerations" for a brief description of
the income tax consequences associated with options granted under the Director
Plan.

VOTE REQUIRED

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE PROPOSAL.

PLAN AMENDMENT BENEFITS

The following table sets forth information regarding the benefits which
will be received pursuant to the proposed amendment to the Equity Marketing,
Inc. Stock Option Plan (Proposal No. 3) and the proposed amendment to the Equity
Marketing, Inc. Non-Employee Director Stock Option Plan (Proposal No. 4) by: (i)
each executive officer named in the Summary Compensation Table (see "Executive
Compensation"); (ii) all current executive officers as a group; (iii) all
current directors who are not executive officers as a group; (iv) all employees,
including all current officers who are not executive officers as a group.

<TABLE>
<CAPTION>
EMPLOYEE PLAN DIRECTOR PLAN
--------------------------------- ---------------------------------
DOLLAR DOLLAR
NAME AND PRINCIPAL POSITION VALUE(1) NUMBER OF SHARES VALUE(1) NUMBER OF SHARES
- ----------------------------------- ------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
Stephen P. Robeck.................. $ 0 0 $ 0 0
Chairman, Co-Chief Executive
Officer
Donald A. Kurz..................... $ 0 0 $ 0 0
President, Co-Chief Executive
Officer
Kenneth M. Fisher.................. $ 0 0 $ 0 0
Senior Vice President Finance and
Administration, Chief Financial
Officer and Treasurer
Gary Trumbo........................ $ 0 0 $ 0 0
Senior Vice President Equity Toy
Kim Thomsen........................ $ 0 0 $ 0 0
Senior Vice President, Creative
Director
Alvaro (David) Valdez.............. $ 0 0 $ 0 0
Vice President, Operations
All current executive officers as a
group............................ $ 0(1) 27,132 $ 0 0
All current directors who are not
executive officers as a group.... $ 0 0 $ 0 30,000(2)
All employees, including current
officers who are not executive
officers, as a group............. $ 0 0 $ 0 0
</TABLE>

15
<PAGE> 19

- ---------------

(1) Options granted under the Employee Plan and the Director Plan are granted at
the market price of a share of Common Stock on the applicable grant date.
Therefore, the spread between the exercise price and the market value on the
date options are granted is zero. The market value of the underlying shares
related to the options granted under the Employee Plan, which are currently
subject to stockholder approval, as of the applicable grant date was
$332,367.

(2) Represents the number of shares to be granted each year to current
non-employee directors pursuant to the terms of the Director Plan. All
option grants pursuant to the Director Plan are at the market value of a
share of Common Stock on the applicable grant date.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

Set forth below is a summary of the salient federal income tax consequences
associated with options granted under the Equity Marketing, Inc. Stock Option
Plan and the Equity Marketing, Inc. Non-Employee Director Stock Option Plan
(each a "Plan and collectively the "Plans").

STOCK OPTIONS -- TAX CONSEQUENCES

An optionee will not realize taxable income upon the grant of an option. In
general, the holder of a nonqualified stock option (i.e., an option which is not
an incentive stock option under Section 422 of the Code) will recognize ordinary
income when the option is exercised equal to the excess of the value of the
stock over the exercise price (i.e., the option spread), and the Company
receives a corresponding deduction. (If the optionee is subject to the six-month
restrictions on sale of Common Stock under Section 16(b) of the Exchange Act,
the optionee generally will recognize ordinary income on the date the
restrictions lapse, unless an early income recognition election is made.) Upon a
later sale of the stock, the optionee will realize capital gain or loss equal to
the difference between the selling price and the value of the stock at the time
ordinary income is realized.

The holder of an incentive stock option will not realize taxable income
upon the exercise of the option, although the option spread is an item of tax
preference income potentially subject to the alternative minimum tax. If stock
acquired upon exercise of an incentive stock option is sold or otherwise
disposed of within two years from the option grant date or within one year from
the exercise date then, in general, gain realized on the sale is treated as
ordinary income to the extent of the option spread at the exercise date, and the
Company receives a corresponding deduction. Any remaining gain is treated as
capital gain. If the stock is held for at least two years from the grant date
and one year from the exercise date, then gain or loss realized upon the sale
will be capital gain or loss and the Company will not be entitled to a
deduction. A special basis adjustment applies to reduce the gain for alternative
minimum tax purposes.

In general, if an optionee delivers previously-owned shares in payment of
the exercise price of an option, no gain or loss will be recognized on the
exchange of the previously-owned shares for an equivalent number of newly issued
shares. If the option being exercised is a nonqualified option, the optionee
will realize ordinary income equal to the amount by which the fair market value
of Common Stock received exceeds the exercise price (as if the exercise price
were paid in cash). Also, if the previously-owned shares delivered in payment of
the exercise price were acquired pursuant to the exercise of an incentive stock
option and the requisite holding periods are not satisfied (see the preceding
paragraph), then the optionee will realize ordinary income as in the case of any
other "early" disposition of shares acquired pursuant to the exercise of an
incentive stock option.

COMPANY DEDUCTION LIMITATIONS

Changes made to the Code in 1993 impose certain limitations on the
deductibility of executive compensation paid by public companies. In general,
under the limitations, the Company may not be able to deduct annual compensation
paid to certain executive officers in excess of $1,000,000 except to the extent
that such compensation qualifies as "performance-based compensation" (or meets
other exceptions). Non-deductibility would result in additional tax cost to the
Company. It is contemplated that the individual grant limitations on options and
restricted stock awards which may be made to any employee in any calendar year

16
<PAGE> 20

under the Employee Plan will enable the Committee to grant options which would
qualify for the "performance-based compensation" exclusion under the new
deduction limitation provisions. Nevertheless, although the Company encourages
the Compensation Committee to consider the net cost to the Company in making all
compensation decisions (including, for this purposes, the potential limitation
on deductibility of executive compensation), there is no assurance that
compensation realized with respect to any particular award would qualify for the
deduction limitation exclusion.

FORM 10-K

UPON WRITTEN REQUEST OF ANY PERSON ENTITLED TO VOTE AT THE MEETING,
ADDRESSED TO THE COMPANY, ATTENTION: SECRETARY, EQUITY MARKETING, INC., 131
SOUTH RODEO DRIVE, BEVERLY HILLS, CALIFORNIA 90212, THE COMPANY WILL PROVIDE
WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1995, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

PROPOSALS OF STOCKHOLDERS

Under certain circumstances, stockholders are entitled to present proposals
for consideration at stockholders meetings. Any such proposal to be included in
the proxy statement for the Company's 1997 Annual Meeting of Stockholders must
be submitted to the Secretary of the Company prior to December 27, 1996. It is
suggested that such proposals be sent by Certified Mail, Return Receipt
Requested.

OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING

The Company knows of no other matters to be presented at the Annual
Meeting, but if any other matters should properly come before the meeting, it is
intended that the persons named in the accompanying form of proxy will vote the
same in accordance with their best judgment and their discretion, and authority
to do so is included in the proxy.

By Order of the Board of Directors

/s/ Merrill M. Kraines
----------------------------------
MERRILL M. KRAINES
Secretary

17
<PAGE> 21

APPENDIX A

Below is a text of the Equity Marketing, Inc. Stock Option Plan as proposed
to be amended pursuant to Proposal No. 3. Proposed new language is set forth in
bold print. Language to be deleted is set forth in brackets.

EQUITY MARKETING, INC.

STOCK OPTION PLAN

1. Purpose. The purpose of the Equity Marketing, Inc. Stock Option Plan
(the "Plan") is to enable Equity Marketing, Inc. (the "Company") and its
stockholders to secure the benefits of common stock ownership by key personnel
of the Company and its subsidiaries. The Board of Directors of the Company (the
"Board") believes that the granting of options under the Plan will foster the
Company's ability to attract, retain and motivate those individuals who will be
largely responsible for the profitability and long-term future growth of the
Company.

2. Stock Subject to the Plan. The Company may issue and sell a total of
1,040,000 [740,000] shares of its common stock (the "Common Stock"), pursuant to
the Plan. Such shares may be either authorized and unissued or held by the
Company in its treasury. New options may be granted under the Plan with respect
to shares of Common Stock which are covered by the unexercised portion of an
option which has terminated or expired by its terms, by cancellation or
otherwise.

3. Administration. The Plan will be administered by a committee (the
"Committee") consisting of at least two directors appointed by and serving at
the pleasure of the Board. If the Company is covered by Section 16 of the
Securities Exchange Act of 1934, then, unless the Board determines otherwise,
the members of the Committee will be "disinterested directors" within the
meaning and for the purposes of Rule 16(b)-3 under said Act. Subject to the
provisions of the Plan, the Committee, acting in its sole and absolute
discretion, will have full power and authority to grant options under the Plan,
to interpret the provisions of the Plan, to fix and interpret the provisions of
option agreements made under the Plan, to supervise the administration of the
Plan, and to take such other action as may be necessary or desirable in order to
carry out the provisions of the Plan. A majority of the members of the Committee
will constitute a quorum. The Committee may act by the vote of a majority of its
members present at a meeting at which there is a quorum or by unanimous written
consent. The decision of the Committee as to any disputed question, including
questions of construction, interpretation and administration, will be final and
conclusive on all persons. The Committee will keep a record of its proceedings
and acts and will keep or cause to be kept such books and records as may be
necessary in connection with the proper administration of the Plan.

4. Eligibility. Options may be granted under the Plan to present or future
key employees of the Company or a subsidiary of the Company (a "Subsidiary")
within the meaning of Section 424(f) of the Internal Revenue Code of 1986 (the
"Code"), and to consultants to the Company or a Subsidiary who are not
employees. Options may also be granted to directors of the Company who are not
employees of or consultants to the Company and/or a Subsidiary. Subject to the
provisions of the Plan, the Committee may from time to time select the persons
to whom options will be granted, and will fix the number of shares covered by
each such option and establish the terms and conditions thereof (including,
without limitation, the exercise price, restrictions on exercisability of the
option and/or on the disposition of the shares of Common Stock issued upon
exercise thereof, and whether or not the option is to be treated as an incentive
stock option within the meaning of Section 422 of the Code (an "Incentive Stock
Option").

5. Terms and Conditions of Options. Each option granted under the Plan will
be evidenced by a written agreement in a form approved by the Committee. Each
such option will be subject to the terms and conditions set forth in this
paragraph and such additional terms and conditions not inconsistent with the
Plan as the Committee deems appropriate.

(a) Option Exercise Price. In the case of an option which is not treated
as an Incentive Stock Option, the exercise price per share may not be less than
the par value of a share of Common Stock on the date the option is granted; and,
in the case of an Incentive Stock Option, the exercise price per share may not

18
<PAGE> 22

be less than 100% of the fair market value of a share of Common Stock on
the date the option is granted (110% in the case of an optionee who, at the time
the option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or a Subsidiary (a "ten
percent shareholder")). For purposes hereof, the fair market value of a share of
Common Stock on any date will be equal to the closing sale price per share as
published by a national securities exchange on which shares of the Common Stock
are traded on such date or, if there is no sale of Common Stock on such date,
the average of the bid and asked prices on such exchange at the closing of
trading on such date or, if shares of the Common Stock are not listed on a
national securities exchange on such date, the closing price or, if none, the
average of the bid and asked prices in the over the counter market at the close
of trading on such date, or if the Common Stock is not traded on a national
securities exchange or the over the counter market, the fair market value of a
share of the Common Stock on such date as determined in good faith by the
Committee.

(b) Option Period. The period during which an option may be exercised
will be fixed by the Committee and will not exceed ten years from the date the
option is granted (five years in the case of an Incentive Stock Option granted
to a "ten percent shareholder").

(c) Exercise of Options. No option will become exercisable unless the
person to whom the option is granted remains in the continuous employ or service
of the Company or a Subsidiary for at least one year (or for such other period
as the Committee may designate) from the date the option is granted. The
Committee will determine and will set forth in the option agreement any vesting
or other restrictions on the exercisability of the option, subject to any
earlier termination of the option required hereunder. All or part of the
exercisable portion of an option may be exercised at any time during the option
period, except that, without the consent of the Committee, no partial exercise
of an option may be for less than 25% of the number of shares originally covered
by the option. An option may be exercised by transmitting to the Company (1) a
written notice specifying the number of shares to be purchased, and (2) payment
of the exercise price in cash or by personal check or by such other means or in
such other manner of payment as the Committee may permit, together with the
amount, if any, deemed necessary by the Committee to enable the Company to
satisfy its income tax withholding obligations with respect to such exercise
(unless other arrangements acceptable to the Company are made with respect to
the satisfaction of such withholding obligations).

(d) Payment of Exercise Price. The purchase price of shares of Common
Stock acquired pursuant to the exercise of an option granted under the Plan may
be paid in cash and/or such other form of payment as may be permitted under the
option agreement, including, without limitation, previously-owned shares of
Common Stock.

(e) Rights as a Stockholder. No shares of Common Stock will be issued in
respect of the exercise of an option granted under the Plan until full payment
therefor has been made. The holder of an option will have no rights as a
stockholder with respect to any shares covered by an option until the date a
stock certificate for such shares is issued to him or her. Except as otherwise
provided herein, no adjustments shall be made for dividends or distributions of
other rights for which the record date is prior to the date such stock
certificate is issued.

(f) Nontransferability of Options. No option shall be assignable or
transferable except upon the optionee's death to a beneficiary designated by the
optionee in accordance with procedures established by the Committee or, if no
designated beneficiary shall survive the optionee, pursuant to the optionee's
will or by the laws of descent and distribution. During an optionee's lifetime,
options may be exercised only by the optionee or the optionee's guardian or
legal representative.

(g) Termination of Employment or Other Service. Unless extended by the
Committee, if an optionee ceases to be employed by or to perform services for
the Company and any Subsidiary for any reason other than death or disability
(defined below), then each outstanding option granted to him or her under the
Plan will terminate on the date of such termination of employment or service,
or, if the optionee's employment is terminated by the Company without cause
(defined below), three months after such date. If an optionee's employment or
service is terminated by reason of the optionee's death or disability (or if the
optionee's employment or service is terminated by reason of his or her
disability and the optionee dies within one year after such termination of
employment or service), then each outstanding option granted to the optionee
under

19
<PAGE> 23

the Plan will terminate on the date one year after the date of such termination
of employment or service (or one year after the later death of a disabled
optionee) or, if earlier, the date specified in the option agreement. For
purposes hereof, the term "disability" means the inability of an optionee to
perform the customary duties of his or her employment or other service for the
Company or a Subsidiary by reason of a physical or mental incapacity which is
expected to result in death or be of indefinite duration; and the term "cause"
means (1) failure or refusal by optionee to perform the duties of his or her
employment with the Company, (2) commission by the optionee of a crime involving
moral turpitude, or (3) the optionee's dishonesty or willful engagement in
conduct which is injurious to the business or reputation of the Company, all as
determined by the Board in its sole discretion.

(h) Transfer Restrictions; Repurchase Option. Notwithstanding anything
to the contrary contained herein, Common Stock acquired pursuant to the exercise
of an option shall not be transferable without the consent of the Board (acting
in its sole and absolute discretion) until the earliest of (a) the date on which
the Company completes its first offering of stock pursuant to a registration
statement under the Securities Act of 1933, as amended, with a minimum net
proceeds to the Company and/or its controlling stockholders of $10 million; (b)
the date on which occurs an Exchange Transaction (as defined in paragraph 6(c))
in respect of which the stockholders of the Company receive stock in another
company which is traded on a national securities exchange or in the over the
counter market; or (c) the date immediately following the date on which the
Company's repurchase option (described in the next sentence) expires. Until the
first anniversary of the date of the termination of an optionee's employment
with the Company and its Subsidiaries (or, if later, the first anniversary of
the date his or her option is exercised), the Company (or its designee) shall
have the right, exercisable in its sole discretion, to purchase from the
optionee (or the successor of a deceased optionee, as the case may be) all of
the shares of Common Stock acquired by the optionee (or by the optionee's
successor), to the extent such shares are otherwise nontransferable in
accordance with the preceding sentence, for a purchase price equal to the fair
market value of such shares as determined by the Company. At the election of the
Company, all or part of such purchase price may be payable in substantially
equal annual or more frequent installments over a period not to exceed five
years, together with interest at least equal to the Citibank, N.A. prime rate in
effect on the date the Company's repurchase option is exercised.

(i) Other Provisions. The Committee may impose such other conditions
with respect to the exercise of options, including, without limitation, any
conditions relating to the application of federal or state securities laws, as
it may deem necessary or advisable.

6. Capital Changes, Reorganization, Sale.

(a) Adjustments Upon Changes in Capitalization. The aggregate number and
class of shares for which options may be granted under the Plan, the number and
class of shares covered by each outstanding option and the exercise price per
share shall all be adjusted proportionately or as otherwise appropriate to
reflect any increase or decrease in the number of issued shares of Common Stock
resulting from a split-up or consolidation of shares or any like capital
adjustment, or the payment of any stock dividend, and/or to reflect a change in
the character or class of shares covered by the Plan arising from a readjustment
or recapitalization of the Company's capital stock.

(b) Cash, Stock or Other Property for Stock. Except as otherwise
provided in this subparagraph, in the event of an Exchange Transaction (as
defined below), all optionees will be permitted to exercise their outstanding
options in whole or in part (whether or not otherwise exercisable) immediately
prior to such Exchange Transaction, and any outstanding options which are not
exercised before the Exchange Transaction will thereupon terminate.
Notwithstanding the preceding sentence, if, as part of the Exchange Transaction,
the stockholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock, and if the
Board, in its sole discretion, so directs, then all outstanding options will be
converted into options to purchase shares of Exchange Stock. The amount and
price of converted options will be determined by adjusting the amount and price
of the options granted hereunder on the same basis as the determination of the
number of shares of Exchange Stock the holders of Common Stock will receive in
the Exchange Transaction and, unless the Board determines otherwise, the vesting
conditions

20
<PAGE> 24

with respect to the converted options will be substantially the same as the
vesting conditions set forth in the original option agreement.

(c) Definition of Exchange Transaction. For purposes hereof, the term
"Exchange Transaction" means a merger (other than a merger of the Company in
which the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation,
reorganization (other than a mere reincorporation or the creation of a holding
company), liquidation of the Company or any other similar transaction or event
so designated by the Board in its sole discretion, as a result of which the
stockholders of the Company receive cash, stock or other property in exchange
for or in connection with their shares of Common Stock.

(d) Fractional Shares. In the event of any adjustment in the number of
shares covered by any option pursuant to the provisions hereof, any fractional
shares resulting from such adjustment will be disregarded, and each such option
will cover only the number of full shares resulting from the adjustment.

(e) Determination of Board to be Final. All adjustments under this
paragraph 6 shall be made by the Board, and its determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.

8. No Rights Conferred. Nothing contained herein will be deemed to give any
individual any right to receive an option under the Plan or to be retained in
the employ or service of the Company or any Subsidiary.

9. Governing Law. The Plan and each option agreement shall be governed by
the laws of the State of New York.

10. Decisions and Determinations of Committee to be Final. Except to the
extent rights or powers under this Plan are reserved specifically to the
discretion of the Board, all decisions and determinations of the Committee are
final and binding.

11. Term of the Plan. The Plan shall be effective as of January 1, 1992,
the date on which it was adopted by the Board and approved by the stockholders
of the Company. The Plan will terminate on December 31, 2001, the date ten years
after the date of adoption, unless sooner terminated by the Board. The rights of
optionees under options outstanding at the time of the termination of the Plan
shall not be affected solely by reason of the termination and shall continue in
accordance with the terms of the option (as then in effect or thereafter
amended).

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<PAGE> 25

APPENDIX B

Below is a text of the Equity Marketing, Inc. Non-Employee Director Stock
Option Plan as proposed to be amended pursuant to Proposal No. 4. Proposed new
language is set forth in bold print. Language to be deleted is set forth in
brackets.

EQUITY MARKETING, INC.

NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

1. Purpose. The purpose of this Non-Employee Director Stock Option Plan
(the "Plan") is to enable Equity Marketing, Inc. (the "Company") to provide
compensatory stock options to members of its Board of Directors (the "Board")
who are not also employees of the Company and who are first elected or appointed
as directors after the date this Plan becomes effective ("Non-Employee
Directors"). It is intended that the Plan will constitute a "formula plan"
within the meaning and for the purposes of Rule 16b-3 issued by the Securities
and Exchange Commission under Section 16 of the Securities Exchange Act of 1934.
The provisions of the Plan and of any option agreement made pursuant to the Plan
will be interpreted and applied accordingly.

2. Stock Subject to the Plan. The Company may issue and sell a total of
190,000 [150,000] shares (subject to equitable adjustment for stock dividends
and certain capital changes) of its common stock, $.001 par value (the "Common
Stock"), pursuant to the Plan. Such shares may be either authorized and unissued
or held by the Company in its treasury. New options may be granted under the
Plan with respect to shares of Common Stock which are covered by the unexercised
portion of an option which has terminated or expired.

3. Administration. The Plan shall be administered by the Board. Subject to
the provisions of the Plan and applicable law, the Board, acting in its sole and
absolute discretion, shall have full power and authority to interpret the
provisions of the Plan and option agreements made under the Plan, to supervise
the administration of the Plan, and to take such other action as may be
necessary or desirable in order to carry out the provisions of the Plan. The
decisions of the Board as to any disputed question, including questions of
construction, interpretation and administration, shall be final and conclusive
on all persons.

4. Automatic Option Grants. Except as otherwise provided herein, an option
to purchase 25,000 shares of Common Stock will automatically be granted to each
Non-Employee Director on the date following the effective date of the Plan on
which he or she is initially appointed or elected as a director (by the Board or
the shareholders, as the case may be), and an option to purchase an additional
10,000 shares of Common Stock will automatically be granted to each Non-Employee
Director on each anniversary of his or her initial grant date provided he or she
is still serving as a director on such anniversary.

5. Terms and Conditions of Options. Each option granted under the Plan
shall be evidenced by a written agreement containing the following terms and
conditions:

a. Option Price. The purchase price per share shall be equal to the fair
market value of a share of Common Stock on the date the option is granted which,
for so long as the Company's Common Stock is listed on the NASDAQ National
Market System, shall be the closing price per share as listed on the NASDAQ
National Market System on such date.

b. Option Period. Unless sooner terminated in accordance with the
provisions hereof, the period during which an option may be exercised shall be
10 years from the date the option is granted.

c. Exercise of Options. No option shall be exercisable unless the
Non-Employee Director to whom the option was granted remains in the continuous
service as a director of the Company for at least six months from the date the
option is granted. All or part of the exercisable portion of an option may be
exercised at any time during the option period, except that, without the consent
of the Board, no partial exercise of an option shall be made for less than 100
shares. An option may be exercised by transmitting to the Company (1) a written
notice specifying the number of shares to be purchased, and (2) payment in full
of the purchase price, together with the amount, if any, deemed necessary to
enable the Company to satisfy its income tax

22
<PAGE> 26

withholding obligations with respect to such exercise (unless other arrangements
acceptable to the Board are made with respect to the satisfaction of such
withholding obligations). Notwithstanding anything in the Plan to the contrary,
no option may be exercised unless and until a registration statement covering
the shares of Common Stock issuable upon exercise of options granted hereunder
has been filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.

d. Payment of Option Price. The purchase price of shares of Common Stock
acquired pursuant to the exercise of an option granted under the Plan shall be
payable in cash or check and/or previously-owned shares of Common Stock. If the
shares of Common Stock are tendered as payment of the option exercise price, the
value of such shares shall be the fair market value as of the date of exercise.
If such tender would result in the issuance of fractional shares of Common
Stock, the Company shall instead return the difference in cash or by check to
the optionee.

e. Rights as a Shareholder. No shares of Common Stock shall be issued in
respect of the exercise of an option granted under the Plan until full payment
therefor has been made. The holder of an option shall have no rights as a
shareholder with respect to any shares covered by an option until the date a
stock certificate for such shares is issued to him or her. Except as otherwise
provided herein, no adjustments shall be made for dividends or distributions of
other rights for which the record date is prior to the date such stock
certificate is issued.

f. Nontransferability of Options. No option shall be assignable or
transferable except upon the optionee's death to a beneficiary designated by the
optionee in accordance with procedures established by the Board or, if no
designated beneficiary shall survive the optionee, pursuant to the optionee's
will or by the laws of descent and distribution. During an optionee's lifetime,
options may be exercised only by the optionee or the optionee's guardian or
legal representative.

g. Termination of Service. If an optionee ceases to perform services as
a director of the Company for any reason other than death or permanent
disability, then each outstanding option granted to him or her under the Plan
shall terminate on the date three months after the date of such termination of
service or, if earlier, the date specified in the option agreement. If an
optionee's service as a director of the Company is terminated by reason of the
optionee's death or permanent disability, or if the optionee's service as a
director of the Company is terminated by reason of his or her disability and the
optionee dies within one year after such termination of service as a director,
then each outstanding option granted to the optionee under the Plan shall
terminate on the date one year after the date of such termination of service (or
one year after the later death of a disabled optionee) or, if earlier, the date
specified in the option agreement. For the purposes hereof, the term "permanent
disability" means the continuous inability of an optionee to perform the duties
of his or her service as a director for ninety (90) consecutive days, or if
during any consecutive twelve (12) month period during his or her term of
office, the inability or unwillingness of the optionees to perform his or her
duties for a total period of ninety (90) days, either consecutively or not, by
reason of ill health, physical or mental illness, or for other causes beyond the
optionee's control.

h. Other Provisions. The Board may impose such other conditions with
respect to the exercise of options, including, without limitation, any
conditions relating to the application of federal or state securities laws, as
it may deem necessary or advisable.

6. Change in Control; Capital Changes.

a. Change in Control. If any event constituting a "Change in Control of
the Company" shall occur, all options granted under the Plan which are
outstanding at the time a Change of Control of the Company occurs shall
immediately become exercisable. A "Change in Control of the Company" shall be
deemed to occur if (1) there shall be consummated (a) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (b) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or

23
<PAGE> 27

substantially all, of the assets of the Company, or (2) the stockholders of the
Company shall approve any plan or proposal for liquidation or dissolution of the
Company, or (3) any person (as such term is used in Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), shall
become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange
Act) of 40% or more of the Company's outstanding Common Stock other than
pursuant to a plan or arrangement entered into by such person and the Company,
or (4) during any period of two consecutive years, individuals who at the
beginning of such period constitute the entire Board of Directors shall cease
for any reason to constitute a majority thereof unless the election, or the
nomination for election by the Company's shareholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.

b. Capital Changes. In the event of any stock split, stock dividend or
similar transaction which increases or decreases the number of outstanding
shares of Common Stock, appropriate adjustment shall be made by the Board to the
number of shares which may be issued under the Plan, as well as the maximum
number of shares which may be issued to any Non-Employee Director pursuant to
Section 4 hereof, and to the number and option exercise price per share of
Common Stock which may be purchased under any outstanding options. In the case
of a merger, consolidation or similar transaction which results in a replacement
of the Company's Common Stock with stock of another corporation but does not
constitute Change in Control of the Company, the Company will make a reasonable
effort, but shall not be required, to replace any outstanding options granted
under the Plan with comparable options to purchase the stock of such other
corporation, or will provide for immediate maturity of all outstanding options,
with all options not being exercised within the time period specified by the
Board being terminated.

c. Fractional Shares. In the event of any adjustment in the number of
shares covered by any option pursuant to the provisions hereof, any fractional
shares resulting from such adjustment will be disregarded, and each such option
will cover only the number of full shares resulting from the adjustment.

d. Determination of Board to be Final. All adjustments under this
paragraph 6 shall be made by the Board, and its determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.

7. Amendment and Termination of the Plan. The Board may amend or terminate
the Plan. Except as otherwise provided in the Plan with respect to equity
changes, any amendment which would increase the aggregate number of shares of
Common Stock as to which options may be granted under the Plan, materially
increase the benefits under the Plan, or modify the class of persons eligible to
receive options under the Plan shall be subject to the approval of the
shareholders of the Company. No amendment or termination may adversely affect
any outstanding option without the written consent of the optionee.
Notwithstanding anything to the contrary contained herein or in any option
agreement made hereunder, the provisions of paragraphs 4 and 5(a) of the Plan
and any other provision of the Plan or of an option agreement relating to the
timing of option grants, the amount of shares covered thereby and the exercise
price thereunder may not be amended more than once every six months, and no
amendment may be made to the Plan or an option agreement if, as a result of such
amendment, the Plan would no longer qualify as a "formula plan" under Rule 16b-3
issued by the Securities and Exchange Commission under Section 16 of the
Securities Exchange Act of 1934.

8. No Rights Conferred. Nothing contained herein will be deemed to give any
individual any right to be retained or elected or re-elected as a member of the
Board.

9. Governing Law. The Plan and each option agreement shall be governed in
all respects by the internal laws of the State of New York without giving effect
to the provisions relating to conflicts of law.

10. Term of the Plan. The Plan shall be effective as of the date on which
stockholder approval of the Plan is obtained. The Plan will terminate on the
date ten years after the date on which it is approved by the shareholders of the
Company, unless sooner terminated by the Board. The rights of optionees under
options outstanding at the time of the termination of the Plan shall not be
affected solely by reason of the termination and shall continue in accordance
with the terms of the option.

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<PAGE> 28

EQUITY MARKETING, INC.
THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JULY 16, 1996

Stephen P. Robeck, Donald A. Kurz and Merrill M. Kraines, and each of them,
as the true and lawful attorneys, agents, and proxies of the undersigned, with
full power of substitution, are hereby authorized to represent and to vote, as
designated below, all shares of Common Stock of Equity Marketing, Inc. held of
record by the undersigned on June 5, 1996, at the Annual Meeting of Stockholders
to be held at 10:00 a.m. on July 16, 1996, at the Regent Beverly Wilshire Hotel,
9500 Wilshire Boulevard, Beverly Hills, California 90212, and at any adjournment
thereof. Any and all proxies heretofore given are hereby revoked.

1. ELECTION OF DIRECTORS. To elect all nominees.
Nominees are: Stephen P. Robeck, Donald A. Kurz, Lawrence Elins,
Merrill Kraines, Bruce Raben.

/ / AUTHORITY GIVEN / / AUTHORITY WITHHELD

For all nominees listed above except:

- --------------------------------------------------------------------------------

2. To ratify the selection of Arthur Andersen LLP as the Company's
independent auditor.

/ / FOR / / AGAINST / / ABSTAIN

3. To approve the amendment to the Equity Marketing, Inc. Stock Option
Plan.

/ / FOR / / AGAINST / / ABSTAIN

4. To approve the amendment to the Equity Marketing, Inc. Non-Employee
Director Stock Option Plan.

/ / FOR / / AGAINST / / ABSTAIN

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 THROUGH 4.

PLEASE MARK, DATE AND SIGN THE REVERSE SIDE AND MAIL PROMPTLY IN THE ENCLOSED
ENVELOPE.
<PAGE> 29

Discretionary authority is hereby granted with respect to such other matters
as may properly come before the meeting.

The signer acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement furnished therewith. Unless otherwise
specified this Proxy will be voted FOR Proposals 1 through 4.

IMPORTANT: Please sign
exactly as name appears
hereon. Each joint owner
shall sign. Executors,
administrators, trustees,
etc., should give their
full title.

-------------------------
SIGNATURE(S)

-------------------------
DATE

-------------------------
SIGNATURE(S)

-------------------------
DATE