EQUITY MARKETING INC, DEFR14A, 1997-05-09

EQUITY MARKETING INC
DEFR14A, 1997-05-09
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. 1)

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 Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 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] No fee required.

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

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

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(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.

May 15, 1997

Dear Stockholder:

We cordially invite you to attend our 1997 Annual Meeting of Stockholders
to be held at 10:00 a.m. on Tuesday, June 24, 1997 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 1996 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 JUNE 24, 1997

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, June 24, 1997, 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 1998 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 certain amendments to the Equity Marketing, Inc. Stock Option
Plan, including increasing the number of shares which may be issued
under the Plan from 1,040,000 shares to 1,640,000 shares;

4. To approve certain amendments to the Equity Marketing, Inc. Non-Employee
Director Stock Option Plan including increasing the number of shares
which may be issued under the Plan from 190,000 to 290,000 shares;

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 May 15, 1997 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 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
May 15, 1997
<PAGE> 4

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

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

JUNE 24, 1997

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, June 24, 1997, at 10:00 a.m., local time, and at
any and all adjournments thereof ("Annual Meeting").

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, 1996, 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 Annual 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, or by appearing at the Annual Meeting and expressing a
desire to vote his or her shares in person. Subject to such revocation, all
shares represented by a properly executed proxy received prior to or at the
Annual 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, 1997, "FOR" the approval of the amendments to the
Equity Marketing, Inc. Stock Option Plan (the "Employee Plan") and "FOR" the
approval of the amendments to the Equity Marketing, Inc. Non-Employee Director
Stock Option Plan (the "Director 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 May 15, 1997.

OUTSTANDING SECURITIES AND VOTING RIGHTS

Only stockholders of record at the close of business on May 15, 1997 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
that date there were 5,920,338 outstanding shares of common stock, par value
$.001 per share, of the Company ("Common Stock"), the only outstanding voting
security of the Company.
<PAGE> 5

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
is discussed under each item.

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 48.7% of the outstanding Common Stock. 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 the Record Date 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, 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.

<TABLE>
<CAPTION>
PERCENT
NUMBER OF SHARES COMMON STOCK
BENEFICIALLY BENEFICIALLY
OWNED(1) OWNED(1)
---------------- ------------
<S> <C> <C>
Donald A. Kurz........................................ 1,529,250 25.8%
Stephen P. Robeck..................................... 1,353,750 22.9%
Bruce Raben(2)........................................ 134,140 2.3%
Kim Thomsen(3)........................................ 77,210 1.3%
Gary Trumbo(3)........................................ 52,856 *
Merrill M. Kraines(4)................................. 20,000 *
Lawrence Elins(5)..................................... 19,634 *
David Valdez(3)....................................... 10,000 *
Albert Ovadia......................................... --
All Executive Officers and Directors as a Group
(fourteen persons)(1)............................... 3,320,840 56.1%
Delaware Management Holdings, Inc.(6)................. 358,700 6.1%
</TABLE>

- ---------------
* Less than one percent.

(1) In accordance with Rule 13d-3(d)(1)(i) of the Securities Exchange Act of
1934, as amended ("Exchange Act"), shares beneficially owned include shares
issuable upon the exercise of options, warrants, rights or conversion
privileges within 60 days of the Record Date. For the purpose of computing
the percentage of outstanding shares beneficially owned by a particular
person, any securities not outstanding which are subject to options,
warrants, rights or conversion privileges exercisable by that person within
60 days of the Record Date 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 122,140 shares issuable upon exercise of options. The business
address of Mr. Raben is CIBC Wood Gundy 1999 Avenue of the Stars, Suite
2340, Los Angeles, California 90067.

2
<PAGE> 6

(3) Represents shares issuable upon exercise of options.

(4) Represents 20,000 shares issuable upon exercise of options. The business
address of Mr. Kraines is Fulbright & Jaworski L.L.P., 666 Fifth Ave., New
York, New York 10103.

(5) Includes 15,000 shares issuable upon exercise of options. The business
address of Mr. Elins is Elins Enterprises, 15260 Ventura Blvd., Suite 1020,
Sherman Oaks, California 91403.

(6) Includes voting power with respect to only 7,650 shares. The business
address of Delaware Management Holdings, Inc. is 2005 Market Street,
Philadelphia, PA 19103. The information with respect to Delaware Management
Holdings, Inc. is based upon a Schedule 13G dated February 14, 1997, filed
by that entity.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

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

A Board of five Directors is to be elected at the Annual Meeting, to hold
office until the 1998 Annual Meeting of Stockholders and thereafter until their
respective successors are elected. The Board of Directors proposes the five
nominees named below, each of whom is presently a director of the Company. All
nominees have advised the Company that they are able and willing to serve as
directors. However, if any nominee is unable to or for good cause will not
serve, the persons named in the accompanying proxy will vote for any other
person nominated by the Board of directors.

If one or more other persons are nominated as directors, the five nominees
receiving the highest number of votes will be elected as directors. Accordingly,
abstentions and broker non-votes will have no affect on the election of
directors.

The following table sets forth the names and ages of the nominees of the
Board of Directors.

<TABLE>
<CAPTION>
NAME AGE POSITION
----------------------- --- ---------------------------------------------------
<S> <C> <C>
Stephen P. Robeck...... 48 Chairman, Co-Chief Executive Officer and Director
Donald A. Kurz......... 41 President, Co-Chief Executive Officer and Director
Lawrence Elins......... 49 Director
Merrill M. Kraines..... 41 Director and Secretary
Bruce Raben............ 43 Director
</TABLE>

Backgrounds of Nominees

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.

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.

3
<PAGE> 7

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., 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 1996, the Board of Directors met nine times. Each director attended
more than seventy-five percent of the Board of Directors meetings and 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 1996. 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 1996, the Compensation Committee met four times and acted one time
by unanimous written consent.

Stock Option Sub-Committee -- The Compensation Committee has a Stock Option
Sub-Committee whose members at the date of this Proxy Statement were Messrs.
Elins and Raben. The Sub-Committee was established to administer and award
grants under the Employee Plan, the Director Plan and the Company's restricted
stock plan, (the 1995 Stock Award Plan).

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. Each Non-employee director automatically receives an option
to purchase 25,000 shares of Common Stock upon initial election to the Board and
an additional option to purchase 10,000 shares of Common Stock on each
anniversary of the initial election. The exercise price of each option is the
fair market value of the Company's Common Stock on the date of grant. From time
to time Directors may also be compensated in the form of stock options or cash
for services they render in addition to their normal Board duties. See
"Amendments to the Equity Marketing, Inc. 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 purchase of Common Stock by Mr. Kurz from the Company. The notes are subject
to Loan Forgiveness

4
<PAGE> 8

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 1996 was $97,640. At December 31, 1996 the outstanding balance of
principal and interest on the notes was $58,885.

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, 1995 and 1996 to its Co-Chief Executive Officers and its four most highly
compensated officers other than the Co-Chief Executive Officers (collectively,
the "Named Executive Officers") at December 31, 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------
SALARY BONUS AWARDS PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS OPTIONS COMPENSATION
- ----------------------------------- ---- --------- -------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Robeck.................. 1996 $ 275,000 $225,000 -- -- $ 38,900(1)
Chairman, Co-Chief Executive 1995 $ 275,000 $200,000 -- -- $ 81,959(1)
Officer 1994 $ 250,000 $ 50,000 -- -- $ 56,153(1)
Donald A. Kurz..................... 1996 $ 275,000 $225,000 -- -- $ 47,431(2)
President, Co-Chief Executive 1995 $ 275,000 $200,000 -- -- $ 91,977(2)
Officer 1994 $ 250,000 $ 50,000 -- -- $ 83,674(2)
Kim Thomsen........................ 1996 $ 150,000 $125,000 -- $646,500 $ 16,750(3)
Senior Vice President, Creative 1995 $ 150,000 $ 75,000 20,000 -- $ 23,667(3)
Director 1994 $ 120,000 $ 40,000 -- -- $ 10,000(3)
Gary Trumbo........................ 1996 $ 150,000 $110,000 -- $300,000 $ 12,000(4)
Senior Vice President Equity 1995 $ 150,000 -- -- -- $113,231(4)
Toys 1994 $ 150,000 $ 10,000 17,860 -- $ 67,719(4)
Alvaro (David) Valdez.............. 1996 $ 125,000 $ 75,000 -- -- $ 10,687(5)
Senior Vice President, Operations 1995 $ 110,000 $ 30,000 50,000 -- $ 2,351(5)
1994 -- -- -- -- --
Albert Ovadia...................... 1996 $ 102,404 $200,000(6) 100,000 -- $204,162(7)
Senior Vice President, Worldwide 1995 -- -- -- -- --
Promotions 1994 -- -- -- -- --
Kenneth M. Fisher.................. 1996 $ 150,000 -- -- $543,000 $117,000(8)
Senior Vice President and 1995 $ 150,000 $ 57,000 -- -- $ 24,658(9)
Chief Financial Officer 1994 $ 120,000 $ 47,000 100,000 -- $ 33,000(9)
</TABLE>

- ---------------
(1) Consists of 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 $7,855 in 1996, 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 automobile allowance, premiums on term life insurance, matching
payments pursuant to the Company's 401(k) Plan, loan forgiveness of $10,667
in 1994, 1995 and 1996, deferred compensation of $34,363 in 1995 and $7,855
in 1996, 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 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 $10,000 in 1994 and $11,667 in
1995.

(4) Consists of an automobile allowance and commissions of $56,719 in 1994 and
$102,011 in 1995.

(5) Consists of an automobile allowance and matching payments pursuant to the
Company's 401(k) Plan.

(6) Includes a bonus paid at the commencement of Mr. Ovadia's employment of
$125,000.

5
<PAGE> 9

(7) Consists of an automobile allowance plus payments in connection with Mr.
Ovadia's relocation to Los Angeles, California of $196,662.

(8) Consists of an automobile allowance and consideration related to a
separation agreement of $105,000. Mr. Fisher's employment with the Company
terminated on December 12, 1997.

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

EMPLOYMENT AGREEMENTS

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 $145,000 per year and a discretionary bonus based on the
recommendation of the Compensation Committee.

Albert Ovadia has an employment agreement with the Company pursuant to
which he is entitled to a base salary at an annual rate of $250,000 per year to
August 5, 1997 and at an annual rate of $300,000 per year from August 5, 1997
through December 31, 1998. He is also entitled to bonus compensation of up to
$100,000 in 1997 and $125,000 in 1998 based on the attainment of corporate
earnings goals as well as divisional and individual performance objectives. In
1996, Mr. Ovadia also received a bonus of $125,000 at the commencement of his
employment.

STOCK OPTIONS

The following table sets forth information with respect to grants of
options ("Options") to purchase Common Stock under the Employee Plan to the
Named Executive Officers during the fiscal year ended December 31, 1996.

OPTION GRANTS IN 1996

<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>
Albert Ovadia.................. 100,000 29% $13.75 2006 $ 865,000 $ 2,191,000
</TABLE>

- ---------------
(1) The exercise price was market value of the Common Stock 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.

6
<PAGE> 10

The following table sets forth, with respect to the Named Executive
Officers, 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 Common Stock.

AGGREGATED OPTION EXERCISES DURING FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN THE MONEY OPTIONS
SHARES VALUE DECEMBER 31, 1996(#) AT DECEMBER 31, 1996(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kim Thomsen.................. 50,000 $646,500 52,568 40,642 $ 907,966 $ 547,992
Gary Trumbo.................. 20,000 $300,000 36,428 43,572 $ 469,638 $ 566,082
David Valdez................. -- -- 10,000 40,000 $ 115,000 $ 460,000
Albert Ovadia................ -- -- -- 100,000 -- $ 475,000
Kenneth M. Fisher............ 36,000 $543,000 4,000 26,000 $ 58,000 $ 345,000
</TABLE>

- ---------------
(1) Represents the difference between the last reported sale price of the Common
Stock on December 31, 1996 and the exercise price of the option multiplied
by the applicable number of shares.

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, 1996 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 and the Stock Option Sub-Committee
(collectively, the "Committee") has the 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 1996.

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.

7
<PAGE> 11

The Committee seeks to maintain levels of compensation that are competitive
with similar companies in the Company's industry. To that end, the Committee
reviews proxy data and other compensation data relating to companies within the
Company's industry. In addition, from time to time, the Committee also receives
assessments and advice regarding the Company's compensation practices from
independent compensation consultants.

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.

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 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 and demonstrated leadership ability. 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 300,000 shares of the
Company's Common Stock to its executive officers in 1996. 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 1996 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 and
expired on February 2, 1997. The Company is

8
<PAGE> 12

currently negotiating new employment agreements with each of Mr. Kurz and Mr.
Robeck and expects the agreements to be finalized by June 1, 1997. 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 1996. 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 earnings and further diversification of the Company's lines of
business, the Committee awarded Mr. Kurz and Mr. Robeck each a bonus of $225,000
for the year ended December 31, 1996. No stock options were granted to Mr. Kurz
or Mr. Robeck in 1995 or 1996. Messrs. Kurz and Robeck were each awarded
options, effective January 1, 1997, to purchase 25,000 shares of Common Stock.

In December 1996, 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

STOCK OPTION SUB-COMMITTEE

Lawrence Elins
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 as amended, 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.

9
<PAGE> 13

STOCKHOLDER RETURN PERFORMANCE PRESENTATION

Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Common Stock against the cumulative
total return of the S & P 500 Index, and the Russell 2000 Consumer Discretionary
Economic Sector Index ("Russell 2000") for the period commencing February 2,
1994 (the effective date of the registration statement for the initial public
offering of the Common Stock) and ended December 31, 1996. The data represented
below assumes $100 invested in each of the Common Stock on February 2, 1994, and
the S & P 500 index and the Russell 2000 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, as amended, or under the Securities Exchange Act of
1934, as amended, (the "Exchange Act") 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 2000
<S> <C> <C> <C>
Jan-94 100.00 100.00 100.00
Dec-94 83.33 95.36 93.94
Dec-95 208.33 127.89 118.55
Dec-96 308.33 153.80 136.05
</TABLE>

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

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under the Exchange Act, 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, 1996.
Each of Kim H. Thomsen, Christopher A Reynolds, Merryl L. Reynolds and Ronda
Drummond were delinquent in filing one report relating to one transaction. All
required reports have since been filed. Other than the foregoing, 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.

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, 1997. Representatives of that

10
<PAGE> 14

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, 1997.

If the Stockholders do not ratify the appointment of Arthur Andersen LLP as
the Company's independent auditor, the Board of Directors will consider
selecting another accounting firm.

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

PROPOSAL NO. 3

AMENDMENTS TO THE EQUITY MARKETING, INC. STOCK OPTION PLAN

In April, 1997, the Board of Directors unanimously adopted, subject to
stockholder approval, certain amendments ("the Employee Plan Amendments") to the
Employee Plan. The full text of the Employee Plan and the Employee Plan
Amendments are set forth in Appendix A to this Proxy Statement and the following
discussion is qualified by reference thereto.

DESCRIPTION OF EMPLOYEE PLAN

The following is a description of the Employee Plan, as presently in
effect. Under the Employee Plan, an aggregate of 1,040,000 shares of Common
Stock may be issued pursuant to options granted to officers, employees,
directors and consultants. The options may be either incentive stock options
("ISO's"), as defined in Section 422 of the Internal Revenue Code of 1986 (the
"Code"), or options which would not qualify as ISO's ("non-ISO's"). The Employee
Plan terminates on December 31, 2001, although such termination does not affect
options outstanding on that date.

The Employee Plan is administered by a committee (the "Administrator")
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. As of May
15, 1997, 21 employees were participating in the Employee Plan.

The exercise price of shares covered by an ISO 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 exercise price may be paid in cash
or such other form of payment as may be permitted by the Administrator
including, without limitation, previously owned shares of Common Stock. The term
of any option may not exceed ten years (five years in the case of an ISO granted
to a 10% Stockholder), and unless otherwise provided in the option agreement,
will expire upon termination of employment of provision of services or upon
specified dates (based upon the reason for termination) up to one year
thereafter. The Employee Plan also provides that the options will become
immediately exercisable upon an Exchange Transaction. 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 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 of Directors 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.

As of May 15, 1997, options to purchase 864,350 shares were outstanding,
and 290,210 shares had been issued pursuant to options exercised, under the
Employee Plan. Accordingly, no shares were available as of that date for
additional options. Of the outstanding options, options to purchase 125,000
shares are subject to approval of the Employee Plan Amendments by the
stockholders.

11
<PAGE> 15

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

Set forth below is a summary of the salient federal income tax consequences
associated with options granted under the Plan and the Director 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

The Code has imposed 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 which may be made
to any employee under the Employee Plan will enable the Administrator to grant
options which would qualify for the "performance-based compensation" exclusion
under the deduction limitation provisions. Nevertheless, although the Company
encourages the Administrator 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.

EMPLOYEE PLAN AMENDMENTS

The Employee Plan Amendments are as follows:

1. Number of Shares. The Employee Plan Amendments would increase the
aggregate number of shares of Common Stock which may be issued under the
Employee Plan from 1,040,000 shares to

12
<PAGE> 16

1,640,000 shares. As set forth above, there are presently no shares
available for future options under the Employee Plan. The Board of
Directors believes that stock options are an effective means of attracting
and retaining individuals as officers, employees, directors and consultants
who can contribute materially to the successful conduct of the business and
affairs of the Company. Accordingly, the Board of Directors believes that
an increase in the number of shares which may be issued pursuant to the
Employee Plan is in the best interests of the Company and its stockholders.

2. Administration. The Employee Plan presently provides for
administration only by a committee of the Board of Directors. In order to
provide the Board of Directors more flexibility with respect to
administration of the Employee Plan, the Employee Plan Amendments would
permit the Board of Directors, as a whole, to administer the Employee Plan,
or at the Board's discretion, a committee of the Board of Directors.

3. Partial Exercises. The Employee Plan presently prohibits an
Optionee from exercising less than 25% of the original number of shares
covered by the optionee's option without the consent of the committee
administering the Employee Plan.. The Employee Plan Amendments would delete
this requirement as too restrictive upon optionees.

4. Limitations on Individual Grants. The Employee Plan Amendments
would limit the aggregate number of shares which may be issued to any
individual under the Employee Plan to 500,000 shares. No such limitation
exists under the Employee Plan as it is presently in effect.

5. Transfer Restrictions. Section 5(h) of the Employee Plan contains
certain transfer restrictions on shares acquired upon exercise of options
and grants to the Company the right to repurchase options on such shares
for so long as the Company was not a public company. The Employee Plan
Amendments would delete this Section since the Company is now a public
company.

6. Governing Law. The Employee Plan presently provides that it is to
be governed by the laws of the State of New York. The Company
reincorporated into Delaware and has relocated to California, and now has
no direct contact with New York. Accordingly, the Employee Plan Amendments
would change the governing law to the laws of the State of California.

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.

13
<PAGE> 17

PROPOSAL NO. 4

AMENDMENTS TO THE EQUITY MARKETING, INC. NON-EMPLOYEE

DIRECTOR STOCK OPTION PLAN

In April, 1997, the Board of Directors unanimously adopted, subject to
stockholder approval, certain amendments ("the Director Plan Amendments") to the
Director Plan. 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.

DESCRIPTION OF DIRECTOR PLAN

Under the Director Plan, an aggregate of 190,000 shares may be granted to
Non-employee directors upon exercise of options. The Director Plan is a formula
plan pursuant to which each Non-employee director automatically receives an
option to purchase 25,000 shares upon initial election to the Board of Directors
and an additional option to purchase 10,000 shares on each anniversary of
initial election. The exercise price of each option is the fair market value of
the Common Stock on the grant date. 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 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 on August 23, 2003, will remain in effect until it is
exercised, terminates or expires in accordance with its terms.

As of May 15, 1997, options to purchase an aggregate of 95,000 shares were
outstanding under the Director Plan to the Company's current non-employee
directors 55,000, shares had been issued pursuant to options exercised and
40,000 shares were available for additional option grants.

See "Certain Federal Income Tax Considerations" under "Amendments to the
Equity Marketing, Inc. Stock Option Plan" for a brief description of the income
tax consequences associated with options granted under the Director Plan.

14
<PAGE> 18

DIRECTOR PLAN AMENDMENTS

The Director Plan Amendments are as follows:

1. Number of Shares. The Director Plan Amendments would increase the
aggregate number of shares of Common Stock which may be issued under the
Director Plan from 190,000 shares to 290,000 shares. As set forth above,
there are presently only 40,000 shares available for future options under
the Director Plan.

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.

2. Governing Law. The Director Plan presently provides that it is to
be governed by the laws of the State of New York. The Company
reincorporated into Delaware and relocated to California, and now has no
direct contact with New York. Accordingly, the Director Plan Amendments
would change the governing law to the laws of the State of California.

VOTE REQUIRED

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

15
<PAGE> 19

PLAN AMENDMENT BENEFITS

The following table sets forth information regarding the benefits which
will be received pursuant to the proposed amendments to the Employee Plan
(Proposal No. 3) and the proposed amendments to the Director Option (Proposal
No. 4) by: (i) each Named Executive Officer; (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
---------------------------------- ----------------------------------
NAME AND PRINCIPAL POSITION DOLLAR VALUE(1) NUMBER OF SHARES DOLLAR VALUE(1) NUMBER OF SHARES
- ------------------------------------ --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Stephen P. Robeck................... $ 0 25,000 $ 0 0
Chairman, Co-Chief Executive
Officer
Donald A. Kurz...................... $ 0 25,000 $ 0 0
President, Co-Chief Executive
Officer
Michael J. Welch.................... $ 0 50,000 $ 0 0
Senior Vice President Finance,
Chief Financial Officer &
Treasurer
Al Ovadia........................... $ 0 0 $ 0 0
Senior Vice President Equity
Promotions
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............................. $ 0 100,000 $ 0 0
All current directors who are not
executive officers as a group..... $12,500 25,000 $ 0 0
All employees, including current
officers who are not executive
officers, as a group.............. $ 0 0 $ 0 0
</TABLE>

- ---------------
(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.
The dollar value of the option listed represents the spread between the
market value as of April 25, 1997 and the exercise price. To the extent that
the exercise price exceeded the market price at April 25, 1997, the value
listed is zero.

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, 1996, 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 1998 Annual Meeting of Stockholders must
be submitted to the Secretary of the Company prior to January 15, 1998. It is
suggested that such proposals be sent by Certified Mail, Return Receipt
Requested.

16
<PAGE> 20

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
1,640,000 [1,040,000] 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 the Board, or at the
discretion of the Board, a committee (the "Committee") consisting of at least
two directors appointed by and serving at the pleasure of the Board. If the Plan
is administered by the Board, references in the Plan to the "Committee" shall
mean 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. No person may receive options to
purchase more than 500,000 shares of Common Stock under the Plan.

A-1
<PAGE> 22

(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 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

A-2
<PAGE> 23

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 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.]

(h) [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

A-3
<PAGE> 24

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 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 California [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).

A-4
<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
290,000 [190,000] 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 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).

B-1
<PAGE> 26

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

B-2
<PAGE> 27

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 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 California [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.

B-3
<PAGE> 28

EQUITY MARKETING, INC.
THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 24, 1997

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 May 15, 1997, at the Annual Meeting of Stockholders
to be held at 10:00 a.m. on June 24, 1997, 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 amendments to the Equity Marketing, Inc. Stock Option Plan

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. To approve the amendments 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