EQUITY MARKETING INC, DEF 14A, 1998-04-30

EQUITY MARKETING INC
DEF 14A, 1998-04-30
GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES)

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<PAGE> 1

SCHEDULE 14A INFORMATION

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

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] 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

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
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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<PAGE> 2

EQUITY MARKETING, INC.

APRIL 28, 1998

Dear Stockholder:

We cordially invite you to attend our 1998 Annual Meeting of Stockholders
to be held at 10:00 a.m. on Wednesday, May 27, 1998 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 1997 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 MAY 27, 1998

TO THE STOCKHOLDERS OF
EQUITY MARKETING, INC.:

Notice is hereby given that the 1998 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 Wednesday, May 27, 1998,
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 1999 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 1,640,000 shares to 2,240,000 shares; and

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 290,000 shares to 500,000
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 April 24, 1998 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/ MICHAEL J. WELCH

MICHAEL J. WELCH
Secretary

Beverly Hills, California
April 28, 1998
<PAGE> 4

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

PROXY STATEMENT
------------------------

ANNUAL MEETING OF STOCKHOLDERS
MAY 27, 1998

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 1998 Annual Meeting of Stockholders to be
held at the Regent Beverly Wilshire Hotel, 9500 Wilshire Boulevard, Beverly
Hills, California 90212, on Wednesday, May 27, 1998, at 10:00 a.m., local time,
and at any and all adjournments thereof (the "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, 1997, accompanies but does not constitute
part of this Proxy Statement.

The purpose of the Annual 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, 1998, "FOR" the approval of the amendments to the
Equity Marketing, Inc. Stock Option Plan (the "Option 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 April 28, 1998.

OUTSTANDING SECURITIES AND VOTING RIGHTS

Only stockholders of record at the close of business on April 24, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
that date there were 6,010,103 outstanding shares of common
<PAGE> 5

stock, par value $.001 per share, of the Company (the "Common Stock"), the only
outstanding voting security of the Company.

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 each
executive officers and directors of the Company, possessed the power to vote
approximately 48% 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 included under
"Executive Compensation and Related Matters"; and (iv) all directors and
nominees 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. Unless otherwise indicated, the address of each person
shown is c/o Equity Marketing, Inc., 131 South Rodeo Drive, Beverly Hills,
California 90212.

<TABLE>
<CAPTION>
NUMBER OF PERCENT
SHARES COMMON STOCK
BENEFICIALLY BENEFICIALLY
OWNED(1) OWNED(1)
------------ ------------
<S> <C> <C>
Donald A. Kurz(2)........................................... 1,532,973 25.5%
Stephen P. Robeck(3)........................................ 1,365,026 22.7%
Delaware Management Holdings, Inc.(4)....................... 370,660 6.2%
Bruce Raben(5).............................................. 122,140 2.0%
Kim Thomsen(6).............................................. 82,338 1.4%
Lawrence Elins(7)........................................... 37,358 *
Merrill M. Kraines(8)....................................... 30,000 *
Albert Ovadia(6)............................................ 20,021 *
Michael Welch(6)............................................ 11,048 *
Sanford R. Climan(9)........................................ -- *
All Executive Officers and Directors as a Group (11
persons)(1)............................................... 3,271,565 51.2%
</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 at any date
include shares issuable upon the exercise of options, warrants, rights or
conversion privileges within 60 days of the that 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
<PAGE> 6

(2) Includes 5,000 shares issuable upon exercise of options.

(3) Includes (i) 5,000 shares issuable upon exercise of options and (ii)
1,353,750 shares held by the Robeck 1997 Trust. Mr. Robeck and his wife are
co-trustees of the Robeck 1997 Trust and have sole voting and dispositive
power over such shares.

(4) Includes voting power with respect to only 103,700 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 solely upon a Schedule 13G dated February 9, 1998,
filed by that entity.

(5) 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.

(6) Represents shares issuable upon exercise of options.

(7) Includes 33,334 shares issuable upon exercise of options. The business
address of Mr. Elins is Elins Enterprises, 15260 Ventura Blvd., Suite 1020,
Sherman Oaks, California 91403.

(8) Represents 30,000 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. Mr. Kraines, a Director of the Company, will not be
standing for re-election.

(9) The business address of Mr. Climan is Creative Artists Agency, 9830 Wilshire
Blvd., Beverly Hills, California 90212.

ELECTION OF DIRECTORS

A Board of five Directors is to be elected at the Annual Meeting, to hold
office until the 1999 Annual Meeting of Stockholders and thereafter until their
respective successors are elected. The Board of Directors proposes the five
nominees named below. 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 BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION
OF THE NOMINEES LISTED BELOW

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

<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
---- --- --------------
<S> <C> <C>
Stephen P. Robeck........................................... 49 1989
Donald A. Kurz.............................................. 42 1990
Sanford R. Climan........................................... 42 --
Lawrence Elins.............................................. 50 1994
Bruce Raben................................................. 44 1993
</TABLE>

STEPHEN P. ROBECK has been a senior executive of the Company and its
predecessor business since 1986. 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,

3
<PAGE> 7

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.

SANFORD R. CLIMAN was employed by Creative Artists Agency ("CAA") from June
1986 to September 1995. From October 1995 through May 1997, Mr. Climan was
Executive Vice President and President, Worldwide Business Development of
Universal Studios, Inc. In June 1997, Mr. Climan returned to CAA as member of
its senior executive team. Mr. Climan received his BA from Harvard College, a
Master of Science in Health Policy and Management from the Harvard School of
Public Health and his MBA from Harvard Business School.

LAWRENCE ELINS was employed by Applause, Inc., toy and gift manufacturer,
until 1988, 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.

BRUCE RABEN was an Executive Vice President of Jeffries & Company, Inc., an
investment banking firm, from 1990 through 1995. 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 1997, the Board of Directors met 11 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 an Audit Committee whose members at the date
of this Proxy Statement were Messrs. Elins, Raben and Merrill Kraines. The Audit
Committee 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 two times in 1997.

Compensation Committee. The Board has a Compensation Committee whose
members at the date of this Proxy Statement were Messrs. Elins, Raben and
Kraines. 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 Option Plan. The Compensation Committee also
reviews and recommends to the Board any new compensation or retirement plans.
During 1997, the Compensation Committee met four times.

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 Director Plan. Each
non-employee director automatically receives an option to purchase 25,000 shares
of Common Stock upon initial election to the Board of Directors 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 and the options vest in
full six months after the date of grant. As amended, the Director Plan would
provide that each non-employee director would receive options to purchase 35,000
shares of Common Stock upon the date such non-employee director first joins the
Board of Directors, such options vesting six months after the date of grant, and
options to purchase 30,000 shares of Common Stock the first time such
non-employee director is elected to the Board of Directors by the stockholders
and each third time thereafter such non-employee director is elected to the
Board of Directors by the shareholders, such options vesting in three equal
installments on each of the first, second and third anniversary of the date of
grant. If a non-employee director

4
<PAGE> 8

first joins the Board of Directors upon election by the stockholders, such
non-employee director would receive both grants of options on the same date.

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 a Loan Forgiveness Agreement 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 1997 was $53,000. At December 31, 1997, the
outstanding balance of principal and interest on the notes was $43,000.

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,
1995, 1996 and 1997 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, 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------------
NAME AND PRINCIPAL OTHER ANNUAL AWARDS PAYOUTS ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS OPTIONS COMPENSATION
------------------ ---- --------- -------- ---------------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen P. Robeck......... 1997 $300,000 -- $ 16,920(1) 50,000 -- $33,485(5)
Chairman, Co-Chief 1996 $275,000 $225,000 $ 16,920(1) -- -- $21,980(5)
Executive Officer 1995 $275,000 $200,000 $ 38,013(2) -- -- $43,976(5)

Donald A. Kurz............ 1997 $300,000 -- $ 16,920(1) 50,000 -- $39,362(6)
President, Co-Chief 1996 $275,000 $225,000 $ 16,920(1) -- -- $30,511(6)
Executive Officer 1995 $275,000 $200,000 $ 38,013(2) -- -- $53,964(6)

Kim Thomsen............... 1997 $200,000 $ 50,000 $ 10,920(1) 25,000 -- $ 4,924(7)
Executive Vice President 1996 $150,000 $125,000 $ 10,920(1) -- $646,500 $ 5,830(7)
Creative Director 1995 $150,000 $ 75,000 $ 14,427(3) 20,000 -- $ 9,240(7)

Albert Ovadia............. 1997 $270,650 -- $ 10,920(1) 25,000 -- $ 2,255(7)
Executive Vice President 1996 $102,404 $200,000(8) $201,212(4) 100,000 -- $ 2,950(7)
Worldwide Promotions 1995 -- -- -- -- -- --

Michael Welch............. 1997 $180,000 $ 85,000(9) $ 10,686(1) 75,000 -- $ 4,924(7)
Executive Vice President 1996 -- -- -- -- -- --
Chief Financial Officer 1995 -- -- -- -- -- --
</TABLE>

- ---------------
(1) Consists of an automobile allowance.

(2) Consists of an automobile allowance and payments in connection with the
Company's relocation to Los Angeles, California of $20,833 in 1995.

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

(4) Consists of an automobile allowance and payments in connection with Mr.
Ovadia's relocation to Los Angeles, California of $196,662 in 1996.

(5) Consists of premiums on term life insurance, matching payment pursuant to
the Company's 401(k) Plan and deferred compensation of $13,753, $7,855 and
$34,363 for 1997, 1996 and 1995, respectively.

5
<PAGE> 9

(6) Consists of an premiums on term life insurance, matching payments pursuant
to the Company's 401(k) Plan and deferred compensation of $13,753, $7,855
and $34,363 for 1997, 1996 and 1995, respectively and loan forgiveness of
$10,667 in 1997, 1996 and 1995.

(7) Consists of premiums on term life insurance and matching payments pursuant
to the Company's 401(k) Plan.

(8) Includes a bonus paid at the commencement of Mr. Ovadia's employment of
$125,000 in 1996.

(9) Includes a bonus paid at the commencement of Mr. Welch's employment of
$85,000 in 1997.

EMPLOYMENT AGREEMENTS

Stephen P. Robeck has entered into an employment agreement with the
Company. The agreement runs from January 1, 1997 through December 31, 1998,
provided the agreement will continue for one additional year if Mr. Robeck does
not terminate the agreement 180 days prior to such extension period. Under the
agreement, Mr. Robeck is entitled to a base salary of $300,000 per year, subject
to upward adjustment in the sole discretion of the Compensation Committee. Mr.
Robeck's base salary for 1998 has been adjusted to $315,000 per year. He is also
entitled to an annual bonus of up to 50% of his base salary based on the
attainment of corporate earnings goals. In addition, in the sole discretion of
the Compensation Committee, Mr. Robeck may be paid a strategic performance bonus
of up to 50% of his base salary, which takes into account the Company's
long-term prospects and position and the accomplishment of certain mutually
agreed to goals. Upon termination of the employment agreement, the Company has
agreed to retain Mr. Robeck as a consultant for a period of three years. If the
Company terminates Mr. Robeck without cause, Mr. Robeck would be entitled to
continue to receive his base salary for the remainder of the term of the
agreement and would be entitled to double the annual corporate earnings goals
bonus he would have been entitled to if he was not terminated. Under this
agreement the Company has agreed to use its best efforts to have Mr. Robeck
elected as a Director of the Company.

Donald A. Kurz has entered into an employment agreement with the Company.
The agreement runs from January 1, 1997 through December 31, 1998, provided the
agreement will continue for one additional year if Mr. Kurz does not terminate
the agreement 180 days prior to such extension period. Under the agreement, Mr.
Kurz is entitled to a base salary of $300,000 per year, subject to upward
adjustment in the sole discretion of the Compensation Committee. Mr. Kurz's base
salary for 1998 has been adjusted to $315,000 per year. He is also entitled to
an annual bonus of up to 50% of his base salary based on the attainment of
corporate earnings goals. In addition, in the sole discretion of the
Compensation Committee, Mr. Kurz may be paid a strategic performance bonus of up
to 50% of his base salary, which takes into account the Company's long-term
prospects and position and the accomplishment of certain mutually agreed to
goals. Upon termination of the employment agreement, the Company has agreed to
retain Mr. Kurz as a consultant for a period of three years. If the Company
terminates Mr. Kurz without cause, Mr. Kurz would be entitled to continue to
receive his base salary for the remainder of the term of the agreement and would
be entitled to double the annual corporate earnings goals bonus he would have
been entitled to if he was not terminated. Under this agreement the Company has
agreed to use its best efforts to have Mr. Kurz elected as a Director of the
Company.

Albert Ovadia has an employment agreement with the Company pursuant to
which he is entitled to a base salary of $300,000 per year from August 6, 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.

6
<PAGE> 10

STOCK OPTIONS

The following table sets forth information with respect to grants of
options ("Options") to purchase Common Stock under the Option Plan to the Named
Executive Officers during the fiscal year ended December 31, 1997.

OPTION GRANTS IN 1997

<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>
Stephen P. Robeck............... 50,000 12.25% (3) 2007 $ 729,125 $1,847,745
Donald A. Kurz.................. 50,000 12.25% (3) 2007 $ 729,125 $1,847,745
Kim Thomsen..................... 25,000 6.13% $28.125 2007 $ 442,192 $1,120,600
Albert Ovadia................... 25,000 6.13% $28.125 2007 $ 442,192 $1,120,600
Michael Welch................... 75,000 18.38% (4) 2007 $1,008,197 $2,554,968
</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.

(3) Options to purchase 25,000 shares are exercisable at $18.25 and options to
purchase 25,000 shares are exercisable at $28.125.

(4) Options to purchase 50,000 shares are exercisable at $18.00 and options to
purchase 25,000 shares are exercisable at $28.125.

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 1997 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, 1997(#) AT DECEMBER 31, 1997(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald A. Kurz................. -- -- -- 50,000 -- 168,750
Stephen P. Robeck.............. -- -- -- 50,000 -- 168,750
Kim Thomsen.................... -- -- 81,210 37,000 1,908,823 153,000
Albert Ovadia.................. -- -- 20,000 105,000 225,000 900,000
Michael Welch.................. -- -- -- 75,000 -- 350,000
</TABLE>

- ---------------
(1) Represents the difference between the last reported sale price of the Common
Stock on December 31, 1997 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
Messrs. Elins, Raben and Kraines . No member of the Board of Directors or the
Compensation Committee has any interlocking relationship with any other
corporation that requires disclosure under this heading.

7
<PAGE> 11

OTHER MATTERS

During the fiscal year ended December 31, 1997 the law firm of Fulbright &
Jaworski L.L.P., in which Mr. Kraines is a partner, performed legal services for
the Company.

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The Compensation Committee (the "Compensation 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 1997.

Compensation Philosophy. At the direction of the Board of Directors, the
Compensation 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 Compensation 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 Compensation 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 Compensation 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 Compensation Committee has designed an executive
compensation program consisting of base salary, annual incentive compensation,
stock options and other employment benefits.

The Compensation Committee seeks to maintain levels of compensation that
are competitive with similar companies in the Company's industry. To that end,
the Compensation Committee reviews proxy data and other compensation data
relating to companies within the Company's industry. In addition, from time to
time, the Compensation 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 Compensation
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 and asset management in making compensation
decisions. The Compensation Committee also appreciates the importance of
achievements that may be difficult to quantify, and accordingly recognizes
qualitative factors, such as successful supervision of major corporate projects,
demonstrated leadership ability and contributions to industry and community
development. The amount of each annual incentive award is recommended for
approval by management and approved by the Compensation Committee.

Stock Options. The Compensation Committee strongly believes that the
compensation 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 key employees
are eligible to receive stock options,

8
<PAGE> 12

giving them the right to purchase shares of Common Stock of the Company at a
specified price in the future. The Compensation Committee believes that the use
of stock options as the basis for long-term incentive compensation meets the
Compensation 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 275,000 shares of the
Company's Common Stock to its executive officers in 1997. In approving grants
and awards under the Plan, the quantitative and qualitative factors and industry
comparisons outlined above are considered.

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 Compensation 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 Compensation Committee's control also affect
the deductibility of compensation. The Compensation 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 Compensation 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 1997
base salaries for Mr. Kurz and Mr. Robeck were based upon the individual
employment agreements between each of Mr. Kurz and Mr. Robeck, each dated as of
January 1, 1997. In evaluating the incentive compensation to be paid to the two
Co-Chief Executive Officers, the Compensation Committee applied the principles
and procedures for evaluating performance against corporate and individual
objectives outlined above. The Compensation Committee determined that the
Company had not met the earnings goals originally established by the Board of
Directors for 1997. Based on these results, the Compensation Committee did not
award Messrs. Kurz and Robeck a bonus for the year ended December 31, 1997.
Messrs. Kurz and Robeck were each awarded options to purchase 25,000 shares of
Common Stock effective January 1, 1997 and options to purchase 25,000 shares of
Common Stock effective December 9, 1997.

In December 1997, the Compensation Committee approved bonuses and granted
options to certain of its executive officers and certain key employees. In each
case, the Compensation Committee's decision was based upon the principles and
procedures outlined above.

COMPENSATION COMMITTEE
Lawrence Elins
Merrill M. Kraines
Bruce Raben

The Report of the Compensation Committee on Executive Compensation shall
not be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the Securities Act of
1993 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 Standard & Poors 500 Index ("S&P 500 Index"), and the
Russell 2000 Index ("Russell 2000 Index") 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, 1997. 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) Equity Marketing 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-96 308.33 153.80 136.00
Dec-97 416.67 201.97 163.97
</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, 1997.
Each of Stephen Robeck, Donald Kurz, Michael Welch, Gary Trumbo, Kim Thomsen,
Albert Ovadia, Mark Lewis and David Valdez were delinquent, by less than one
week, in filing their reports on Form 5. 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.

10
<PAGE> 14

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, 1998. Representatives of that firm will be present at the
Annual Meeting to respond to appropriate questions and will be given an
opportunity to make a statement if they so desire.

Stockholders are being asked to ratify the appointment of Arthur Andersen
LLP as the Company's independent auditor for the year ending December 31, 1998.

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.

AMENDMENTS TO THE EQUITY MARKETING, INC. STOCK OPTION PLAN

In April 1998, the Board of Directors unanimously adopted, subject to
stockholder approval, certain amendments (the "Amendments") to the Option Plan.
The full text of the Option Plan and the Amendments are set forth in Appendix A
to this Proxy Statement and the following discussion is qualified by reference
thereto.

DESCRIPTION OF THE OPTION PLAN

The following is a description of the Option Plan, as presently in effect.
Under the Option Plan, an aggregate of 1,640,000 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 Option Plan
terminates on December 31, 2001, although such termination does not affect
options outstanding on that date.

The Option Plan may be administered by the Board of Directors or 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. All Employees are eligible to participate in the Option 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 Option 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 Option 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 April 24, 1998, options to purchase 1,172,350 shares were
outstanding, and 325,210 shares had been issued pursuant to options exercised,
under the Option Plan. Accordingly, 142,440 shares were available as of
11
<PAGE> 15

that date for additional options. As of April 24, 1998, 24 employees had been
granted options under the Option Plan.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

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

An optionee will not realize taxable income upon the grant of an option. In
general, the holder of a non-ISO 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 ISO 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 ISO is sold or otherwise disposed of within two years from the
option grant date or within eighteen months 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 eighteen months
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 non-ISO, 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 ISO 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 ISO.

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

AMENDMENTS TO THE OPTION PLAN

The Option Plan Amendments are as follows:

1. Number of Shares. The Amendments would increase the aggregate
number of shares of Common Stock which may be issued under the Option Plan
from 1,640,000 shares to 2,240,000 shares. As set forth above, there are
presently 142,440 shares available for future options under the Option
Plan. The Board of Directors believes that stock options are an effective
means of attracting and retaining

12
<PAGE> 16

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 Option
Plan is in the best interests of the Company and its stockholders.

2. Termination of Employment. The Option Plan presently provides for
specific time periods, following termination of employment, during which a
former employee may exercise his or her vested option and only provides the
Administrator with the right to extend such periods. The Amendments would
delete this requirement as too restrictive, and as amended would allow the
Administrator the discretion to either shorten or extend the exercise
period following termination of employment.

3. Exchange Transaction Provisions. The Option Plan presently provides
that in the event of an "Exchange Transaction" (which is broadly defined to
include transactions and events that result in a change of control as well
as transaction and events that do not result in a change of control) all
outstanding options will be exercisable in whole or part (whether or not
otherwise exercisable) immediately prior to such transaction and, to the
extent not exercised prior to such transaction, the options will terminate
upon such transaction. The Option Plan also provides that with respect to
an Exchange Transaction where the stockholders of the Company receive
capital stock of another corporation, the Board of Directors, in its sole
discretion, may provide that each outstanding option will not accelerate
and terminate, but instead continue as an option to purchase shares of
capital stock of such other corporation. The Amendments would narrow the
definition of "Exchange Transaction" to include only change of control
transactions and also eliminate the Board of Directors' discretion to
provide that the options survive certain Exchange Transactions. These
amendments are designed to enumerate with more specificity the transactions
and events that would result in the acceleration and termination of options
granted under the Option Plan.

VOTE REQUIRED

The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented at the meeting 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

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 Director Plan Amendment are set forth
in Appendix B to this Proxy Statement and the following discussion is qualified
by reference thereto.

DESCRIPTION OF THE DIRECTOR PLAN

Under the Director Plan, an aggregate of 290,000 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 a
non-ISO option to purchase 25,000 shares upon initial election to the Board of
Directors and an additional non-ISO 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 of Directors, 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 April 24, 1998, options to purchase an aggregate of 177,140 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 57,860
shares were available for additional option grants under the Director Plan.

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 the non-ISO options granted under the Director
Plan.

DIRECTOR PLAN AMENDMENTS

The principal 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 290,000 shares to

14
<PAGE> 18

500,000 shares. As set forth above, there are presently only 57,860 shares
available for future options under Director Plan.

2. Change Automatic Grant Terms. The Director Plan currently provides
that each non-employee director automatically receives an option to
purchase 25,000 shares of Common Stock upon initial election to the Board
of Directors and an additional option to purchase 10,000 shares of Common
Stock on each anniversary of the initial election, and that such options
vest six months after the date of grant. As amended, the Director Plan
would provide that each non-employee director would receive options to
purchase 35,000 shares of Common Stock upon the date such non-employee
director first joins the Board of Directors, such options vesting six
months after the date of grant, and options to purchase 30,000 shares of
Common Stock the initial time such non-employee director is elected to the
Board of Directors by the stockholders and each third time thereafter such
non-employee director is elected to the Board of Directors by the
shareholders, such options vesting in three equal installments on each of
the first, second and third anniversary of the date of grant. If a
non-employee director first joins the Board of Directors upon election by
the stockholders, such non-employee director would receive both grants of
options on the same date.

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.

VOTE REQUIRED

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

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, 1997, 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 1999 Annual Meeting of Stockholders must
be submitted to the Secretary of the Company prior to January 15, 1999. It is
suggested that such proposals be sent by Certified Mail, Return Receipt
Requested.
15
<PAGE> 19

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/ MICHAEL J. WELCH

MICHAEL J. WELCH
Secretary

16
<PAGE> 20

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
2,240,000 [1,640,000] 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". 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) 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

A-1
<PAGE> 21

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. 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], UNLESS OTHERWISE DETERMINED 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
unvested option granted to him or her under the Plan will terminate on the date
of such termination of employment or service. If the optionee's employment is
terminated by the Company without cause (defined below), the vested options
granted to him or her under the Plan will terminate three months after such
date, unless extended by the Committee. If the optionee's employment is
terminated by resignation, the vested options granted to him or her under the
Plan will terminate thirty days after such date, unless
A-2
<PAGE> 22

extended by the Committee. 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) 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] IN the event of an Exchange Transaction (as defined
below), all optionees will be permitted to exercise their outstanding options in
whole or in part (whether or not otherwise exercisable) immediately prior to
such Exchange Transaction, and any outstanding options which are not exercised
before the Exchange Transaction will thereupon terminate. [Notwithstanding the
preceding sentence, if, as part of the Exchange Transaction, the stockholders of
the Company receive capital stock of another corporation ("Exchange Stock") in
exchange for their shares of Common Stock, and if the Board, in its sole
discretion, so directs, then all outstanding options will be converted into
options to purchase shares of Exchange Stock. The amount and price of converted
options will be determined by adjusting the amount and price of the options
granted hereunder on the same basis as the determination of the number of shares
of Exchange Stock the holders of Common Stock will receive in the Exchange
Transaction and, unless the Board determines otherwise, the vesting conditions
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 SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE
COMPANY, A LIQUIDATION OR DISSOLUTION OF THE COMPANY, OR A MERGER, CONSOLIDATION
OR SIMILAR TRANSACTION IN WHICH THE COMPANY IS NOT THE SURVIVING CORPORATION.
THE DETERMINATION AS TO WHICH PARTY TO A MERGER OR CONSOLIDATION IS THE
"SURVIVING CORPORATION" SHALL BE MADE ON THE BASIS OF THE RELATIVE EQUITY
INTERESTS OF THE SHAREHOLDERS IN THE CORPORATION EXISTING AFTER THE TRANSACTION,
AS FOLLOWS: IF IMMEDIATELY FOLLOWING ANY MERGER OR CONSOLIDATION THE HOLDERS OF
OUTSTANDING VOTING SECURITIES OF THE COMPANY IMMEDIATELY PRIOR TO THE MERGER OR
CONSOLIDATION OWN EQUITY SECURITIES POSSESSING MORE THAN 50% OF THE VOTING POWER
OF THE CORPORATION EXISTING FOLLOWING THE MERGER OR CONSOLIDATION, THEN FOR
PURPOSES OF THIS PLAN, THE COMPANY SHALL BE THE SURVIVING CORPORATION. IN ALL
OTHER CASES, THE COMPANY SHALL NOT BE THE SURVIVING CORPORATION. IN MAKING THE
DETERMINATION OF OWNERSHIP BY THE SHAREHOLDERS OF A CORPORATION IMMEDIATELY
AFTER THE MERGER OR CONSOLIDATION, EQUITY SECURITIES WHICH THE SHAREHOLDERS
OWNED IMMEDIATELY BEFORE THE MERGER OR CONSOLIDATION AS SHAREHOLDERS OF ANOTHER
PARTY TO THE TRANSACTION SHALL BE DISREGARDED. FURTHER, FOR PURPOSES OF THIS
SECTION 6(C) ONLY, OUTSTANDING VOTING SECURITIES OF A CORPORATION SHALL BE
CALCULATED BY ASSUMING THE CONVERSION OF ALL EQUITY SECURITIES CONVERTIBLE

A-3
<PAGE> 23

(IMMEDIATELY OR AT SOME FUTURE TIME) INTO SHARES ENTITLED TO VOTE. [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.

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> 24

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] 500,000 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 35,000 [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 30,000 [10,000] shares of Common Stock will automatically be granted
to each Non-Employee Director on [each] THE INITIAL DATE SUCH
NON-EMPLOYEE-DIRECTOR IS ELECTED AS A DIRECTOR BY THE SHAREHOLDERS AND EACH
THIRD TIME THEREAFTER SUCH NON-EMPLOYEE DIRECTOR IS ELECTED AS A DIRECTOR BY THE
SHAREHOLDERS[anniversary of his or her initial grant date provided he or she is
still serving as a director on such anniversary]. IF A NON-EMPLOYEE DIRECTOR
FIRST JOINS THE BOARD OF DIRECTORS UPON ELECTION BY THE STOCKHOLDERS, SUCH
NON-EMPLOYEE DIRECTOR WOULD RECEIVE BOTH GRANTS OF OPTIONS ON THE SAME DATE.

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. OTHER THAN THE OPTION TO PURCHASE 35,000 SHARES OF COMMON
STOCK GRANTED TO

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<PAGE> 25

EACH NON-EMPLOYEE DIRECTOR UPON HIS OR HER INITIAL APPOINTMENT, ALL OPTIONS
GRANTED UNDER THIS PLAN SHALL BECOME EXERCISABLE IN THREE EQUAL INSTALLMENTS OF
10,000 SHARES ON EACH OF THE FIRST, SECOND AND THIRD ANNIVERSARIES OF THE DATE
OF GRANT. 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). 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

B-2
<PAGE> 26

shall immediately become exercisable. A "Change in Control of the Company" shall
be deemed to occur if (1) there shall be consummated (a) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (b) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or 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 without giving
effect to the provisions relating to conflicts of law.
B-3
<PAGE> 27

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-4
<PAGE> 28

EQUITY MARKETING, INC.
THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 27, 1998

Stephen P. Robeck, Donald A. Kurz and Michael J. Welch, 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 April 24, 1998, at the Annual Meeting of
Stockholders to be held at 10:00 a.m. on May 27, 1998, 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, Sanford R.
Climan, 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