<PAGE>
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 Section240.14a-11(c) or
Section240.14a-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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
Equity Marketing, Inc.
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
HOTEL NIKKO
465 S. LA CIENEGA BLVD.
LOS ANGELES, CALIFORNIA
MAY 26, 1999
<PAGE>
EQUITY MARKETING, INC.
6330 SAN VICENTE BLVD.
LOS ANGELES, CALIFORNIA 90048
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1999
------------------------
TO THE STOCKHOLDERS OF
EQUITY MARKETING, INC.:
Notice is hereby given that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of Equity Marketing, Inc., a Delaware corporation (the
"Company"), will be held at the Hotel Nikko, 465 S. La Cienega Blvd., Los
Angeles, California 90048, on Wednesday, May 26, 1999, beginning at 10:00 a.m.,
local time. The Annual Meeting will be held for the following purposes:
1. To elect six members of the Board of Directors, each to hold office
until the 2000 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; and
3. To transact such other business as may properly come before the meeting
or any postponements or adjournments thereof.
The Board of Directors has fixed March 29, 1999 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 10 days prior to the Annual Meeting.
We hope that you will use this opportunity to take an active part in the
affairs of the Company by voting on the business to come before the Annual
Meeting, either by executing and returning the enclosed Proxy Card or by casting
your vote in person at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Leland P. Smith
LELAND P. SMITH
SECRETARY
Los Angeles, California
April 12, 1999
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.
<PAGE>
EQUITY MARKETING, INC.
6330 SAN VICENTE BLVD.
LOS ANGELES, CALIFORNIA 90048
(323) 932-4300
------------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 1999
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 1999 Annual Meeting of Stockholders to be
held at the Hotel Nikko, 465 S. La Cienega Blvd., Los Angeles, California 90048,
on Wednesday, May 26, 1999, at 10:00 a.m., local time, and at any and all
adjournments thereof (the "Annual Meeting").
The purpose of the Annual Meeting and the matters to be acted upon are set
forth in the following Proxy Statement. 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
and "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, 1999.
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 12, 1999.
OUTSTANDING SECURITIES AND VOTING RIGHTS
Only stockholders of record at the close of business on March 29, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
that date there were 6,202,151 outstanding shares of common stock, par value
$.001 per share, of the Company (the "Common Stock"), the only outstanding
voting security of the Company.
The holders of record of a majority of the outstanding shares of Common
Stock will constitute a quorum for the transaction of business at the Annual
Meeting. As to all matters, each stockholder is entitled to one vote for each
share of Common Stock. Stockholders are not entitled to cumulate their votes.
Abstentions and broker non-votes (shares held by a broker or nominee which are
represented at the Annual Meeting, but with respect to which such broker or
nominee is not empowered to vote on a particular proposal) are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. In the election of directors, holders of Common Stock are entitled
to elect six directors with the six candidates who receive the highest number of
affirmative votes being elected. Votes against a candidate and votes withheld
have no legal effect. In matters other than the election of directors,
<PAGE>
abstentions have the effect of votes against a proposal in tabulations of the
votes cast on proposals presented to stockholders, whereas broker non-votes do
not have any effect for purposes of determining whether a proposal has been
approved.
As of the Record Date, Stephen P. Robeck and Donald A. Kurz possessed the
power to vote approximately 44% 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 election of the nominees for director set
forth herein and "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, 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the shares of Common Stock
owned as of March 1, 1999 by (i) each person known to the Company to be the
beneficial owner of more than 5% of the Common Stock; (ii) each director and
nominee for 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., 6330 San Vicente
Blvd., Los Angeles, California 90048.
<TABLE>
<CAPTION>
NUMBER OF PERCENT COMMON
SHARES STOCK
BENEFICIALLY BENEFICIALLY
OWNED(1) OWNED(1)
----------- -----------------
<S> <C> <C>
Donald A. Kurz (2)........................................................... 1,566,144 25.2%
Stephen P. Robeck (2)........................................................ 1,183,597 19.0%
Baron Capital (3)............................................................ 375,000 6.0%
Kennedy Capital Management (4)............................................... 364,900 5.9%
Bruce Raben (2).............................................................. 122,000 2.0%
Mitchell H. Kurz............................................................. 74,600 1.2%
Kim H. Thomsen (2)........................................................... 74,575 1.2%
Albert Ovadia (2)............................................................ 48,915 *
Lawrence Elins (2)........................................................... 38,244 *
Sanford R. Climan (2)........................................................ 37,650 *
Joseph F. Morrison........................................................... 6,000 *
Edward T. Boyd............................................................... 2,000 *
Executive Officers and Directors as a Group (13 persons)(5).................. 3,159,916 48.8%
</TABLE>
- ------------------------
* Less than one percent.
(1) In accordance with Rule 13d-3(d)(1)(i) of the Securities Exchange Act of
1934, as amended (the "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 March 1, 1999 have been deemed to be outstanding,
but have not been deemed outstanding for the purpose of computing the
percentage of the class beneficially owned by any other person.
(2) Includes shares of Common Stock which the following officers and directors
have the right to acquire by exercise of options within 60 days following
March 1, 1999: D. Kurz, 18,334; Robeck, 18,334; Raben, 50,000; Thomsen,
73,210; Elins, 35,000; Ovadia, 48,334; and Climan, 35,000.
(3) As reported on a Schedule 13G dated January 22, 1999 and filed with the
Securities and Exchange Commission by Baron Capital. The address of Baron
Capital is 767 Fifth Avenue, New York, NY 10153.
(4) As reported on a Schedule 13G dated February 5, 1999 and filed with the
Securities and Exchange Commission by Kennedy Capital Management. The
address of Kennedy Capital Management is 10829 Olive Blvd., St. Louis, MO
63141.
(5) The amount stated includes an aggregate of 278,212 shares of Common Stock
which may be acquired upon the exercise of options within 60 days following
March 1, 1999.
2
<PAGE>
ELECTION OF DIRECTORS
A Board of six directors is to be elected at the Annual Meeting, to hold
office until the 2000 Annual Meeting of Stockholders and thereafter until their
respective successors are elected. The Board of Directors proposes the six
nominees named below. All of the nominees for election as directors are
incumbent directors. 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.
Except as set forth below, no arrangement or understanding exists between
any nominee and any other person or persons pursuant to which any nominee was or
is to be selected as a director or nominee. Under his consulting agreement, the
Company has agreed to use its best efforts to have Mr. Robeck elected as a
director of the Company. (See "Certain Relationships and Related Transactions"
below.) Under his employment agreement, the Company has agreed to use its best
efforts to have Mr. Kurz elected as a director of the Company. (See "Employment
Agreements" below.) Donald A. Kurz and Mitchell H. Kurz are brothers.
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>
Donald A. Kurz..................................................................... 43 1990
Sanford R. Climan.................................................................. 43 1998
Lawrence Elins..................................................................... 51 1994
Mitchell H. Kurz................................................................... 47 1999
Bruce Raben........................................................................ 45 1993
Stephen P. Robeck.................................................................. 50 1989
</TABLE>
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. On January 1, 1999, he was elected Chairman
of the Board and Chief Executive Officer. Prior to joining the Company, Mr. Kurz
was a management consultant for seven years with the general management
consulting division of Towers Perrin, where he was a Vice President (Senior
Partner) and, most recently, Manager of the New York office. Mr. Kurz received
his BA from 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. From June 1997 to February 1999, Mr. Climan returned to
CAA as a member of its senior executive team. He is currently pursuing other
interests. 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.
MITCHELL H. KURZ is the Chairman and founder of Kurz and Friends, a
consulting company to the global advertising and marketing services business.
Mr. Kurz retired from Young & Rubicam Inc. in December 1998, followng a 24-year
career during which he held numerous executive positions. His most recent
position at Young & Rubicam was Chairman of Client Services, where he oversaw
key global client relationships representing approximately 50 percent of the
company's annual revenues. From 1996 to 1998, he was Pesident and Chief
Operating Officer of Young & Rubicam Advertising, and from 1992 to 1996, he was
Worldwide Chief Executive Officer of Wunderman Cato Johnson, a Young & Rubicam
operating unit.
3
<PAGE>
Mr. Kurz received his MBA from Harvard Business School and his bachelor's degree
from Dartmouth College.
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
Oppenheimer, 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.
STEPHEN P. ROBECK was a senior executive of the Company and its predecessor
business from 1986 to 1998. He became a director of the Company in 1989 and was
elected Chairman and Co-Chief Executive Officer in September 1991. Effective
December 31, 1998, Mr. Robeck resigned as Chairman and Co-Chief Executive
Officer. On January 1, 1999, he became a consultant to the Company. 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.
During 1998, the Board of Directors met 11 times. Each director attended
more than 75% 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 consisting of Messrs.
Climan, Elins and Raben. 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 1998.
COMPENSATION COMMITTEE. The Board has a Compensation Committee consisting
of Messrs. Climan, Elins and Raben. The Compensation Committee is authorized to
review and recommend to the Board the salaries, bonuses and perquisites for the
Company's executive officers and to administer the Equity Marketing, Inc. Stock
Option Plan (the "Option Plan"). The Compensation Committee also reviews and
recommends to the Board any new compensation or retirement plans. During 1998,
the Compensation Committee met three 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 Equity Marketing, Inc.
Non-Employee Director Stock Option Plan (the "Director Plan"). Each non-employee
director automatically receives an option 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 stockholders, 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 receives both grants of options on the same date.
On February 25, 1999, each of Messrs. Climan, Elins and Raben received a
grant of options to purchase 20,000 shares of Common Stock at $5.75 per share,
fair market value on the date of grant. The options expire on February 25, 2009,
the tenth anniversary of the date of grant, and vest in four equal biannual
installments beginning on November 1, 1999. The options were granted under the
Option Plan.
4
<PAGE>
Using the assumed rates of appreciation as set forth in the Option Grants table
below, the grants to each of Messrs. Climan, Elins and Raben had a value of
$72,322 at 5% and $183,280 at 10% as of March 15, 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Donald A. Kurz, Chairman of the Board and Chief Executive Officer 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 1998 was $43,000. At December 31, 1998, the
outstanding balance of principal and interest on the notes was approximately
$32,000.
Stephen P. Robeck, formerly Chairman of the Board and Co-Chief Executive
Officer, has entered into a consulting agreement with the Company. The agreement
runs from January 1, 1999 through December 31, 2001, subject to earlier
termination upon Mr. Robeck's death or disability or termination by the Company
For Cause or Other Than For Cause (each as defined in the agreement). The
agreement provides that Mr. Robeck will serve as a financial and business
consultant to the Company and be available to fulfill his obligations thereunder
no less than twenty (20) hours per month. The agreement contains provisions
restricting Mr. Robeck's ability to compete with the Company while providing
services as a consultant and to solicit the Company's employees through the
first anniversary of the end of the consulting period. Under the agreement, Mr.
Robeck receives a consulting fee of $210,000 per year, a car allowance of
$18,000 per year and certain medical, disability and life insurance benefits. He
is also entitled to reimbursement of certain business-related expenses incurred
for all reasonable travel and out-of-pocket expenses incurred in the performance
of his services as a consultant. If the agreement is terminated by reason of
death or disability, Mr. Robeck or his estate shall receive his full consulting
fee through the end of the month of his death or disability and a prorated share
of any other compensation or benefits required under the agreement. If the
agreement is terminated by the Company For Cause, Mr. Robeck's compensation and
benefits shall cease as of the date of termination. If the agreement is
terminated by the Company Other Than For Cause, Mr. Robeck shall receive his
full consulting fee and any other compensation or benefits required under the
agreement through the end of the term of the agreement. Under the agreement, the
Company has agreed to use its best efforts to have Mr. Robeck elected as a
director of the Company.
Larry Elins, a director of the Company, provided financial and business
consulting services to the Company in 1998. As consideration for these services,
Mr. Elins received on March 11, 1998 a grant of options to purchase 30,000
shares of Common Stock at $19.94 per share, fair market value on the date of
grant. The options expire on March 11, 2008, the tenth anniversary of the date
of grant, and vest in three equal annual increments beginning on the first
anniversary of the date of grant. The options were granted under the Option
Plan. Using the assumed rates of appreciation as set forth in the Option Grants
table below, the grant to Mr. Elins had a value of $376,202 at 5% and $953,375
at 10% as of December 31, 1998. On December 14, 1998, Mr. Elins elected to
exchange this grant and two other grants received by him in 1997 also as
consideration for consulting services for a lesser number of options priced at
fair market value. (See "Stock Option Repricing" below.) Mr. Elins exchanged
grants of 30,000, 25,000 and 5,000 shares with exercise prices of $19.94, $16.50
and $18.13 per share, respectively, for grants to purchase 20,000, 16,667 and
3,333, shares, respectively, with exercises prices of $7.50 each. Each
replacement grant retained the original grant's vesting schedule but imposed a
one year moratorium on exercise ending December 14, 1999. Using the assumed
rates of appreciation as set forth in the Option Grants table below, the
repriced grants to Mr. Elins of 20,000, 16,667 and 3,333 shares had values of
$94,334 at 5% and $239,061 at 10%, $78,613 at 5% and $199,221 at 10%, and
$15,721 at 5% and $39,840 at 10%, respectively, as of December 31, 1998.
5
<PAGE>
EXECUTIVE COMPENSATION AND RELATED MATTERS
The following table sets forth the cash compensation (including cash
bonuses) paid or accrued by the Company for its fiscal years ended December 31,
1996, 1997 and 1998 to its Co-Chief Executive Officers and its four most highly
compensated officers other than the Co-Chief Executive Officers (collectively,
the "Named Executive Officers") at December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------------
SECURITIES
OTHER ANNUAL UNDERLYING OPTION
YEAR SALARY($) BONUS($)(1) COMPENSATION($)(2) OPTIONS PAYOUTS($)
--------- ----------- ----------- ------------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Robeck........... 1998 315,000 -- 16,095 -- --
Chairman, Co-Chief 1997 300,000 -- 16,920 50,000 --
Executive Officer(4) 1996 275,000 225,000 16,920 -- --
Donald A. Kurz.............. 1998 315,000 -- 16,095 -- --
President, Co-Chief 1997 300,000 -- 16,920 50,000 --
Executive Officer(4) 1996 275,000 225,000 16,920 -- --
Joseph F. Morrison.......... 1998 164,440 10,000 8,970 296,667 --
President, Promotions and
Consumer Products(5)
Kim H. Thomsen.............. 1998 210,000 125,000 10,920 25,833 --
Executive Vice President, 1997 200,000 50,000 10,920 25,000 --
Creative Director 1996 150,000 125,000 10,920 -- 646,500
Albert Ovadia............... 1998 300,000 -- 13,320 -- 206,400
Executive Vice President, 1997 270,650 -- 10,920 25,000 --
Worldwide Promotions(6) 1996 102,404 200,000 201,212(8) 100,000 --
Edward T. Boyd.............. 1998 150,000 90,000 7,826 112,500 --
Senior Vice President,
Worldwide Operations(7)
<CAPTION>
ALL OTHER
COMPENSATION($)(3)
-------------------
<S> <C>
Stephen P. Robeck........... 16,115
Chairman, Co-Chief 33,485
Executive Officer(4) 21,980
Donald A. Kurz.............. 21,924
President, Co-Chief 39,362
Executive Officer(4) 30,511
Joseph F. Morrison.......... --
President, Promotions and
Consumer Products(5)
Kim H. Thomsen.............. 5,000
Executive Vice President, 4,924
Creative Director 5,830
Albert Ovadia............... 5,000
Executive Vice President, 2,255
Worldwide Promotions(6) 2,950
Edward T. Boyd.............. --
Senior Vice President,
Worldwide Operations(7)
</TABLE>
- ------------------------------
(1) Amounts were earned in the years indicated. Annual bonuses are generally
paid in the first quarter of the following year.
(2) Consists of an automobile allowance unless otherwise indicated.
(3) 1998 amounts consist of: (i) matching payments pursuant to the Company's
401(k) Plan in the following amounts: Mr. Robeck-- $5,000; Mr. Kurz--$5,000;
Ms. Thomsen--$5,000; and Mr. Ovadia--$5,000; (ii) premiums on term life
insurance in the following amounts: Mr. Robeck--$11,115; and Mr.
Kurz--$6,257; and (iii) loan forgiveness in the following amounts: Mr.
Kurz--$10,667.
(4) On December 31, 1998, Mr. Robeck resigned as Chairman and Co-Chief Executive
Officer of the Company, and on January 1, 1999, Mr. Kurz became Chairman and
Chief Executive Officer of the Company.
(5) Mr. Morrison commenced employment in April, 1998.
(6) Mr. Ovadia retired from his position with the Company effective December 31,
1998. Mr. Ovadia received a signing bonus of $125,000 in 1996.
(7) Mr. Boyd commenced employment in April, 1998. Mr. Boyd received a signing
bonus of $50,000.
(8) Includes payments in the amount of $196,662 in connection with Mr. Ovadia's
relocation to Los Angeles, California in 1996.
EMPLOYMENT AGREEMENTS
Donald A. Kurz has entered into an employment agreement with the Company.
The agreement runs from January 1, 1999 through December 31, 2002, subject to
earlier termination upon Mr. Kurz's death or disability or termination by the
Company For Cause or Other Than For Cause (each as defined in the agreement).
The agreement also terminates upon the first anniversary of a Change of Control
(as defined in the agreement). Under the agreement, Mr. Kurz is entitled to a
base salary of $375,000 per year, subject
6
<PAGE>
to upward annual adjustment at the discretion of the Compensation Committee in
an amount no less than increases in the Consumer Price Index (as defined in the
agreement), a car allowance of $19,200 per year and certain medical, disability
and life insurance benefits. Pursuant to the agreement, Mr. Kurz received a
grant of 50,000 stock options in January 1999 priced at a 50% premium to fair
market value on that date and may receive future stock option grants at the
discretion of the Compensation Committee. Mr. Kurz is also entitled to an annual
bonus of up to 50% of his base salary based on the attainment of certain
corporate earnings goals and, at the discretion of the Compensation Committee, a
strategic performance bonus of up to 50% of his base salary after taking into
account the Company's long-term prospects and position and the accomplishment of
strategic goals devised by Mr. Kurz and the Board of Directors. Upon termination
of the employment term, the Company has agreed to retain Mr. Kurz as a
consultant for a period of three years, unless the agreement is terminated
pursuant to a Change of Control. If the agreement is terminated by reason of
death or disability, Mr. Kurz or his estate shall receive his full base salary
through the end of the month of his death or disability and a prorated share of
any other compensation or benefits required under the agreement. If the
agreement is terminated by the Company For Cause, Mr. Kurz's compensation and
benefits shall cease as of the date of termination. If the agreement is
terminated by the Company Other Than For Cause, Mr. Kurz shall receive his full
base salary and any other compensation or benefits required under the agreement
through the end of the term of the agreement and double the annual corporate
earnings goals bonus he would have been entitled to if he was not terminated.
Under the agreement, the Company has agreed to use its best efforts to have Mr.
Kurz elected as a director of the Company.
Joseph F. Morrison has entered into an employment agreement with the
Company. The agreement runs from September 1, 1998 through December 31, 2000,
subject to earlier termination upon Mr. Morrison's death or disability or
termination by the Company For Cause or Other Than For Cause (each as defined in
the agreement). The agreement contains provisions restricting Mr. Morrison's
ability to compete with the Company through April 24, 2003 and to solicit the
Company's employees through April 24, 2003. Under the agreement, Mr. Morrison is
entitled to a base salary of $275,000 per year, a car allowance of $14,400 per
year and certain medical, disability and life insurance benefits. Pursuant to
the agreement, Mr. Morrison received a grant of 100,000 stock options in
September 1998. Mr. Morrison is also entitled to an annual bonus of up to 80% of
his base salary based on the attainment of certain corporate earnings goals and
business group earnings goals. If the agreement is terminated by reason of death
or disability, Mr. Morrison or his estate shall receive his full base salary
through the end of the month of his death or disability and a prorated share of
his annual bonus as determined under the agreement. If the agreement is
terminated by the Company For Cause, Mr. Morrison's compensation and benefits
shall cease as of the date of termination. If the agreement is terminated by the
end of the employment term, Mr. Morrison's compensation and benefits shall cease
as of the date of termination, but he shall be entitled to payment of his annual
bonus through the end of the calendar year in which his employment terminates
subject to proration if applicable. If the agreement is terminated by the
Company Other Than For Cause, Mr. Morrison shall receive his full base salary
and any other compensation or benefits required under the agreement through the
end of the term of the agreement.
Albert Ovadia had an employment agreement with the Company pursuant to which
he was entitled to receive a base salary of $300,000 per year from August 6,
1997 through December 31, 1998. He was also eligible to receive 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. Mr. Ovadia retired from his position with the Company
effective December 31, 1998.
Edward T. Boyd has entered into an employment agreement with the Company.
The agreement runs from April 13, 1998 through April 12, 2000, subject to
earlier termination upon Mr. Boyd's death or disability or termination by the
Company For Cause or Other Than For Cause (each as defined in the agreement).
Following April 12, 2000, Mr. Boyd's employment with the Company may continue on
an "at will basis" subject to termination by him upon 30 days prior written
notice to the Company. The agreement
7
<PAGE>
contains provisions restricting Mr. Boyd's ability to solicit the Company's
employees through the second anniversary of the agreement's termination. Under
the agreement, Mr. Boyd is entitled to a base salary of $200,000 per year, a car
allowance of $12,000 per year and certain medical, disability and life insurance
benefits. Pursuant to the agreement, Mr. Boyd received a grant of 75,000 stock
options in April 1998. Mr. Boyd is also entitled to an annual bonus of up to 60%
of his base salary based on the attainment of certain corporate earnings goals
and business group earnings goals. Pursuant to the agreement, Mr. Boyd received
a signing bonus of $50,000 in April 1998 which is refundable to the Company in
the event he is terminated For Cause on or prior to April 13, 1999. If the
agreement is terminated by reason of death or disability, Mr. Boyd or his estate
shall receive his full base salary through the end of the month of his death or
disability and a prorated share of his annual bonus as determined under the
agreement. If the agreement is terminated by the Company For Cause, Mr. Boyd's
compensation and benefits shall cease as of the date of termination. If the
agreement is terminated by the end of the employment term, Mr. Boyd's
compensation and benefits shall cease as of the date of termination. If the
agreement is terminated by the Company Other Than For Cause, Mr. Boyd shall
receive his full base salary and other benefits required under the agreement
through the end of the term of the agreement, and he shall be entitled to
payment of his annual bonus through the end of the calendar year in which his
employment terminates.
8
<PAGE>
STOCK OPTIONS
The following table sets forth information with respect to grants of options
to purchase Common Stock under the Option Plan to the Named Executive Officers
during the fiscal year ended December 31, 1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATE OF STOCK
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM($)(2)
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED(#) YEAR ($/SH)(1) DATE 5% 10%
- ------------------------------------- ----------- ------------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Robeck.................... 0 -- -- -- -- --
Donald A. Kurz....................... 0 -- -- -- -- --
Joseph F. Morrison................... 100,000(3) 10.5% 22.00 2001 346,775 728,200
100,000(4) 10.5% 15.00 2008 943,335 2,390,610
30,000(5) 3.1% 7.50 2008 141,500 358,592
66,666(6) 7.0% 7.50 2008 314,442 796,862
Kim H. Thomsen....................... 13,334(7) 1.4% 7.50 2005 40,712 94,876
12,500(8) 1.3% 7.50 2007 51,687 127,308
Albert Ovadia........................ 0 -- -- -- -- --
Edward T. Boyd....................... 75,000(9) 7.9% 21.00 2008 990,502 2,510,141
37,500(10) 3.9% 7.50 2008 176,875 448,239
</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 were granted in connection with the acquisition of Corinthian
Marketing, Inc. and were granted at fair market value on the date of grant.
10,000 shares vest on the first anniversary of the date of grant. The
remaining shares vest in three equal annual installments commencing on the
first anniversary of the date of grant subject to the achievement of certain
performance criteria related to the acquired business. Options were
cancelled on December 14, 1998 in connection with a repricing. (See "Stock
Option Repricing" below.)
(4) Options were granted at fair market value on the date of grant, were for a
term of ten years and vest in five equal annual installments commencing on
the first anniversary of the date of grant subject to accelerated vesting
upon achievement of certain financial performance criteria. Options were
cancelled on December 14, 1998 in connection with a repricing. (See "Stock
Option Repricing" below.)
(5) Options were granted in connection with a repricing. (See "Stock Option
Repricing" below.) Options were granted at fair market value on the date of
repricing, were for a term of ten years and vest in three equal annual
installments commencing on April 4, 1999. The options are subject to a one
year moratorium on exercise ending December 14, 1999.
(6) Options were granted in connection with a repricing. (See "Stock Option
Repricing" below.) Options were granted at fair market value on the date of
repricing. The original options were granted on September 1, 1998, were for
a term of ten years and vest in three equal annual installments commencing
on September 1, 1999. The vesting terms were not amended at the time of
repricing, but the options are subject to a one year moratorium on exercise
ending December 14, 1999.
(7) Options were granted in connection with a repricing. (See "Stock Option
Repricing" below.) Options were granted at fair market value on the date of
repricing. The original options were granted on December 7, 1995, were for a
term of ten years and vest in five equal annual installments commencing on
December 7, 1996. The vesting terms were not amended at the time of
repricing, but the options are subject to a one year moratorium on exercise
ending December 14, 1999.
(8) Options were granted in connection with a repricing. (See "Stock Option
Repricing" below.) Options were granted at fair market value on the date of
repricing. The original options were granted on December 9, 1997, were for a
term of ten years and vest in three equal annual installments commencing on
December 9, 1998. The vesting terms were not amended at the time of
repricing, but the options are subject to a one year moratorium on exercise
ending December 14, 1999.
(9) Options were granted at fair market value on the date of grant, were for a
term of ten years and vest in five equal annual installments commencing on
the first anniversary of the date of grant. Options were cancelled on
December 14, 1998 in connection with a repricing. (See "Stock Option
Repricing" below.)
(10) Options were granted in connection with a repricing. (See "Stock Option
Repricing" below.) Options were granted at fair market value on the date of
repricing. The original options were granted on April 13, 1998, were for a
term of ten years and vest in five equal annual installments commencing on
April 13, 1999. The vesting terms were not amended at the time of repricing,
but the options are subject to a one year moratorium on exercise ending
December 14, 1999.
9
<PAGE>
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 Common
Stock.
AGGREGATED OPTION EXERCISES DURING FISCAL 1998 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, 1998 AT DECEMBER 31, 1998(1)
ACQUIRED ON REALIZED ---------------------------------- ------------------------------
NAME EXERCISE(#) ($) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
- ----------------------- ----------- --------- --------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Robeck...... 0 0 13,334 36,666 0 0
Donald A. Kurz......... 0 0 13,334 36,666 0 0
Joseph F. Morrison..... 0 0 0 96,667 0 72,500
Kim H. Thomsen......... 0 0 73,210 25,833 580,555 19,375
Albert Ovadia.......... 20,000 206,400 28,334 76,666 0 0
Edward T. Boyd......... 0 0 0 37,500 0 28,125
</TABLE>
- ------------------------------
(1) Represents the difference between the last reported sale price of the Common
Stock on December 31, 1998 and the exercise price of the option multiplied
by the applicable number of shares.
STOCK OPTION REPRICING
On December 14, 1998, the Company permitted option holders to exchange their
outstanding stock options for a lesser number of options priced at fair market
value on that date, $7.50. Options with an exercise price greater than $20.00 a
share were eligible to be exchanged for options priced at $7.50 with a 50%
reduction in the number of options. For example, an option to purchase 10,000
shares at $22.00 per share was eligible to be exchanged for an option to
purchase 5,000 shares at $7.50. Options with an exercise price less than or
equal to $20.00 a share were eligible to be exchanged for options priced at
$7.50 with a 33% reduction in the number of options. For example, an option to
purchase 10,000 shares at $18.00 per share was eligible to be exchanged for an
option to purchase 6,667 shares at $7.50. Optionholders with more than one grant
could choose to exchange one or more grants, but were required to exchange the
entirety of any grant selected for exchange. Each replacement grant retained the
original grant's vesting schedule but imposed a one year moratorium on exercise
ending December 14, 1999. The objectives of the exchange were: (i) to replace
the opportunity to share in the Company's success through stock price
appreciation; (ii) to meet competitive threats to the Company's key executives
who could be enticed to join a competitor with option grants priced at the
competitor's current fair market value; (iii) to recapture existing outstanding
options, thereby reducing the number of outstanding grants and increasing
availability for future grants; and (iv) to continue to align the interests of
key employees and stockholders by adding meaningful incentives and strengthening
the retentive powers of the existing grants.
10
<PAGE>
The following table sets forth certain information with respect to executive
officers of the Company who elected to exchange options on December 14, 1998,
the only date the Company has ever repriced options. At the discretion of the
Compensation Committee, Messrs. Robeck and Kurz were not eligible to participate
in the exchange.
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES NUMBER OF ORIGINAL OPTION
UNDERLYING SECURITIES EXERCISE TERM REMAINING AT
OPTIONS UNDERLYING MARKET PRICE OF PRICE AT TIME NEW DATE OF REPRICING
BEFORE OPTIONS AFTER STOCK AT TIME OF EXERCISE (REPRESENTED IN
NAME AND TITLE REPRICING(#) REPRICING(#) OF REPRICING($) REPRICING($) PRICE($) YEARS)
- --------------------------------- ------------- ------------- --------------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Joseph F. Morrison............... 100,000 30,000 7.50 22.00 7.50 2.4
President, Promotions and 100,000 66,666 7.50 15.00 7.50 9.8
Consumer Products
Kim H. Thomsen................... 20,000 13,334 7.50 12.25 7.50 7.0
Executive Vice President, 25,000 12,500 7.50 28.13 7.50 9.0
Creative Director
Edward T. Boyd................... 75,000 37,500 7.50 21.00 7.50 9.4
Senior Vice President,
Worldwide Operations
Leland P. Smith.................. 40,000 20,000 7.50 21.00 7.50 9.8
Senior Vice President, General
Counsel and Secretary
Gaetano Mastropasqua............. 10,000 5,000 7.50 20.63 7.50 8.5
Senior Vice President, 10,000 5,000 7.50 28.13 7.50 9.0
Promotions
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors are
Messrs. Climan, Elins and Raben. 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.
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee on Executive Compensation
and the Performance Graph shall not be deemed to be "soliciting material" or to
be "filed" with the Securities and Exchange Commission (the "Commission") or
subject to Regulations 14A or 14C of the Commission or the liabilities of
Section 18 of the Exchange Act. Such Report and Performance Graph shall not be
deemed incorporated by reference into any filing under the Securities Act of
1933 or the Exchange Act, notwithstanding any general incorporation by reference
of this Proxy Statement into any other document.
GENERAL. 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. In evaluating the performance of members of management, the
Compensation Committee consults with the co-chief executive officers except when
reviewing the co-chief executive officers' performance, in which case it meets
independently. The Committee reviews with the Board in detail all aspects of
compensation for the senior executives, including the Named Executive Officers.
The Committee met three times in 1998. Set forth below are the principal factors
underlying the Committee's philosophy used in setting compensation for fiscal
1998.
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. 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.
In 1998, the Company engaged a consultant to access the competitiveness of
salaries throughout the Company. After reviewing the results of the survey, the
Compensation Committee implemented salary adjustments for those employees deemed
to be receiving "below market" salaries.
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
12
<PAGE>
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 bonus 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, gross margin, sales growth and expense and asset
management in making bonus 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.
In 1998, performance objectives regarding the attainment of corporate
earnings goals were not achieved. Based on the attainment of divisional and
individual performance objectives, cash bonuses were awarded to the Named
Executive Officers in the following amounts: Mr. Robeck--$0; Mr. Kurz--$0; Mr.
Morrison--$10,000; Ms. Thomsen--$125,000; Mr. Ovadia--$0; and Mr. Boyd--$40,000.
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, 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.
On December 14, 1998, the Company permitted option holders to exchange their
outstanding stock options for a lesser number of options priced at fair market
value on that date, $7.50. Options with an exercise price greater that $20.00 a
share were eligible to be exchanged for options priced at $7.50 with a 50%
reduction in the number of options, and options with an exercise price less than
or equal to $20.00 a share were eligible to be exchanged for options priced at
$7.50 with a 33% reduction in the number of options. Each replacement grant
retained the original grant's vesting schedule but imposed a one year moratorium
on exercise. Twenty-one employees and consultants of the Company elected to
participate, exchanging an aggregate of options to purchase 817,500 shares of
Common Stock at exercise prices ranging from $12.25 to $28.13 a share in return
for an aggregate of options to purchase 422,417 shares of Common Stock at an
exercise price of $7.50 per share. At the discretion of the Compensation
Committee, Messrs. Robeck and Kurz, the Company's co-chief executive officers,
were not eligible to participate in the exchange. The Compensation Committee
determined to allow the exchange following a substantial decline in the price of
the Common Stock from its 1998 high of $27.00 and in recognition that a
substantial number of option holders had joined the Company within the last
year. The objectives of the exchange were as follows: (i) to replace the
opportunity to share in the Company's success through stock price appreciation;
(ii) to meet competitive threats to the Company's key executives who could be
enticed to join a competitor with option grants priced at the competitor's
current fair market value; (iii) to recapture existing outstanding options,
thereby reducing the number of outstanding grants and increasing availability
for future grants; and (iv) to continue to align the interests of key employees
and stockholders by adding meaningful incentives and strengthening the retentive
powers of the existing grants.
In 1998, the Company granted options to purchase shares of the Company's
Common Stock to the Named Executive Officers in the following amounts,
(including shares granted in the December 14, 1998 exchange): Mr. Robeck--0; Mr.
Kurz--0; Mr. Morrison--296,667; Ms. Thomsen--25,833; Mr. Ovadia--0; and Mr.
Boyd--112,500. In approving grants and awards under the Option Plan, the
quantitative and qualitative factors and industry comparisons outlined above are
considered.
13
<PAGE>
OTHER EMPLOYMENT BENEFITS. The Company provides health and welfare benefits
to executives and employees similar to those provided by other 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. Certain executives are also eligible for a
monthly car allowance.
INTERNAL REVENUE CODE SECTION 162(M). 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.
For these and other reasons, the Compensation Committee will not necessarily
limit executive compensation to that deductible under Section 162(m) of the
Internal Revenue Code. 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 1998
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 1998. Based on these results, the Compensation Committee did not
award Messrs. Kurz and Robeck a bonus for the year ended December 31, 1998. In
addition, Messrs. Kurz and Robeck did not receive any options to purchase shares
of Common Stock in 1998 and were not eligible to participate in the December 14,
1998 stock option exchange.
COMPENSATION COMMITTEE
Lawrence Elins, Chairman
Sanford R. Climan
Bruce Raben
14
<PAGE>
PERFORMANCE GRAPH
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, 1998. 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 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EQUITY MARKETING S&P 500 RUSSELL 2000
<S> <C> <C> <C> <C> <C> <C>
01/94 $100.00 $100.00 $100.00
12/94 $83.33* $95.36 $93.94
12/95 $208.33 $127.89 $118.55
12/96 $308.33 $153.80 $136.05
12/97 $416.67 $201.50 $163.97
12/98 $137.50 $255.23 $158.32
Comparison of cumulative return
among the Company, the S&P 500
Index and the Russell 2000 Index
01/94 12/94 12/95 12/96 12/97 12/98
Equity Marketing $100.00 $83.33* $208.33 $308.33 $416.67 $137.50
S&P 500 $100.00 $95.36 $127.89 $153.80 $201.50 $255.23
Russell 2000 $100.00 $93.94 $118.55 $136.05 $163.97 $158.32
</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 officers, and
any persons holding more than 10% of the Common Stock are required to report
their ownership of the Common Stock and any changes in that ownership to the
Commission. 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, 1998. In his Form 5 filed
in February 1998 covering transactions occurring in 1997, Donald A. Kurz omitted
a gift made in February 1997 of 4,500 shares of Common Stock. To correct the
omission, Mr. Kurz filed an amended Form 5 in October 1998. Mr. Elins was
delinquent by less than two weeks in filing his report on Form 5 for the year
ended December 31, 1998. Other than the foregoing, all of these filing
requirements were satisfied by its directors, officers and 10% holders. In
making these statements, the Company has relied on the written representations
of its directors, officers and its 10% holders and copies of the reports that
they have filed with the Commission.
15
<PAGE>
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, 1999. 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, 1999.
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.
FORM 10-K
UPON WRITTEN REQUEST OF ANY PERSON ENTITLED TO VOTE AT THE MEETING,
ADDRESSED TO THE COMPANY, ATTENTION: SECRETARY, EQUITY MARKETING, INC., 6330 SAN
VICENTE BLVD., LOS ANGELES, CALIFORNIA 90048, THE COMPANY WILL PROVIDE WITHOUT
CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998, 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 2000 Annual Meeting of Stockholders must
be submitted to the Secretary of the Company prior to December 14, 1999. It is
suggested that such proposals be sent by Certified Mail, Return Receipt
Requested.
ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS
The Company's Bylaws require advance notice for any business to be brought
before a meeting of stockholders. In general, for business to be brought before
an annual meeting by a stockholder, written notice of the stockholder proposal
must be delivered to the Secretary of the Company not less than the close of
business on the one hundred twentieth day nor earlier than the close of business
on the one hundred fiftieth day prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the one hundred fiftieth day prior to
such annual meeting and not later than the close of business on the later of the
one hundred twentieth day prior to such annual meeting or the 10th day following
the day on which public announcement of the date of such annual meeting is first
made. Assuming that the date of the Company's 2000 Annual Meeting of
Stockholders is less than 30 days before or less than 60 days after such
anniversary date, any such proposal to be included in the proxy statement for
the Company's 2000 Annual Meeting of Stockholders must be submitted to the
Secretary of the Company prior to December 14, 1999 and after November 14, 1999.
In general, the stockholder's notice to the Secretary must contain a brief
description of the business to be brought before the meeting and the reasons for
conducting such business at the meeting, as well as certain other information.
Written notice of any such stockholder proposal should be sent to the Secretary,
Equity Marketing, Inc., 6330 San Vicente Blvd., Los Angeles, California 90048.
16
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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.
SOLICITATION OF PROXIES
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.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Leland P. Smith
LELAND P. SMITH
SECRETARY
17
<PAGE>
EQUITY MARKETING, INC.
THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 26, 1999
Donald A. Kurz, Leland P. Smith and Teresa P. Covington, 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 March 29, 1999, at the Annual Meeting of
Stockholders to be held at 10:00 a.m. on May 26, 1999, at the Hotel Nikko, 465
S. La Cienega Blvd., Los Angeles, California 90048, and at any adjournment
thereof. Any and all proxies heretofore given are hereby revoked.
1. ELECTION OF DIRECTORS. To elect all nominees.
Nominees are: Donald A. Kurz, Sanford R. Climan, Lawrence Elins, Mitchell H.
Kurz, Bruce Raben and Stephen P. Robeck.
/ / 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
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
PLEASE MARK, DATE AND SIGN THE REVERSE SIDE AND MAIL PROMPTLY IN THE ENCLOSED
ENVELOPE.
<PAGE>
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 and 2.
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
