EXECUTION COPY
Exhibit 10.2
EMPLOYMENT AGREEMENT
     This Employment Agreement (this “Agreement”) is made and entered into on
October 3, 2005 (the “Effective Date”), by and among EMAK Worldwide, Inc. (the
“Parent”), Equity Marketing, Inc., a Delaware corporation (the “Company”), and
Jonathan Banks (“Executive”).
1.      Engagement and Duties.
     (a)      Upon the terms and subject to the conditions set forth in this
Agreement, the Company hereby engages and employs Executive as an officer of the
Company, with the title and designation “Co-Chief Executive Officer” and also as
a member of the Company Board. Executive hereby accepts such engagement and
employment. In addition, by executing this Agreement, Executive hereby resigns,
and the Company and the Parent hereby accept Executive’s resignation, from any
and all positions that he currently holds with the Company and the Parent,
although this will not affect Executive’s participation in the benefit plans of
Parent.
     (b)      During the Employment Term, the Executive, as Co-Chief Executive
Officer, shall report to the Chief Executive Officer of the Parent (“Parent
CEO”). The Executive shall, subject to the shared authority of Kim H. Thomsen,
as Executive’s Co-Chief Executive Officer (the “Other CEO”) and subject to the
reasonable direction and control of the Parent CEO, have general and active
supervision and control of the Company and shall perform all duties and enjoy
all powers commonly incident to the position of chief executive officer and
otherwise as may be delegated to him from time to time by the Company Board or
the Parent Board consistent with the position of CEO, including, without
limitation, succession planning for Executive’s position and the development and
implementation of transition plans for key client relationships at the end of
the Employment Term.
     (c)      Executive agrees to devote his full-time business time, energy and
efforts to the business of the Company and will use his best efforts and
abilities faithfully and diligently to promote the Company Group’s business
interests.

 

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     (d)      For so long as Executive is employed by the Company and for one
year thereafter, Executive shall not, directly or indirectly, as owner, partner,
joint venturer, shareholder, employee, broker, agent, principal, trustee,
corporate officer, director, licensor, or in any other capacity whatsoever
engage in, become financially interested in, be employed by, render any
consultation or business advice with respect to, or have any connection with,
any business engaged in the development, design, manufacture, sale, marketing,
utilization or exploitation of any products or services which are designed for
the same purpose as, are similar to, or are otherwise competitive with, products
or services of the Company Group provided as of the end of the Employment Term,
in any geographic area where, prior to or at the time of the termination of his
employment, the business of the Company Group was being conducted in any manner
whatsoever; provided, however, that the Executive may own any securities of any
corporation which is engaged in such business and is publicly owned and traded
but in an amount not to exceed at any one time one percent (1%) of any class of
stock or securities of such corporation. Subject to the foregoing prohibition
and provided such services or investments do not violate any applicable law,
regulation or order, or interfere in any way with the faithful and diligent
performance by Executive of the services to the Company otherwise required or
contemplated by this Agreement or duly requested by the Parent Board, the
Company and the Parent expressly acknowledge that Executive may:
          (i)      make and manage personal business investments of Executive’s
choice without consulting the Parent Board;
          (ii)      serve in any capacity with any civic, educational,
charitable or trade organization; and
          (iii)      serve as a member of the board of directors of other
companies or businesses with the approval of the Parent Board, which approval
will not be unreasonably withheld.
2.      Definitions.
     For the purposes of this Agreement, the following terms shall have the
meanings set forth below:

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     “2008 Severance Compensation” shall have the meaning set forth in Section
5(e) of this Agreement.
     “Affiliate” shall mean, with respect to any Person, any individual,
partnership, limited liability company, corporation, trust, estate, real estate
investment trust, association or any other entity, directly or indirectly,
through one or more intermediaries, controlling, controlled by or under common
control with such Person. The term “control,” as used in the immediately
preceding sentence, means, with respect to a corporation or other entity, the
right to exercise, directly or indirectly, more than 10% of the voting rights
attributable to the controlled corporation or other entity, and with respect to
any individual, partnership, limited liability company, trust, association or
other entity, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled entity.
     “Base Salary” shall have the meaning set forth in Section 3(a) of this
Agreement.
     “Board of Directors” shall mean the Board of Directors of the Parent.
     “Change of Control” shall be deemed to have occurred if:
     (a)      any Person is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly of securities of the company representing more than 50% of the
combined voting power of the Parent’s then outstanding voting securities;
     (b)      during any period of twenty-four (24) consecutive months,
individuals, who at the beginning of such period constitute the Board of
Directors, and any new director whose election by the Board of Directors, or
whose nomination for election by the Parent’s stockholders, was approved by a
vote of at least one-half (1/2) of the directors then in office (other than in
connection with a contested election), cease for any reason to constitute at
least one-half (1/2) of the Board of Directors; or
     (c)      the stockholders of the Parent approve (i) a plan of complete
liquidation of the Parent; or (ii) the sale or other disposition by the Parent
of all or substantially all of the Parent’s assets; or
     (d)      the consummation of a merger, consolidation or reorganization of
the Parent with any other entity other than:

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          (i)      a merger, consolidation or reorganization which results in
the voting securities of the Parent outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the surviving entity’s outstanding voting securities immediately
after such merger, consolidation or reorganization; or
          (ii)      a merger, consolidation or reorganization which would result
in the directors of the Parent (who were directors immediately prior thereto)
continuing to constitute at least 50% of all directors of the surviving entity
immediately after such merger, consolidation or reorganization.
     (e)      the Parent enters into a definitive agreement with respect to any
of the foregoing transactions during the Employment Term or the SARs Term, and
the transaction contemplated by such definitive agreement is actually
consummated by Parent.
For purposes of paragraph (d) above, “surviving entity” shall mean only an
entity in which all of the Parent’s stockholders immediately before such merger,
consolidation or reorganization (determined without taking into account any
stockholders properly exercising appraisal or similar rights) become
stockholders by the terms of such merger, consolidation or reorganization, and
the phrase “directors of the Parent (who were directors immediately prior
thereto)” shall include only individuals who were directors of the Parent, as
applicable, at the beginning of the twenty-four (24) consecutive month period
preceding the date of such merger, consolidation or reorganization.
     “Code” shall mean the Internal Revenue Code of 1986, as amended and as the
same may be further amended from time to time.
     “Common Stock” shall have the meaning set forth in Section 3(b)(i)(B) of
this Agreement.
     “Company Board” shall mean the Board of Directors of the Company
     “Company Group” shall mean the Company, including all parent, subsidiary
and Affiliates of the Company (including all subsidiaries and Affiliates of the
Parent), and each Person with respect to which the Company or the Parent
directly or indirectly has Control.

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     “Consumer Price Index Adjustment” shall be determined as follows: the
Consumer Price Index for the Los Angeles — Riverside — Orange County, CA (All
Items), as published by the United States Department of Labor, Bureau of Labor
Statistics (1982-84=100) (the “Index”) which is most recently available at the
commencement of the new year (the “New Index”) shall be compared with the Index
most recently available twelve months prior to the New Index (the “Previous
Index”). If the New Index has increased over the Previous Index, the Consumer
Price Index Adjustment shall be set by multiplying the Base Salary of the prior
year by a fraction, the numerator of which is the New Index and the denominator
of which is the Previous Index; provided, however, that if the Index is changed
so that the base year used for the New Index differs from that used for the
Previous Index, the New Index shall be converted in accordance with the
conversion factor published by the United States Department of Labor, Bureau of
Labor Statistics.
     “Control” shall mean, with respect to any Person, (i) the beneficial
ownership of any of the outstanding voting securities of such Person, or
(ii) the power, directly or indirectly, by proxy, voting trust or otherwise, to
elect any of the outstanding directors, trustees or other managing persons of
such Person.
     “Direct Allocations” shall mean (i) the Company’s share of the cost of the
Parent’s shared service centers (i.e., creative, operations, warehouse, Hong
Kong, product integrity, etc.) based on estimated usage or time spent working on
behalf of the Company, and (ii) corporate overhead (i.e., occupancy, finance &
accounting, MIS, legal & business affairs, human resources, insurance, etc.)
allocated to the Company based on estimated usage/service levels; provided that
the methodology for determining Direct Allocations shall be the same as that
used by the Company and Parent in preparing budgets and accounting statements
prior to the date hereof. The parties acknowledge and agree that Direct
Allocations have historically under Parent’s practice and shall continue to
exclude the Parent’s expenses of being a public company (e.g., expenses of
filing period reports under the Securities Exchange Act of 1934, investor
relations expenses, preparation and distribution of proxy statements, annual
meeting expenses, Board of Directors fees and expenses, etc.).
     “EBITDA” shall mean earnings before interest, taxes, depreciation, and
amortization of the Company, as reported on the Parent’s internal unaudited
statement of operations for the Company using the Company’s actual expenses for
its own operations and only Direct

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Allocations. For purposes of calculating EBITDA, the following costs shall be
excluded: (i) the compensation payable pursuant to Sections 3(b)(i) and (ii) of
this Agreement, as well as the identical compensation provisions of the Other
CEO’s employment agreement; and (ii) the discretionary bonuses paid to employees
of the Company. For purposes of calculating EBITDA, all revenues received and
expenses incurred by Parent or its subsidiaries in servicing the clients on
Schedule 2, as amended from time to time by mutual agreement, shall be included
subject to any mutually agreed allocations or limitations set forth in
Schedule 2. Additional clients shall be added to Schedule 2 at any time when the
Company commences to provide services to them. Attachment A hereto sets forth
the methodology for determining EBITDA.
     “Employment Term” shall mean the Effective Date through December 31, 2007,
unless earlier terminated as provided herein.
     “For Cause” shall mean, in the context of a basis for termination of
Executive’s employment with the Company, that:
     (a)      Executive materially breaches any obligation, duty or agreement
under this Agreement, which breach is not either waived by the Company or cured
or corrected by Executive within 15 days of written notice thereof from the
Company (except for breaches of Sections 1(d), 6 or 7 of this Agreement, which
cannot be cured and for which the Executive shall have no opportunity to cure);
     (b)      Executive is grossly negligent in the course of providing services
to the Company, or commits any act of personal dishonesty, fraud or breach of
fiduciary duty or trust against the Company;
     (c)      Executive is convicted of, or pleads guilty or nolo contendere
with respect to, theft, fraud or felony under federal or applicable state law;
     (d)      Executive commits any act or acts of personal conduct that,
following due investigation and determination by the Parent Board of probable
cause, gives rise to a likelihood of liability under federal or applicable state
law for discrimination or sexual or other forms of harassment or other similar
liabilities with respect to subordinate employees; or
     (e)      Executive commits continued and repeated material violations of
specific directions of the Parent CEO, which directions are consistent with past
practices, with this Agreement and with Executive’s position as a chief
executive officer, or continued and repeated substantive failure to perform
duties assigned by or pursuant to this Agreement; provided that no

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termination shall be deemed “For Cause” under this subsection (e) unless
Executive first receives written notice from the Parent CEO advising him of the
specific acts or omissions alleged to constitute violations of written
directions or a material failure to perform his duties, and such violations or
material failure continue after he shall have had a reasonable opportunity to
correct the acts or omissions so complained of.
     “Minimum EBITDA Threshold” shall mean the dollar amount set forth on
Schedule 1 attached hereto under the heading Minimum EBITDA Threshold for the
applicable fiscal year of the Company.
     “Other CEO” shall have the meaning set forth in Section 1(b) of this
Agreement.
     “Other Than For Cause” shall mean, in the context of termination of
Executive’s employment with the Company, any termination by the Company other
than pursuant to Sections 4(a), (b), (c) or (e) hereof.
     “Parent” has the meaning set forth in the preamble of this Agreement.
     “Parent Board” shall mean the Board of Directors of the Parent.
     “Parent CEO” has the meaning set forth in Section 1(b) of this Agreement.
     “Person” shall mean an individual or a partnership, corporation, trust,
association, limited liability company, governmental authority or other entity.
     “Prior Employment Agreement” shall mean that certain employment agreement
entered into between the Parent and Executive dated as of December 12, 2003.
     “SARs Term” shall mean the Effective Date through the fifth anniversary of
the termination of this Agreement, unless earlier terminated as provided herein
or in the SAR Agreement.
3.      Compensation; Executive Benefit Plans.
     (a)      Base Salary and Signing Bonus. The Company shall pay to Executive
a base salary (the “Base Salary”) at an annual rate of $300,000 during the
period from April 1, 2005 to December 31, 2005. The Base Salary shall be payable
in installments throughout the year in the same manner and at the same times the
Company pays base salaries to other executive officers of the Company.
Commencing April 1, 2006, the Base Salary shall be adjusted upward annually in
an amount at the discretion of the Parent Board; provided, however, that such
upward annual adjustment shall be greater than or equal to the Consumer Price
Index

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Adjustment. In addition to Executive’s base salary, on or before execution of
this Agreement, Executive shall receive a one-time signing bonus of $100,000.
Executive acknowledges receipt of such signing bonus on September 23, 2005.
     (b)      Bonus. During the Employment Term, the Executive’s bonus program
shall consist of the following:
          (i)      Annual Bonus.
               (A)      Executive shall be eligible to receive an annual bonus
no later than 75 days after the end of each Company fiscal year that is included
within the Employment Term. The annual bonus shall be based upon the Company
achieving certain EBITDA thresholds for the most recently completed fiscal year.
The annual bonus shall be calculated as follows: for each fiscal year, in order
for Executive to receive an annual bonus, the Company must exceed the Minimum
EBITDA Threshold for such fiscal year. If the Company’s EBITDA exceeds the
Minimum EBITDA Threshold, Executive may earn one-half (1/2) of the specified
percentage of each applicable tranche based upon the Company’s EBITDA (each an
“EBITDA Tranche”). The parties acknowledge that the remaining one-half (1/2) of
the specified percentage of each EBITDA Tranche may be payable to the Other CEO
pursuant to her employment agreement with the Company. Schedule 1 attached
hereto sets forth the applicable Minimum EBITDA Threshold, the EBITDA Tranches
and the percentages earned for each applicable EBITDA Tranche as well as two
sample calculations to illustrate the calculation of Executive’s annual bonus.
               (B)      The annual bonus shall be payable to Executive as
follows: (1) twenty-five percent (25%) shall be payable in cash; (2) twenty-five
percent (25%) shall be payable in shares of the Parent’s common stock, $.001 par
value per share (“Common Stock”); and (3) the remaining fifty percent (50%) may
be paid in either cash and/or Common Stock, at the election of Executive.
               (C)     The number of shares of Common Stock issued to Executive
pursuant to this Section 3(b)(i) shall be a number of shares equal to the
quotient of the dollar amount of the annual bonus to be paid in Common Stock
divided by the average closing price of

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the Common Stock, for the 30 trading days immediately preceding the date of
issuance. To the extent that any shares of Common Stock are issued to Executive
pursuant to this Section 3(b)(i), the Parent shall be entitled to offset the
amount of any applicable withholding taxes required by the Code and any other
applicable laws against the cash portion of such annual bonus due to the
Executive pursuant to this Section 3(b)(i) and, if the cash portion of such
annual bonus is insufficient to cover the amount of such withholding taxes,
against the payment of the Executive’s base salary.
          (ii)      Stock Appreciation Rights. On the Effective Date, Executive
and the Parent shall enter into a Stock Appreciation Rights Agreement (the “SAR
Agreement”) in the form of Exhibit A attached hereto. Pursuant to the SAR
Agreement, Executive shall be granted free-standing stock appreciation rights in
200,000 shares of Common Stock (“SARs”). The grant price of the SARs shall be
$8.03 per share, which the parties hereto hereby acknowledge and agree is the
average closing price of the Common Stock for the five trading days ending the
week of September 23, 2005. As provided in the SAR Agreement, the SARs shall
vest and become exercisable only upon a Change of Control of the Parent
(assuming that Executive has served the Company in accordance with the terms of
this Agreement including post-employment service as provided below, through the
date of the Change of Control) and only if the Company has experienced positive
growth in EBITDA over the period commencing January 1, 2005 and ending upon the
earlier of December 31, 2007 or the date of a Change of Control. In the event
that a Change of Control of the Parent does not occur during the Employment
Term, the SARs shall continue in full force and effect for a period of five
(5) years following the termination of this Agreement; provided that Executive:
(x) continuously served the Company in accordance with the terms of this
Agreement through the Employment Term and thereafter continues to serve as a
member of the Company Board, and (y) continues to abide by the provisions of
Sections 1(d), 6 and 7 of this Agreement.
     (c)      Reimbursement. Executive shall be entitled to reimbursement from
the Company for the reasonable costs and expenses that he incurs in connection
with the performance of his duties and obligations under this Agreement in a
manner consistent with the Company’s practices and policies for reimbursements
for executive officers.

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     (d)      Additional Reimbursement. During the Employment Term, the Company
shall reimburse Executive on a basis comparable to the current practice of the
Company, for leasing garage space, telephone and home office equipment for his
use in performing his employment duties and obligations under this Agreement.
     (e)      Group Benefit Plans. Executive shall be eligible to participate in
the Parent’s group health, dental, life, disability, retirement (including
401(k)) and pension benefit plans, subject to the terms, conditions and
limitations contained in the applicable plan documents and insurance policies.
     (f)      Vacation. In accordance with the Company’s policy for executives
at the rank of vice president and above, no specific amount of vacation time
will be accrued by Executive. Executive shall be entitled to take the amount of
vacation time he and the Parent CEO determine to be appropriate in light of his
workload from time to time. Any vacation time shall be scheduled to minimize
interference with the exercise of Executive’s duties under this Agreement.
     (g)      Insurance. During the Employment Term, the Company shall pay to or
on behalf of the Executive such amounts as are required on an after-tax basis to
maintain all premiums on (i) supplemental disability insurance paying at least
$14,000 per month, and (ii) term life insurance having a face value payable on
death of no less than $700,000 on the life of the Executive with the Executive
(or his estate) as beneficiary.
     (h)      Withholding. The Company may deduct from any compensation payable
to Executive the minimum amounts sufficient to cover applicable federal, state
and/or local income tax withholding, old-age and survivors’ and other social
security payments, state disability and other insurance premiums and payments.
     (i)      Fringe Benefits. During the Employment Term, Executive shall be
entitled to an automobile allowance of $1,000 per month and a cellular phone
allowance of $150 per month. Such allowances shall be paid in a manner
consistent with the Company’s practices and policies therefor. During the
Employment Term, Executive shall also be entitled to reimbursement for expenses
of travel (including business class airline upgrades) and hotel

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accommodations while traveling on Company business in accordance with the
policies of the Company as in effect from time to time. The Company agrees to
reimburse Executive up to a total of $15,000 for the cost of reasonable
attorneys’ fees incurred in connection with the negotiation and preparation of
this Agreement.
     (j)      [INTENTIONALLY LEFT BLANK]
     (k)      Current Options, Restricted Stock, etc. As of the date hereof,
Executive has received and shall be entitled to retain: (i) 25,000 options to
purchase Common Stock at $9.94 per share expiring March 3, 2010 and reflected in
Parent’s records as grant number 265; (ii) 3,000 options to purchase Common
Stock at $10.90 per share expiring May 17, 2011 and reflected in Parent’s
records as grant number 305; (iii) 4,000 restricted stock units vesting April 1,
2007 and reflected in Parent’s records as grant number 458; and (iv) 10,000
restricted stock units vesting April 1, 2008 and reflected in Parent’s records
as grant number 567.
4.      Termination of Employment.
          Executive’s employment pursuant to this Agreement shall commence on
the Effective Date and shall terminate on the earliest to occur of the
following:
     (a)      upon the death of Executive;
     (b)      upon delivery to Executive of written notice of termination by the
Company if Executive shall suffer a physical or mental disability which renders
Executive unable to perform his duties and obligations under this Agreement for
at least 120 days, whether or not consecutive, in any 12-month period
(“Disability”);
     (c)      upon delivery to Executive of written notice of termination by the
Company For Cause; or
     (d)      upon delivery to Executive of written notice of termination by the
Company Other Than For Cause; or
     (e)      upon the earlier to occur of (i) the end of the Employment Term,
or (ii) the first anniversary of a Change of Control.

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5.      Severance Compensation.
     (a)      If Executive’s employment is terminated pursuant to Section 4(a)
(death) or Section 4(b) (Disability), the Company shall pay to the Executive or
his estate his full Base Salary through the end of the month of Executive’s
death or Disability, and Executive or his estate shall be entitled to a prorated
share of any bonus or benefits as provided under Section 3 hereof for the
calendar year during which his death or Disability occurred. Notwithstanding the
foregoing, if (i) Executive’s employment is terminated due to a Disability, and
(ii) Executive is denied all or some disability benefits under the applicable
disability policy, then Executive shall be entitled to continue to receive his
Base Salary from the Company in accordance with Section 3(a) of this Agreement
through December 31, 2007, payable at the same time and in the same manner as if
Executive’s employment had not terminated. Any disability benefits that
Executive does receive shall be offset against any amounts payable to Executive
pursuant to the preceding sentence. Executive agrees to cooperate fully with the
Company and the disability insurance carrier with respect to any claim for
disability benefits.
     (b)      If Executive’s employment is terminated pursuant to Section 4(c)
(by the Company For Cause), Executive’s Base Salary and all benefits under
Section 3 shall cease as of the date of termination, and Executive shall not be
entitled to any bonus for the calendar year during which his employment shall be
terminated or at any time thereafter. In the event of termination of Executive’s
employment pursuant to Section 4(c) (by the Company For Cause), and subject to
applicable law and regulations, the Company shall be entitled to offset against
any payments due Executive the loss and damage, if any, which shall have been
suffered by the Company as a result of the acts or omissions of Executive giving
rise to termination under Section 4(c). The foregoing shall not be construed to
limit any cause of action, claim or other rights which the Company may have
against Executive in connection with such acts or omissions.
     (c)      If Executive’s employment is terminated pursuant to Section 4(d)
(by the Company Other Than For Cause) prior to December 31, 2007, Executive
shall be entitled to continue to receive (i) his Base Salary in accordance with
Section 3(a) of this Agreement, through December 31, 2007, payable at the same
time and in the same manner as if Executive’s employment had not terminated,
(ii) the benefits provided under Sections 3(b)(ii),

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3(e), 3(g), 3(i) and 3(j) of this Agreement, through December 31, 2007, payable
at the same time and in the same manner as if Executive’s employment had not
terminated, (iii) his compensation under Section 5(e), (iv) any rights he may
have under the plans and agreements set forth under Section 3(k) according to
their terms, and (v) the annual bonus payable to Executive pursuant to
Section 3(b)(i) for the fiscal year in which Executive’s employment is
terminated pursuant to Section 4(d) (by the Company Other Than For Cause) and
the annual bonus for the next fiscal year. If for some reason the Executive is
not eligible to participate in the Company’s group plans, the Company shall pay
the COBRA premiums associated with Executive’s obtaining comparable benefits.
Executive shall have no duty to seek other employment upon such termination, and
if Executive does so, any income therefrom, shall not be credited against
amounts due hereunder.
     (d)      If Executive terminates his employment in breach of this Agreement
prior to December 31, 2007, Executive shall as of the date of termination cease
to be entitled to Base Salary, benefits or bonuses. In addition, the Company
shall be entitled to seek any other available remedies pursuant to this
Agreement or otherwise for such breach, and to offset against any amounts due
Executive any damages suffered as a result of such breach.
     (e)      At December 31, 2007 unless Executive is terminated for Cause, and
provided that Executive has fulfilled all of his material obligations hereunder
for the entire Employment Term, Executive shall be entitled to severance
compensation (the “2008 Severance Compensation”) in an amount equal to
Executive’s annual bonus for fiscal year 2008, calculated in accordance with
Section 3(b)(i) and Schedule 1 attached hereto as if Executive continued to be
employed by the Company for fiscal year 2008. The amount of Executive’s 2008
Severance Compensation shall be calculated and paid to Executive quarterly in
arrears through fiscal year 2008. Within thirty (30) days after the end of each
quarter in fiscal year 2008, the amount of the 2008 Severance Compensation shall
be calculated in accordance with the procedures set forth in Section 3(b)(i) by
annualizing the current EBITDA of the Company on the last business day of such
quarter. Executive shall be entitled to receive payment of 25%, 50% and 75% of
such calculated 2008 Severance Compensation within thirty-five (35) days
following the end of the first, second and third quarters, respectively, less
any amounts of 2008 Severance Compensation previously paid to Executive. Within
90 days

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of the end of the Company’s fiscal year 2008, the final amount of Executive’s
2008 Severance Compensation shall be calculated and the Company shall pay to
Executive the remainder of any amounts not having been previously paid to
Executive pursuant to this Section 5(e).
     (f)      Executive acknowledges that the Company has the right to terminate
Executive’s employment Other Than For Cause and that such termination shall not
be a breach of this Agreement or any other express or implied agreement between
the Company and Executive. Accordingly, in the event of such termination,
Executive shall be entitled only to the compensation and benefits specifically
provided for in this Agreement in the event of such termination, and shall not
have any other rights to any compensation or damages from the Company for breach
of contract.
     (g)      Executive acknowledges that in the event of termination of his
employment for any reason, he shall not be entitled to any severance or other
compensation from the Company except as specifically provided in this Section 5.
Without limitation on the generality of the foregoing, this Section supersedes
any plan or policy of the Company which provides for severance to its officers
or employees, and Executive shall not be entitled to any benefits under any such
plan or policy.
6.      Covenant Not To Solicit.
     (a)      During the Employment Term and through the third anniversary of
the end of the Employment Term, Executive will not directly or indirectly,
either alone or by action in concert with others: (i) induce any employee of any
member of the Company Group to engage in any activity in which Executive is
prohibited from engaging by Section 1(d) of this Agreement or to terminate his
or her employment with any member of the Company Group; or (ii) offer employment
or induce any Person to employ or offer employment to anyone who is or was
within the 12 months prior to the date of the proscribed action employed by any
member of the Company Group; or (iii) induce or attempt to induce any customer,
supplier, licensee or other Person with a business relationship with any member
of the Company Group to discontinue or reduce its business with any member of
the Company Group, or in any way interfere with the relationship between any
such customer, supplier, licensee or other Person and any member of the Company
Group; or (iv) solicit or accept any business whatsoever

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from any of the customers with which the Company did business during the
Executive’s engagement or employment by the Company. The Parent CEO shall have
the authority to waive the provisions of Section 6(a)(ii) insofar as it relates
to the personal assistant who was assigned to Executive. (All of the provisions
of this Section 6(a) shall continue to apply through the third anniversary of
the end of the Employment Term (the “Post-Employment Period”)).
     (b)      Executive acknowledges that the Company Group conducts business on
a world-wide basis, that its sales and marketing prospects are for continued
expansion into world markets and that, therefore, the territorial and time
limitations set forth in Section 1(d) and in this Section 6 are reasonable and
properly required for the adequate protection of the business of the Company
Group. In the event any such territorial or time limitation is deemed to be
unreasonable by a court of competent jurisdiction, Executive agrees to the
reduction of the territorial or time limitation to the largest area or the
longest period which such court deems reasonable.
     (c)      If any portion of the restrictions set forth in Section 1(d) and
in this Section 6 should, for any reason whatsoever, be declared invalid by a
court of competent jurisdiction, the validity or enforceability of the remainder
of such restrictions shall not thereby be adversely affected.
     (d)      The existence of any claim or cause of action by Executive against
the Company (other than Company’s failure to pay Executive the compensation
owing pursuant to this Agreement) shall not constitute a defense to the
enforcement by the Company of the restrictive covenants set forth in Section
1(d) and in this Section 6, but such claim or cause of action shall be litigated
separately.
7.      Confidentiality.
     Executive will not at any time (whether during or after his employment with
the Company) disclose or use for his own benefit or purposes or the benefit or
purposes of any other Person, other than any member of the Company Group, any
trade secrets, information or data of a proprietary or sensitive nature, any
information, data or conclusions relating to any audit pursuant to Section 9, or
other confidential information relating to customers, development

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programs, costs, marketing, trading, investment, sales activities, promotion,
credit and financial data, financial methods, plans, or the business and affairs
of the Company Group generally. Executive agrees that upon termination for any
reason of this Agreement, he will immediately return to the Company all such
confidential memoranda, books, papers, plans, information, letters and other
data of a proprietary or sensitive nature, and all copies thereof or therefrom,
in any way relating to the business of the Company Group. Executive further
agrees that he will not retain or use at any time any trade name, trademark or
other proprietary business designation used or owned in connection with the
business of any member of the Company Group. Executive further agrees that he
shall take all reasonable measures to prevent any of his auditors, agents and
representatives from disclosing any of the type of information described above.
8.      Copyright and Trademarks.
     (a)      All right, title and interest, of every kind whatsoever, in the
United States and throughout the world, in (i) any work, including the copyright
thereof (for the full terms and extensions thereof in every jurisdiction),
created by the Executive at any time during the Employment Term, and all
material embodiments of the work subject to such rights; and (ii) all
inventions, ideas, discoveries, designs and improvements, patentable or not,
made or conceived by the Executive at any time during the Employment Term, shall
be and remain the sole property of the Company Group without payment of any
further consideration to the Executive or any other person than as set forth
herein, and each such work shall, for purposes of United States copyright law,
be deemed created by the Executive pursuant to his duties under this Agreement
and within the scope of his employment and shall be deemed a work made for hire;
and Executive agrees to assign, at the Company’s expense, and the Executive does
hereby assign, all of his right, title and interest in and to all such works,
copyrights, materials, inventions, ideas, discoveries, designs and improvements,
patentable or not, and any copyrights, letters patent, trademarks, trade
secrets, and similar rights, and the applications therefor, which may exist or
be issued with respect thereto to the Company Group. For the purposes of this
Section 8, “works” shall include all materials created during the Employment
Term, whether or not ever used by or submitted to the Company Group, including,
without limitation, any work which may be the subject matter of a copyright
under the United States copyright law. In addition to its other rights, the
Company Group may copyright any such work in any of their names in the United
States in accordance with the

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requirements of the United States copyright law and the Universal Copyright
Convention and any other convention or treaty to which the United States is or
may become a party. Notwithstanding the foregoing, Executive is hereby notified
and acknowledges that this Section 8(a) does not apply (i) to an invention which
qualifies fully under the provisions of Section 2870 of the California Labor
Code and/or (ii) to any work(s) which were developed entirely on Executive’s own
time without using the Company Group’s equipment, supplies, facilities, or trade
secrets, except as to any of these which are related to the Company Group’s
business or actual or demonstrably anticipated research or development of the
Company Group.
     (b)      Whenever the Company Group shall so request, whether during or
after the Employment Term, the Executive shall execute, acknowledge and deliver
all applications, assignments or other instruments; make or cause to be made all
rightful oaths; testify in all legal proceedings; communicate all known facts
which relate to such works, copyrights, inventions, ideas, discoveries, designs
and improvements; perform all lawful acts and otherwise render all such
assistance as the Company Group may deem necessary to apply for, obtain,
register, enforce and maintain any copyrights, letters patent and trademark
registrations of the United States or any foreign jurisdiction or under the
Universal Copyright Convention (or any other convention or treaty to which the
United States is or may become a party), or otherwise to protect the Company
Group’s interests therein, including any which the Company Group shall deem
necessary in connection with any proceeding or litigation involving the same.
The Company Group shall reimburse the Executive for all reasonable out-of-pocket
costs incurred by the Executive in testifying at the Company Group’s request or
in rendering any other assistance requested by the Company Group pursuant to
this Section 8 plus (if Executive is not then an employee of the Company Group)
reasonable compensation based on his prior compensation by the Company Group.
All registration and filing fees and similar expenses shall be paid by the
Company Group.
9.      Specific Performance; Audit.
     (a)      Executive acknowledges and agrees that the Company’s remedies at
law for a breach or threatened breach of any of the provisions of Sections 1(d),
6 or 7 would be inadequate and, in recognition of this fact, Executive agrees
that, in the event of such a breach

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or threatened breach, in addition to any remedies at law, the Company shall be
entitled to obtain equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction or any other
equitable remedy which may then be available. In addition, the Executive
recognizes that the services to be rendered by him under this Agreement are of a
special, unique, unusual, extraordinary and intellectual character involving
skill of the highest order and giving them peculiar value, the loss of which
cannot be adequately compensated in damages. Consequently, in the event of a
breach of this Agreement by the Executive, the Company shall be entitled to
injunctive relief or any other legal or equitable remedies. The Executive agrees
that the Company also may recover by appropriate action the amount of the actual
damage caused the Company by any failure, refusal or neglect of the Executive to
perform his agreements, representations and warranties contained in this
Agreement. The remedies provided in this Agreement shall be deemed cumulative
and the exercise of one shall not preclude the exercise of any other remedy at
law or in equity for the same event or any other event.
     (b)      Executive shall have the right to engage an independent accounting
firm of national reputation, mutually acceptable to Executive and Parent, to
audit the books and records of the Company upon which the calculation of the
annual bonus pursuant to Section 3(b)(i) is based. Executive shall pay all costs
and expenses of such audit unless such examination shows an underpayment of at
least five percent (5%) or more of the total amount payable (and at least $5,000
in actual dollar amount) during the period covered by the audit, in which case
the costs of the audit shall be paid by the Company. Executive hereby
acknowledges and agrees that neither Executive nor such independent accounting
firm may disclose any information relating to such audit to any other Person,
and may not use such information for any purpose other than for confirming or
determining the amount of Executive’s bonus pursuant to Section 3(b)(i) hereof.
10.      Resolution of Disputes.
     (a)      Except as provided in subsection (c) below, any controversy or
claim between or among the parties, relating to Executive’s employment with the
Company, including but not limited to those arising out of or relating to this
Agreement or any agreements or instruments relating hereto or delivered in
connection herewith and any claim based on or

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arising from an alleged tort, shall at the request of any party be determined by
arbitration. The arbitration shall be conducted in Los Angeles, California, in
accordance with the United States Arbitration Act (Title 9 of the United States
Code), notwithstanding any choice of law provision in this Agreement, and under
the National Rules for the Resolution of Employment Disputes of the American
Arbitration Association (“AAA”). The parties shall have the right to review and
approve a panel of prospective arbitrators supplied by AAA, but the arbitration
shall be conducted by a single arbitrator selected from the approved panel by
AAA or by stipulation of the parties. The arbitrator shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator. The
arbitrator shall be entitled to order specific performance of the obligations
imposed by this Agreement. Judgment upon the arbitration award may be entered in
any court having jurisdiction.
     (b)      All decisions of the arbitrator shall be final, conclusive and
binding on all parties and shall not be subject to judicial review. All costs of
the arbitration shall be borne by the party which is not the Prevailing Party
(as defined in Section 12(h) of this Agreement). If required, each party shall
advance 50% of any costs of the arbitration required to be advanced, subject to
the right of the non-Prevailing Party to reimbursement.
     (c)      Subsection (a) above does not prohibit a party from seeking and
obtaining injunctive relief from a court of competent jurisdiction pending the
outcome of arbitration. A party bringing an action for injunctive relief shall
not be deemed to have waived its right to demand arbitration of all disputes.
11.      Miscellaneous.
     (a)      Notices. All notices, requests, demands and other communications
(collectively, “Notices”) given pursuant to this Agreement shall be in writing,
and shall be delivered by personal service, courier, facsimile transmission or
by United States first class, registered or certified mail, addressed to the
following addresses:

             
 
  (i)   If to the Company, to:    
 
      Equity Marketing, Inc.    
 
      6330 San Vicente Blvd.    

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      Los Angeles, California 90048    
 
      Attn: General Counsel    
 
           
 
  (ii)   If to the Parent, to:    
 
      EMAK Worldwide, Inc.    
 
      6330 San Vicente Blvd.    
 
      Los Angeles, California 90048    
 
      Attn: General Counsel    
 
           
 
  (iii)   If to Executive, to:    
 
      Jonathan Banks    
 
           
 
           
 
      Los Angeles, CA 90049      
 
  (iv)   With a copy to:    
 
           
 
      Guth Christopher LLP    
 
      10866 Wilshire Blvd., Suite 1250    
 
      Los Angeles, California 90024    
 
      Attn: Theodore E. Guth, Esq.    

     Any Notice, other than a Notice sent by registered or certified mail, shall
be effective when received; a Notice sent by registered or certified mail,
postage prepaid return receipt requested, shall be effective on the earlier of
when received or the third day following deposit in the United States mails (or
on the seventh day if sent to or from an address outside the United States). Any
party may from time to time change its address for further Notices hereunder by
giving notice to the other party in the manner prescribed in this Section.
     (b)      Entire Agreement. This Agreement and the SAR Agreement
(collectively, the “Agreements”) contain the sole and entire agreement and
understanding of the parties with respect to the entire subject matter of the
Agreements, and any and all prior discussions, negotiations, commitments and
understandings, whether oral, written or implied, related to the subject matter
of the Agreements and any and all prior discussions, negotiations, commitments,
agreements (including the Prior Employment Agreement) and understandings,

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whether oral, written or implied, related thereto, are hereby extinguished and
superseded. No representations, oral or otherwise, express or implied, other
than those contained in the Agreements have been relied upon by any party to the
Agreements.
     (c)      Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
     (d)      Governing Law. This Agreement has been made and entered into in
the State of California and shall be construed in accordance with the laws of
the State of California.
     (e)      Captions. The various captions of this Agreement are for reference
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
     (f)      Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
     (g)      Business Day. If the last day permissible for delivery of any
notice under any provision of this Agreement, or for the performance of any
obligation under this Agreement, shall be other than a business day, such last
day for such notice or performance shall be extended to the next following
business day (provided, however, under no circumstances shall this provision be
construed to extend the date of termination of this Agreement).
     (h)      Attorneys’ Fees. If any action, proceeding or arbitration is
brought to enforce or interpret any provision of this Agreement, the Prevailing
Party shall be entitled to recover as an element of its costs, and not its
damages, its reasonable attorneys’ fees, costs and expenses. The “Prevailing
Party” is the party who would have been entitled to recover its costs under the
California Code of Civil Procedure had the action been maintained in the
Superior Court of California regardless of whether there is final judgment. A
party not entitled to recover its costs may not recover attorneys’ fees. No sum
for attorneys’ fees shall

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be counted in calculating the amount of a judgment for purposes of determining
whether a party is entitled to recover its costs or attorneys’ fees.
     (i)      Advice from Independent Counsel. The parties hereto understand
that this Agreement is legally binding and may affect such party’s rights. Each
party represents to the other that it has received legal advice from counsel of
its choice regarding the meaning and legal significance of this Agreement.
     (j)      Interpretation. Should any provision of this Agreement require
interpretation, it is agreed that any court or arbitrator interpreting or
construing the same shall not apply a presumption that the terms hereof shall be
more strictly construed against any Person by reason of the rule of construction
that a document is to be construed more strictly against the Person who itself
or through its agent prepared the same, it being agreed that all Parties have
participated in the preparation of this Agreement.
     (k)      Survival. The termination of the Executive’s employment hereunder
shall not affect the enforceability of Sections 1(d), 6, 7 and 8.
     (l)      Waiver of Jury Trial. IF NOTWITHSTANDING THE AGREEMENT THAT ALL
DISPUTES BE SUBMITTED TO BINDING ARBITRATION, A DISPUTE IS SUBMITTED TO A COURT,
EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY
MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY AND
ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS WRITTEN CONSENT TO A WAIVER OF TRIAL
BY JURY.

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EXECUTION COPY
     IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
on his own behalf or caused this Agreement to be executed on its behalf as of
the date first written above.

            EQUITY MARKETING, INC.
      By:   /S/TERESA L. TORMEY         Teresa L. Tormey,        EVP, General
Counsel and Secretary     

            EMAK WORLDWIDE, INC.
      By:   /S/TERESA L. TORMEY         Teresa L. Tormey,        EVP, General
Counsel and Secretary     

            EXECUTIVE:
      By:   /S/JONATHAN BANKS         Jonathan Banks   

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