10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

Commission file number 001-32337

DREAMWORKS ANIMATION SKG, INC.

(Exact name of registrant as specified in its charter)

Delaware	68-0589190
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)
1000 Flower Street Glendale, California	91201
(Address of principal executive offices)	(Zip code)

(818) 695-5000

(Registrants’ telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x      Accelerated filer  ¨      Non-accelerated filer  ¨      Smaller reporting company  ¨

(Do not check if a smaller reporting company)                                

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock: As of June 30, 2008, there were 80,568,821 shares of Class A common stock and 11,884,461 shares of Class B common stock of the registrant outstanding.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements—DreamWorks Animation SKG, Inc. (unaudited)	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	28
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 4.	Submission of Matters to a Vote of Security Holders	30
Item 6.	Exhibits	33
SIGNATURES		34
EXHIBIT INDEX		35

Unless the context otherwise requires, the terms “DreamWorks Animation,” the “Company,” “we,” “us” and “our” refer to DreamWorks Animation SKG, Inc., its consolidated subsidiaries, predecessors in interest, and the subsidiaries and assets and liabilities contributed to it by DreamWorks L.L.C. (“DreamWorks Studios”) on October 27, 2004 in connection with our separation from DreamWorks Studios, including Pacific Data Images, Inc. and its subsidiary, Pacific Data Images, LLC.

1

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2008			December 31, 2007
	(unaudited)
	(in thousands, except par value and share amounts)
Assets
Cash and cash equivalents	$	401,617		$	292,489
Trade accounts receivable, net of allowance for doubtful accounts		14,172			3,470
Receivable from Paramount, net of reserve for returns and allowance for doubtful accounts		84,266			272,647
Film costs, net		581,631			541,917
Prepaid expenses and other assets		33,049			47,609
Property, plant, and equipment, net of accumulated depreciation and amortization		96,070			86,772
Deferred taxes, net		50,039			48,664
Goodwill		34,216			34,216
Total assets	$	1,295,060		$	1,327,784
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable	$	8,959		$	3,169
Accrued liabilities		87,315			108,457
Payable to stockholder		48,166			68,371
Income taxes payable		20,131			31,651
Deferred revenue and other advances		52,391			24,561
Borrowings and other debt		70,059			70,059
Total liabilities		287,021			306,268
Commitments and contingencies
Minority interest		2,941			2,941
Stockholders’ equity:
Class A common stock, par value $.01 per share, 350,000,000 shares authorized, 94,696,219 and 93,547,321 shares issued, as of June 30, 2008 and December 31, 2007, respectively		947			935
Class B common stock, par value $.01 per share, 150,000,000 shares authorized, 11,884,461 and 12,984,461 shares issued and outstanding, as of June 30, 2008 and December 31, 2007, respectively		119			130
Additional paid-in capital		852,707			831,115
Retained earnings		556,355			502,763
Less: Class A Treasury common stock, at cost, 14,127,398 and 10,445,278 shares, as of June 30, 2008 and December 31, 2007, respectively		(405,030	)		(316,368	)
Total stockholders’ equity		1,005,098			1,018,575
Total liabilities and stockholders’ equity	$	1,295,060		$	1,327,784

See accompanying notes.

2

DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
	(in thousands, except per share amounts)
Revenues	$	140,787		$	222,471		$	297,354		$	316,199
Costs of revenues		75,168			110,645			170,918			164,124
Gross profit		65,619			111,826			126,436			152,075
Selling, general and administrative expenses		27,630			27,466			54,488			53,236
Operating income		37,989			84,360			71,948			98,839
Interest income, net		2,474			6,382			5,457			12,653
Other income, net		1,080			1,439			1,857			2,883
Increase in income tax benefit payable to stockholder		(8,010	)		(23,909	)		(17,440	)		(29,726	)
Income before income taxes		33,533			68,272			61,822			84,649
Provision for income taxes		6,040			6,494			8,230			7,471
Net income	$	27,493		$	61,778		$	53,592		$	77,178
Basic net income per share	$	0.30		$	0.61		$	0.59		$	0.75
Diluted net income per share	$	0.30		$	0.60		$	0.58		$	0.75
Shares used in computing net income per share
Basic		90,370			102,052			91,366			102,716
Diluted		90,788			102,466			91,615			103,105

See accompanying notes.

3

DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2008			2007
	(in thousands)
Operating activities
Net income	$	53,592		$	77,178
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and write off of film costs		158,931			154,908
Stock compensation expense		18,277			19,150
Depreciation and amortization		4,971			4,691
Revenue earned against deferred revenue and other advances		(42,084	)		(47,690	)
Deferred taxes, net		(1,375	)		(12,383	)
Change in operating assets and liabilities:
Trade accounts receivable		(10,702	)		(2,061	)
Receivable from Paramount		188,381			(25,390	)
Film costs		(196,643	)		(208,330	)
Prepaid expenses and other assets		15,239			(39,352	)
Accounts payable and accrued liabilities		(15,428	)		33,077
Payable to stockholder		(20,205	)		7,802
Income taxes payable, net		(11,538	)		18,872
Deferred revenue and other advances		75,553			41,394
Net cash provided by operating activities		216,969			21,866
Investing activities
Purchases of property, plant and equipment		(18,765	)		(1,370	)
Net cash used in investing activities		(18,765	)		(1,370	)
Financing Activities
Purchase of treasury stock		(88,662	)		(44,050	)
Other		(414	)		830
Net cash used in financing activities		(89,076	)		(43,220	)
Increase in cash and cash equivalents		109,128			(22,724	)
Cash and cash equivalents at beginning of period		292,489			506,304
Cash and cash equivalents at end of period	$	401,617		$	483,580
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes, net	$	21,076		$	724
Cash paid during the period for interest, net of amounts capitalized	$	567		$	85

See accompanying notes.

4

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Basis of Presentation

Business

The businesses and activities of DreamWorks Animation SKG, Inc. (“DreamWorks Animation” or the “Company”) include the development, production and exploitation of animated films and characters in the worldwide theatrical, home entertainment, television, merchandising and licensing and other markets. The Company’s films are distributed in theatrical, home entertainment and television markets on a worldwide basis by Paramount Pictures Corporation, a subsidiary of Viacom Inc., and its affiliates (collectively, “Paramount”) pursuant to an exclusive distribution agreement and a fulfillment services agreement through the later of (i) the Company’s delivery to Paramount of 13 new animated feature films and (ii) December 31, 2012, unless, in either case, terminated earlier in accordance with the terms of the agreements. The Company generally retains all other rights to exploit its films, including commercial tie-in and promotional rights with respect to each film, as well as merchandising, interactive, literary publishing, music publishing and soundtrack rights.

Basis of Presentation and Use of Estimates

The consolidated financial statements of the Company present the financial position, results of operations and cash flows of DreamWorks Animation and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited financial statements as of June 30, 2008 and for the three and six months ended June 30, 2008 and 2007 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, certain information and footnote disclosures normally included in comprehensive financial statements have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet as of December 31, 2007, was derived from audited financial statements.

These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 (the “2007 Form 10-K”).

The accompanying unaudited consolidated financial statements reflect all adjustments, consisting of only normal recurring items, which in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full year or for any future period.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including estimates of ultimate revenues and ultimate costs of film and television product, estimates of product sales that will be returned and the amount of receivables that ultimately will be collected, the potential outcome of future tax consequences of events that have been recognized in the Company’s financial statements, loss contingencies and estimates used in the determination of the fair value of stock options and other equity awards for stock-based compensation. Actual results could differ from those estimates. To the extent that there are material differences between these estimates and actual results, the Company’s financial condition or results of operations will be affected. Estimates are based on past experience and other assumptions that management believes are reasonable under the circumstances, and management evaluates these estimates on an ongoing basis.

Certain amounts in the prior period’s consolidated balance sheet, consolidated statement of cash flows and financial statement footnotes have been reclassified to conform to the current period’s presentation.

5

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued FAS No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 establishes a common definition of fair value to be used whenever GAAP requires (or permits) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. It also requires expanded disclosure about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. On February 12, 2008, the FASB issued FASB Staff Position No. FAS No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”) which defers the effective date for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually), to fiscal years beginning after November 15, 2008. In addition, in February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of FASB Statement No. 115” (“FAS 159”). FAS 159 expands the use of fair value accounting but does not affect existing standards that require assets or liabilities to be carried at fair value. Under FAS 159, a company may elect to use fair value to measure most financial assets and liabilities and any changes in fair value are recognized in earnings. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. The Company adopted both FAS 157 and FAS 159 on January 1, 2008 for its financial assets and liabilities and, in accordance with FSP 157-2, deferred the effective date for its nonfinancial assets and liabilities. The adoption of FAS 157 and FAS 159 had no impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued FAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51” (“FAS 160”). FAS 160 clarifies the classification in a company’s consolidated balance sheet and the accounting for and disclosure of transactions between the company and holders of noncontrolling interests. FAS 160 is effective for the Company January 1, 2009. Early adoption is not permitted. The Company does not expect the adoption of FAS 160 will have a material impact on its consolidated financial statements.

2. Film Costs

Film costs consist of the following (in thousands):

	June 30, 2008		December 31, 2007
	(unaudited)
In release, net of amortization	$	288,950	$	267,724
In production		230,727		239,450
In development		61,954		34,743
Total film costs	$	581,631	$	541,917

The Company anticipates that 55% and 89% of “in release” film costs as of June 30, 2008 will be amortized over the next 12 months and three years, respectively.

As of June 30, 2008, the Company has accrued participation and residuals costs totaling $39.8 million. The Company currently estimates that it will pay approximately $21.5 million of such costs in the next 12 months.

6

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	June 30, 2008		December 31, 2007
	(unaudited)
Employee compensation	$	32,456	$	54,675
Participations and residuals		39,842		37,275
Deferred rent		6,080		6,686
Other accrued liabilities		8,937		9,821
Total accrued liabilities	$	87,315	$	108,457

4. Deferred Revenue and Other Advances

Deferred revenue and other advances and the related amounts earned consist of the following (in thousands):

					Amounts Earned
	June 30, 2008		December 31, 2007		Three Months Ended June 30,				Six Months Ended June 30,
					2008		2007		2008		2007
	(unaudited)				(unaudited)
Home Box Office Inc., Advance	$	13,333	$	—	$	13,333	$	13,627	$	13,333	$	13,922
Strategic Alliance/Development Advance(1)		4,627		2,104		5,826		4,020		7,977		5,624
Deferred Revenue		10,498		5,594		9,674		17,485		9,983		17,595
Licensing Advances		20,863		13,185		313		5,852		1,322		7,760
Other Advances		3,070		3,678		4,557		4,557		5,108		4,557
Total deferred revenue and other advances	$	52,391	$	24,561

⁽¹⁾ Of the total amounts earned against the “Strategic Alliance/Development Advances,” $4.2 million and $1.6 million, respectively, for the three months ended June 30, 2008 and 2007, and $5.7 million and $1.8 million, respectively, for the six months ended June 30 , 2008 and 2007, were capitalized as an offset to film costs or property, plant and equipment.

5. Financing Arrangements

Credit Agreements. On June 24, 2008, the Company entered into a new revolving credit facility (“New Credit Facility”) with several banks pursuant to which the Company is permitted to borrow up to $125.0 million. The Company is required to pay a commitment fee at an annual rate of 0.375% on undrawn amounts. Interest on borrowed amounts is determined by reference to either the lending banks’ base rate plus 0.50% per annum or to LIBOR plus 1.50% per annum. Borrowings are secured by substantially all the Company’s assets. The New Credit Facility requires the Company to maintain a specified leverage ratio and, subject to specific exceptions, prohibits the Company from taking certain actions without the lenders’ consent, such as granting liens or entering into any merger or other significant transaction. The New Credit Facility terminates on June 24, 2013. As of June 30, 2008, there were no borrowings under the New Credit Facility.

7

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In connection with entering into the New Credit Facility, the Company terminated its prior $100 million revolving credit facility (“Prior Credit Facility”) and the Company did not incur any material termination penalties in connection with this termination.

Outstanding Financing. The following table summarizes the balances outstanding and other information associated with the Company’s various financing arrangements that were outstanding either at June 30, 2008 and\or December 31, 2007 (in thousands):

								Interest Cost
	Balance Outstanding				Maturity Date	Interest Rate as of June 30, 2008		Three Months Ended June 30,						Six Months Ended June 30,
	June 30, 2008		December 31, 2007					2008			2007			2008			2007
Animation Campus Financing(1)	$	73,000	$	73,000	October 2009	2.60	%	$	762		$	1,196		$	1,643		$	2,365
New Credit Facility	$	—		N/A	June 2013	0.375	%(2)	$	—	(2)		N/A		$	—	(2)		N/A
Prior Credit Facility(3)		N/A	$	—	N/A	N/A		$	180	(3)	$	382	(3)	$	372	(3)	$	760	(3)

⁽¹⁾ The entire amount of the obligation, $73.0 million, is due and payable in October 2009, bears interest primarily at 30-day commercial paper rates and is fully collateralized by the underlying real property. In connection with the adoption of FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities,” the special-purpose entity associated with this financing was consolidated by the Company as of December 31, 2003 and, as such, the balance of the obligation is presented on the consolidated balance sheets as $70.1 million of borrowings and other debt and a $2.9 million minority interest.

⁽²⁾ As of June 30, 2008, there was no debt outstanding under the New Credit Facility. The Company is required to pay a commitment fee of 0.375% per annum on undrawn amounts. Amounts associated with the commitment fee were immaterial for the three- and six-month periods ended June 30, 2008.

⁽³⁾ There was no debt outstanding under the Prior Credit Facility for the respective periods prior to its termination in June 2008. Under the Prior Credit Facility, the Company was required to pay a commitment fee of 0.75% on undrawn amounts.

As of June 30, 2008, the Company was in compliance with all applicable financial debt covenants.

Interest Capitalized to Film Costs. Interest capitalized to film costs during the three months ended June 30, 2008 and 2007 totaled $0.8 million and $2.3 million, respectively, and for the six months ended June 30, 2008 and 2007 totaled $1.6 million and $4.6 million, respectively.

8

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. Income Taxes

The provision for income taxes for the three and six months ended June 30, 2008 and 2007, respectively, differed from the amounts computed by applying the U.S. Federal statutory rate of 35% to income before income taxes and increase in income tax benefit payable to stockholder as a result of the following:

	Three Months Ended June 30,				Six Months Ended June 30,
	2008		2007		2008		2007
	(unaudited)
Provision for income taxes (excluding effects of Stockholder’s Tax Agreement)(1)
U.S. Federal statutory rate	35.0	%	35.0	%	35.0	%	35.0	%
U.S. state taxes, net of Federal benefit	2.2		2.1		2.0		1.9
Revaluation of deferred tax assets, net	(1.4	)	(3.3	)	(3.6	)	(4.2	)
Other	(2.0	)	(0.8	)	(1.0	)	(0.2	)
Total provision excluding effect of Stockholder’s Tax Agreement(1)	33.8	%	33.0	%	32.4	%	32.5	%
Effects of Stockholder’s Tax Agreement(1)
U.S. state taxes, net of Federal benefit	(1.1	)	(0.7	)	(1.2	)	(0.7	)
Revaluation of deferred tax assets, net	(18.9	)	(27.2	)	(21.5	)	(26.9	)
Other	0.7		1.9		0.7		1.6
Total effect of Stockholder’s Tax Agreement(1)	(19.3	)%	(26.0	)%	(22.0	)%	(26.0	)%
Total net provision for income taxes	14.5	%	7.0	%	10.4	%	6.5	%

⁽¹⁾ Stockholder’s Tax Agreement: As a result of a series of transactions entered into by affiliates controlled by a stockholder, the Company is obligated to remit to an affiliate of this stockholder 85% of any such cash savings in U.S. Federal income tax and California franchise tax and certain other related tax benefits.

The Company’s federal income tax returns for the tax years ended December 31, 2005 and December 31, 2006 are currently under examination by the Internal Revenue Service (“IRS”). The Company’s California Franchise tax returns for the years ended December 31, 2004 and 2005 are currently under examination by the Franchise Tax Board (“FTB”). The IRS has concluded its limited-scope audit of the Company’s federal income tax return for the period from October 24, 2004 through December 31, 2004 without any adjustments. All tax years since the Company’s separation from DreamWorks Studios on October 27, 2004 remain open to audit by relevant federal, state and local taxing jurisdictions.

7. Stockholders’ Equity

Class A Common Stock

Stock Repurchase Programs. In December 2007, the Company’s Board of Directors approved a stock repurchase program pursuant to which the Company was authorized to repurchase up to an aggregate of $150 million of its outstanding stock. From January 1, 2008 through June 30, 2008, the Company repurchased approximately 3.7 million shares of its outstanding Class A common stock for $88.2 million. In July 2008, the Company’s Board of Directors terminated the December 2007 share repurchase program and approved a new stock repurchase program pursuant to which the Company may repurchase up to an aggregate of $150 million of its outstanding stock.

9

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Class B Common Stock

Conversion of Class B Common Stock. In May 2008, David Geffen, a significant stockholder and member of the Company’s Board of Directors, converted 1,100,000 shares of the Company’s Class B common stock into an equal amount of shares of the Company’s Class A common stock. This transaction had no impact on the total amount of the Company’s shares outstanding.

8. Equity-Based Compensation

The Company recognizes stock-based compensation in accordance with the provisions of FASB Statement No. 123 (revised 2004), “Share-Based Payment” (“FAS 123R”). Under FAS 123R, the Company recognizes compensation costs for equity awards granted to its employees based on their grant-date fair value. Most of the Company’s equity awards contain vesting conditions dependent upon the completion of specified service periods. The Company has awarded some equity awards to senior management that are dependent upon the achievement of established sets of performance or market-based criteria. Compensation cost for service-based equity awards is recognized ratably over the vesting period. Compensation cost for performance-based awards is adjusted to reflect the probability of vesting.

The impact of stock options (including stock appreciation rights) and restricted stock awards on net income (excluding amounts capitalized) for the three- and six- month periods ended June 30, 2008 and 2007, respectively, was as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
	(unaudited)
Total equity-based compensation	$	8,583		$	9,595		$	18,277		$	19,150
Tax impact(1)		(2,901	)		(3,042	)		(5,922	)		(6,070	)
Reduction in net income, net of tax	$	5,682		$	6,553		$	12,355		$	13,080

⁽¹⁾ Tax impact is determined at the Company’s annual blended effective tax rate, excluding the effect of the Stockholder’s Tax Agreement (see Note 6).

Equity-based compensation cost capitalized as a part of film costs was $1.4 million and $0.9 million for the three-month periods ended June 30, 2008 and 2007, respectively, and $2.9 million and $1.6 million for the six-month periods ended June 30, 2008 and 2007, respectively.

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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following tables set forth the number and weighted average fair value of equity awards granted during the three- and six-month periods ended June 30, 2008 and 2007:

	Three Months Ended June 30,			Six Months Ended June 30,
	Number Granted	Weighted Average Fair Value		Number Granted	Weighted Average Fair Value
	(unaudited)
	(in thousands)			(in thousands)
2008
Stock appreciation rights	15	$	11.10	59	$	9.99
Restricted stock and restricted stock units	34	$	29.54	69	$	27.69
2007
Stock appreciation rights	17	$	12.67	34	$	11.95
Restricted stock and restricted stock units	25	$	29.83	51	$	28.23

As of June 30, 2008, the total compensation cost related to unvested equity awards granted to employees (excluding equity awards with performance objectives deemed not probable of achievement) but not yet recognized was approximately $62.5 million. This cost will be amortized on a straight-line basis over a weighted average life of 2.4 years.

9. Significant Customer and Segment Information

Significant Customer. Paramount represented 66.3% and 84.2% of total revenue for the three-month periods ended June 30, 2008 and 2007, respectively, and 73.5% and 86.6% for the six-month periods ended June 30, 2008 and 2007, respectively.

Revenue by Film.

The Company’s revenue by film consists of the following (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2008		2007		2008		2007
	(unaudited)
Kung Fu Panda	$	46,438	$	—	$	46,438	$	—
Shrek the Third		29,855		109,098		78,122		109,098
Bee Movie		25,533		—		74,455		—
Over the Hedge		5,390		26,856		9,502		59,929
Flushed Away		7,296		12,358		19,932		13,572
Film Library / Other(1)		26,275		74,159		68,905		133,600
	$	140,787	$	222,471	$	297,354	$	316,199

⁽¹⁾ Primarily includes film library revenue from Antz, Prince of Egypt, The Road to El Dorado, Chicken Run, Joseph: King of Dreams, Shrek, Spirit: Stallion of the Cimarron, Sinbad: Legend of the Seven Seas, Shrek 2, Shark Tale, Madagascar, and Wallace & Gromit: The Curse of the Were-Rabbit.

11

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. Commitments and Contingencies

Legal Proceedings. From time to time, the Company is involved in legal proceedings arising in the ordinary course of its business, typically intellectual property litigation and infringement claims related to the Company’s feature films, which could cause the Company to incur significant expenses or prevent the Company from releasing a film. The Company also has been the subject of patent and copyright claims relating to technology and ideas that it may use or feature in connection with the production, marketing or exploitation of the Company’s feature films, which may affect the Company’s ability to continue to do so. While the resolution of these matters cannot be predicted with certainty, the Company does not believe, based on current knowledge, that any existing legal proceedings or claims are likely to have a material adverse effect on its financial position, results of operations or liquidity.

11. Net Income Per Share

The following table sets forth the computation of basic and diluted net income per share (in thousands except per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
	(unaudited)
Numerator:
Net income	$	27,493		$	61,778		$	53,592		$	77,178
Denominator:
Weighted average common shares and denominator for basic calculation:
Weighted average common shares outstanding		92,386			104,541			93,382			105,205
Less: Unvested restricted stock		(2,016	)		(2,489	)		(2,016	)		(2,489	)
Denominator for basic calculation		90,370			102,052			91,366			102,716
Weighted average effects of dilutive equity-based compensation awards:
Employee stock options and stock appreciation rights		119			166			108			172
Restricted stock awards		299			248			141			217
Denominator for diluted calculation		90,788			102,466			91,615			103,105
Net income per share—basic	$	0.30		$	0.61		$	0.59		$	0.75
Net income per share—diluted	$	0.30		$	0.60		$	0.58		$	0.75

12

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth (in thousands) the weighted average number of options to purchase shares of common stock and stock appreciation rights, and shares of restricted common stock which were not included in the calculation of diluted per share amounts because they were anti-dilutive. In addition, the table sets forth the following weighted average number of equity awards subject to performance conditions which were also not included in the calculation of diluted net income per share because the number of shares that ultimately will be issued is contingent upon the Company’s performance against measures established for the performance period:

	Three Months Ended June 30,		Six Months Ended June 30,
	2008	2007	2008	2007
	(unaudited)
Options to purchase shares of common stock	1,204	1,263	1,270	1,253
Stock appreciations rights	2,461	1,290	2,446	1,299
Equity awards subject to performance conditions	1,849	1,849	1,849	1,849
Total	5,514	4,402	5,565	4,401

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This section and other parts of this Quarterly Report on Form 10-Q (the “Quarterly Report”) contain forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements. You should read the following discussion and analysis in conjunction with our unaudited consolidated financial statements and the related notes thereto contained elsewhere in this Quarterly Report, and our audited consolidated financial statements and related notes thereto, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Risk Factors” section included in our Annual Report on Form 10-K for the year ended December 31, 2007 (the “2007” Form 10-K”). We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (the “SEC”), including our 2007 Form 10-K and Current Reports on Form 8-K, before deciding to purchase, hold or sell our common stock.

Overview

Our Business and Distribution and Servicing Arrangements

Our business is primarily devoted to developing and producing computer-generated, or CG, animated feature films. Our films are distributed in theatrical, home entertainment and television markets on a worldwide basis by Paramount Pictures Corporation, a subsidiary of Viacom Inc., and its affiliates (collectively, “Paramount”) pursuant to an exclusive distribution agreement and a fulfillment services agreement. We generally retain all other rights to exploit our films, including commercial tie-in and promotional rights with respect to each film, as well as merchandising, interactive, literary publishing, music publishing and soundtrack rights. Please see Part I, Item 1 “Business—Distribution and Servicing Arrangements” in our 2007 Form 10-K for a discussion of our distribution and servicing arrangements with Paramount.

Our Revenues and Costs

Our feature films are the source of substantially all of our revenue. We derive revenue from the worldwide exploitation of our feature films in the following markets:

• Theatrical and Home Entertainment—Our films are distributed in the worldwide theatrical and home entertainment markets by Paramount, our distributor and fulfillment service provider. International results are generally reported to us by our distributor on a 30-day lag. Paramount uses film receipts to recover the distribution and marketing expenses it incurs for each film and to cover its 8% distribution fee. Accordingly, we only record revenue from the theatrical and home entertainment exploitation of our films to the extent it exceeds our distributor’s costs and fee, which may be several quarters after a film’s theatrical release.

• Television—Our films are distributed in the worldwide free and pay television markets by our distributor. Paramount licenses our films pursuant to output agreements and individual and package film agreements, which generally provide that the exhibitor pay a fee for each film exhibited during the specified license period for that film, which may vary according to the theatrical success of the film. The majority of our revenue from television licensing is based on predetermined rates and schedules that have been established as part of output arrangements between our distributor and various television licensees.

• Licensing/Merchandising—We generate royalty-based revenues from the licensing of our character and film elements to consumer product companies worldwide. Typically, these agreements provide us with a royalty based upon a percentage of net sales of the products. We also license our characters and storylines for use in conjunction with our promotional partners’ products or services. In exchange, we generally receive promotional fees as well as the additional marketing benefits from cross-promotional opportunities. Because these activities are not subject to our exclusive distribution agreement or fulfillment services agreement with Paramount, we receive payment of licensing and merchandising revenues directly from third parties.

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For a detailed description of our sources of revenues, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Revenues and Costs—Sources of Revenue” in our 2007 Form 10-K.

Our primary operating expenses include:

• Costs of Revenues—Under our distribution arrangements, our costs of revenues primarily include the amortization of capitalized production, overhead and interest costs, participation and residual costs and write-offs of amounts previously capitalized for films not expected to be released or released films not expected to recoup their capitalized costs. As the profitability for each film varies depending upon its individual projection of total revenue to be received from all sources and its amount of capitalized costs incurred, amortization of capitalized film costs as a percentage of film revenue may vary from period to period due to several factors, including: (i) changes in the mix of films earning revenue, (ii) changes in the estimate of any film’s estimated remaining total revenue to be received from all sources or capitalized costs and (iii) write-downs of film costs due to changes in the estimated fair value of unamortized film costs. Generally, our costs of revenues do not include distribution and marketing costs or third-party distribution and fulfillment services fees. Distribution and marketing costs would only be included in our costs of revenues to the extent that we caused our distributor to make additional expenditures in excess of agreed amounts. Exclusive of our distribution arrangements, our costs of revenues also include direct costs for sales commissions to outside third parties for the licensing and merchandising of our characters.

• Selling, General and Administrative Expenses—Our selling, general and administrative expenses consist primarily of employee compensation (including salaries, bonuses, stock compensation and employee benefits), rent, insurance and fees for professional services.

For a detailed description of our operating expenses, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Revenues and Costs—Costs of Revenues” and “—Selling, General and Administrative Expenses” in our 2007 Form 10-K.

Because our films are distributed in foreign countries, fluctuations in foreign currency exchange rates can affect our business, results of operations and cash flow. For a detailed discussion of our foreign currency risk, please see “Quantitative and Qualitative Disclosures About Market Risk” under Part I, Item 3 of this Quarterly Report.

Seasonality

Our revenues fluctuate based upon the timing of our films’ theatrical and home entertainment releases and the recoupment position of our distributor on a film-by-film basis, which varies depending upon a film’s overall performance. For example, our distributor reported revenue for both our second quarter 2008 and 2007 releases, Kung Fu Panda (released on June 6, 2008) and Shrek the Third (released on May 18, 2007), during the same quarter as their respective theatrical release as a result of each film’s strong domestic theatrical performance. Conversely, for Bee Movie, which was theatrically released on November 2, 2007, no revenue was reported to us by our distributor until the first quarter of 2008, because our distributor is entitled to first recover its marketing and distribution costs (including its distribution fee) before we recognize any revenue generated from the exploitation of the film. Furthermore, revenues related to the licensing of our character and film elements are influenced by seasonal consumer purchasing behavior and the timing of animated theatrical releases. As a result, our annual or quarterly operating results for any period are not necessarily indicative of results to be expected for future periods.

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Results of Operations

Overview of Financial Results

The following table sets forth, for the periods presented, certain data from our unaudited consolidated statements of income. This information should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report.

	Three Months Ended June 30,											Six Months Ended June 30,
	2008			2007			$ Change			% Change		2008			2007			$ Change			% Change
	(unaudited)
	(in millions, except percentages and per share data)
Revenues	$	140.8		$	222.5		$	(81.7	)	(36.7	)%	$	297.4		$	316.2		$	(18.8	)	(5.9	)%
Costs of revenues		75.2			110.6			35.4		32.0	%		170.9			164.1			(6.8	)	(4.1	)%
Selling, general and administrative expenses		27.6			27.5			(0.1	)	(0.4	)%		54.5			53.2			(1.3	)	(2.4	)%
Operating income		38.0			84.4			(46.4	)	(55.0	)%		72.0			98.9			(26.9	)	(27.2	)%
Interest income, net		2.4			6.4			(4.0	)	(62.5	)%		5.4			12.6			(7.2	)	(57.1	)%
Other income, net		1.1			1.4			(0.3	)	(21.4	)%		1.8			2.9			(1.1	)	(37.9	)%
Increase in income tax benefit payable to stockholder		(8.0	)		(23.9	)		15.9		66.5	%		(17.4	)		(29.7	)		12.3		41.4	%
Income before income taxes		33.5			68.3			(34.8	)	(51.0	)%		61.8			84.7			(22.9	)	(27.0	)%
Provision for income taxes		6.0			6.5			0.5		7.7	%		8.2			7.5			(0.7	)	(9.3	)%
Net income	$	27.5		$	61.8		$	(34.3	)	(55.5	)%	$	53.6		$	77.2		$	(23.6	)	(30.6	)%
Diluted net income per share	$	0.30		$	0.60		$	(0.30	)	(50.0	)%	$	0.58		$	0.75		$	(0.17	)	(22.7	)%
Diluted shares used in computing diluted net income per share(1)		90.8			102.5			N/A		11.4	%		91.6			103.1			N/A		11.2	%

⁽¹⁾ During the three- and six-month periods ended June 30, 2008, and the year ended December 31, 2007, we repurchased a total of 3.5 million, 3.7 million and 10.1 million shares of our Class A common stock, respectively.

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Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

The following table sets forth (in millions), for the periods presented, our revenues by film. This information should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report.

⁽¹⁾ For each period shown, “Current year theatrical releases” consists of revenues attributable to films released during the current year, “Prior year theatrical releases” consists of revenues attributable to films released during the immediately prior year and “All Other” consists of revenues attributable to films released during all previous periods, including our library titles, as well as revenues from any other sources.

Revenues. For the three months ended June 30, 2008, our revenue was $140.8 million, a decrease of $81.7 million, or 36.7%, as compared to $222.5 million for the three months ended June 30, 2007. As illustrated in the revenue chart above, the decrease in revenue in the second quarter of 2008 as compared to the second quarter of 2007 was primarily related to the comparative performance of the films comprising the “Current year theatrical releases” and “All Other” categories. Kung Fu Panda, our most recent theatrical release, while contributing 33.0% of the total revenue for the second quarter of 2008, contributed approximately $63 million less revenue than the higher-grossing Shrek the Third for the second quarter of 2007, which, in addition, was released in the domestic theatrical market approximately two weeks earlier in the second quarter of 2007 than Kung Fu Panda in the comparable quarter of 2008. In addition, as a result of $25.5 million of net revenue reported by our current distributor in the second quarter of 2007 associated with the conclusion of the transition of our home entertainment fulfillment services from our prior distributor and, to a lesser extent, an increase in home entertainment revenue for both Shrek and Shrek 2 in connection with Shrek the Third’s theatrical release, the revenue generated by the films comprising our “All Other” category during the three months ended June 30, 2008 was approximately $35 million less than that for the three months ended June 30, 2007.

Revenue for the quarter ended June 30, 2008, was comprised of amounts earned by a variety of films. Kung Fu Panda, our most recent theatrical release and single greatest source of revenue for the quarter, contributed $46.4 million earned in both the domestic theatrical market and through ancillary revenue sources. In addition to merchandising and licensing revenue, ancillary revenue for Kung Fu Panda includes non-recurring revenue associated with the completion of a strategic relationship that accounted for slightly less than half of the film’s total revenue for the second quarter of 2008. Bee Movie, our 2007 fourth quarter release, generated $25.5 million of revenue primarily attributable to the international home entertainment market and Shrek the Third earned an additional $29.9 million of revenue earned primarily in the domestic pay television market. Over the Hedge, Flushed Away and Wallace & Gromit contributed additional revenue of $5.4 million, $7.3 million and $5.3 million, respectively, earned primarily in the international television markets. Our other properties, including our library of titles, contributed revenues totaling $21.0 million earned across a variety of worldwide markets.

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For the second quarter of 2007, Shrek the Third, the single greatest source of revenue, contributed $109.1 million of revenue earned in the domestic theatrical market and ancillary markets (which includes merchandising and licensing). The remaining revenue for the quarter was contributed by a variety of films across several markets: Over the Hedge contributed $26.9 million of revenue earned largely in the domestic pay television market, Flushed Away generated revenue in a variety of markets totaling $12.4 million, Wallace & Gromit generated revenue of $14.7 million attributable primarily to the worldwide home entertainment market and our other films, including our library titles, contributed revenues totaling $59.4 million generated in a variety of markets. In addition, during the second quarter of 2007, the transition of our home entertainment fulfillment services from Universal Studios Inc. (“Universal Studios”) to Paramount was substantially completed. As a result, the net revenue reported to us by our distributor for this quarter for several of our films, including Wallace & Gromit and some of our library titles, increased by $25.5 million as a result of a reduction of certain previously recorded estimates of home entertainment product returns and marketing costs.

Costs of Revenues. Costs of revenues decreased by $35.4 million, or 32.0%, to $75.2 million for the three months ended June 30, 2008. Cost of revenues (the primary component of which is film amortization costs) as a percentage of film revenue was 53.4% for the three months ended June 30, 2008 and 49.7% for the three months ended June 30, 2007. While the amortization rate for the film comprising each quarter’s respective “Current year theatrical releases” category was comparable, the increase in amortization of film costs as a percentage of film revenue for the three months ended June 30, 2008 was primarily due to the combined higher rate of amortization for our 2008 “Prior year theatrical releases” (Shrek the Third and Bee Movie) for the three months ended June 30, 2008, as compared to the amortization rate for our 2007 “Prior year theatrical releases” (Over the Hedge and Flushed Away) during the comparable period of 2007. This increase in amortization rates between the periods was slightly offset by the lower rates of amortization for the “All Other” category during the quarter ended June 30, 2008 as compared to the quarter ended June 30, 2007.

Selling, General and Administrative Expenses. Selling, general and administrative expenses (including stock compensation expense) totaled $27.6 million for the three months ended June 30, 2008, and remained relatively unchanged from $27.5 million for the three months ended June 30, 2007. This slight aggregate increase related to higher employee-related costs and increased corporate travel offset by a $1.0 million decrease in stock compensation expense. The decrease in stock compensation expense was due to additional expense recorded in the second quarter of 2007 associated with the increase in the anticipated level of achievement of certain performance-based equity awards granted to certain executive officers partially offset by additional expense associated with the continued growth in the number of equity awards granted to the overall employee base. As of June 30, 2008, the total compensation cost related to unvested equity awards granted to employees (excluding equity awards with performance objectives deemed not probable of achievement) but not yet recognized was approximately $62.5 million. This cost will be amortized on a straight-line basis over a weighted average life of 2.4 years.

Operating Income. Operating income for the three months ended June 30, 2008 was $38.0 million compared to $84.4 million for the comparable period of 2007. The decrease of $46.4 million in operating income for the three months ended June 30, 2008 was primarily due to the stronger performance of Shrek the Third during the three months ended June 30, 2007 as compared to our most current theatrical release, Kung Fu Panda, during the comparable period of 2008 and lower revenue contributed by our “All Other” category quarter-over-quarter primarily as a result of the additional revenue reported by our distributor in the second quarter of 2007 as a result of the completion of the transition of home entertainment fulfillment services from our prior distributor.

Interest Income, Net. For the three months ended June 30, 2008, total net interest income was $2.4 million, a decrease of $4.0 million or 62.5% from $6.4 million for the same period of 2007. The decrease in net interest income for the second quarter of 2008 as compared to the second quarter of 2007 was mainly due to lower average rates of interest earned on cash and cash equivalents and, to a lesser extent, lower average balances of cash and cash equivalents largely due to the stock repurchases made throughout 2007 and continuing in first quarter of 2008.

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Interest expense capitalized to production film costs was $0.8 million and $2.3 million for the three months ended June 30, 2008 and 2007, respectively. The $1.5 million decrease between the periods was primarily due to the decrease in amount of interest expense eligible for capitalization during the second quarter of 2008 because of the repayment of debt in 2007.

Other Income, Net. For the three months ended June 30, 2008 and 2007, total other income was $1.1 million and $1.4 million respectively. Other income in both years consisted entirely of income recognized in connection with preferred vendor arrangements.

Increase in Income Tax Benefit Payable to Stockholder. As a result of a partial increase in the tax basis of our tangible and intangible assets attributable to transactions entered into by affiliates controlled by a stockholder (“Tax Basis Increase”), we may pay reduced tax amounts to the extent we generate sufficient taxable income in the future. As discussed below in “—Critical Accounting Policies and Estimates—Provision for Income Taxes,” we are obligated to remit to such affiliates 85% of any cash savings in U.S. Federal income tax and California franchise tax and certain other related tax benefits, subject to repayment if it is determined that these savings should not have been available to us. For the quarter ended June 30, 2008, we recorded $9.4 million in net tax benefits associated with the Tax Basis Increase as a reduction in the provision for income taxes and recorded an expense of $8.0 million representing 85% of these recognized benefits to increase income tax benefit payable to stockholder.

During the quarter ended June 30, 2007, we recognized $28.1 million in net tax benefits associated with the Tax Basis Increase as an increase in the provision for income taxes and recorded an expense of $23.9 million representing 85% of these recognized benefits to increase the income tax benefit payable to stockholder for the three months ended June 30, 2007.

Provision for Income Taxes. For the three months ended June 30, 2008 and 2007, we recorded a provision for income taxes of $6.0 million and $6.5 million, respectively, or an effective tax rate of 14.5% and 7.0%, respectively. The quarter-over-quarter change in the effective tax rate is driven by changes in the valuation allowance required against the deferred tax assets. Our effective tax rate for both periods was lower than the 35% statutory federal rate because of the decrease in our valuation allowance for deferred tax assets primarily resulting from the increase in the net tax benefits recognized from the Tax Basis Increase as described above. However, when our provision for income taxes is combined with the amounts associated with the Increase in Income Tax Benefit Payable to Shareholder (see above), the combined percentages remain relatively consistent between the three months ended June 30, 2008 and June 30, 2007, at 33.8% and 33.0%, respectively.

Net Income. Net income for the three months ended June 30, 2008 was $27.5 million, or $0.30 per diluted share, compared to a net income of $61.8 million, or $0.60 net income per diluted share, in the corresponding period in 2007.

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Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

The following table sets forth (in millions), for the periods presented, our revenues by film. This information should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report.

⁽¹⁾ For each period shown, “Current year theatrical releases” consists of revenues attributable to films released during the current year, “Prior year theatrical releases” consists of revenues attributable to films released during the immediately prior year and “All Other” consists of revenues attributable to films released during all previous periods, including our library titles, as well as revenues from any other sources.

Revenues. For the six months ended June 30, 2008, our revenues totaled $297.4 million, a decrease of $18.8 million, or 5.9%, as compared to $316.2 million for the six months ended June 30, 2007. As illustrated in the chart above, the slight change in revenues for the first six months of 2008 as compared to the corresponding period in 2007 is a function of the lower revenues contributed by the films comprising the “Current year theatrical releases” and “All Other” categories being largely offset by the stronger performance of the “Prior year theatrical releases” category. Kung Fu Panda, while performing strongly enough in the domestic theatrical market to enable our distributor to report revenue during the same quarter as its respective theatrical release, contributed approximately $63 million less revenue than the higher-grossing Shrek the Third in the first half of 2007, which, moreover, was released in the domestic theatrical market approximately two weeks earlier in the second quarter of 2007 than Kung Fu Panda in the comparable period of 2008. In addition, the “All Other” category benefited in the first six months of 2007 from $25.5 million of net revenue reported by our current distributor in the second quarter of 2007 associated with the conclusion of the transition of our home entertainment fulfillment services from our prior distributor. Nevertheless, the stronger performance of our 2008 “Prior year theatrical releases” (Shrek the Third and Bee Movie) as compared to 2007’s “Prior year theatrical releases” (Over the Hedge and Flushed Away) largely offset the unfavorable revenue comparisons for the “Current year theatrical releases” and “All Other” categories.

Several films contributed to our revenue totaling $297.4 million for the six-month period ended June 30, 2008. Kung Fu Panda, our most recent release, contributed $46.4 million of revenue associated with its domestic theatrical release and ancillary revenue sources. In addition to merchandising and licensing revenue, ancillary revenue for Kung Fu Panda included non-recurring revenue associated with the completion of a strategic relationship that accounted for slightly less than half of the film’s total revenue for the six months ended June 30, 2008. Our “Prior year theatrical releases,” Shrek the Third and Bee Movie, generated a total of $152.6 million primarily attributable to the worldwide theatrical, home entertainment and ancillary markets (including non-recurring revenue associated with strategic relationship that accounted for slightly less than one-third of

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Bee Movie’s total revenue for the six months ended June 30, 2008) and Over the Hedge, Flushed Away and Wallace & Gromit contributed additional revenue of $9.5 million, $19.9 million and $13.4 million, respectively, earned primarily in the international television and worldwide home entertainment markets. Our other properties, including our library of titles, contributed revenues totaling $55.6 million earned across a variety of worldwide markets.

For the six months ended June 30, 2007, a variety of films across several markets contributed to our total revenue of $316.2 million: Shrek the Third, the single greatest source of revenue, contributed $109.1 million of revenue earned primarily in the domestic theatrical market and ancillary markets (which includes merchandising and licensing); Over the Hedge contributed $59.9 million of revenue earned largely in the worldwide home entertainment and domestic pay television markets; Flushed Away contributed $13.6 million earned across a variety of markets; Wallace & Gromit contributed $24.1 million earned primarily in worldwide television and worldwide home entertainment markets; and our other films, including our library of titles, contributed revenues totaling $109.5 million, respectively, generated in a variety of markets. In addition, during the second quarter of 2007, the transition of our home entertainment fulfillment services from Universal Studios to Paramount was substantially completed. As a result, the net revenue reported to us by our distributor for the six months ended June 30, 2007 for several of out titles, including Wallace & Gromit and some of our library titles, increased by $25.5 million as a result of a reduction of certain previously recorded estimates of home entertainment product returns and marketing costs.

Costs of Revenues. Costs of revenues increased by $6.8 million, or 4.1%, to $170.9 million for the six months ended June 30, 2008. Cost of revenues (the primary component of which is film amortization costs) as a percentage of film revenue was 57.5% for the six months ended June 30, 2008 and 51.9% for the six months ended June 30, 2007. While the amortization rates for each period’s respective “Current year theatrical release” (Kung Fu Panda and Shrek the Third) were largely consistent, the increase in amortization of film costs as a percentage of film revenue was principally because the combined amortization rate for our 2008 “Prior year theatrical releases” for the six months ended June 30, 2008, was higher than that for 2007 “Prior year theatrical releases” (Over the Hedge and Flushed Away) during the comparable period of 2007. This increase in amortization rates between the six-month periods was slightly offset by the combined lower rate of amortization for the “All Other” category during the six months ended June 30, 2008 as compared to the six months ended June 30, 2007.

Selling, General and Administrative Expenses. Total selling, general and administrative expenses (which includes stock compensation expense) increased by $1.3 million to $54.5 million for the six months ended June 30, 2008 from $53.2 million for the six months ended June 30, 2007. This 2.4% aggregate increase related to higher employee-related costs and increased corporate travel partially offset by a $0.8 million decrease in stock compensation expense. The decrease in stock compensation expense period-over-period is primarily due to the additional expense recorded during the six-month period ended June 30, 2007 associated with the increase in the expected level of achievement of certain performance-based awards granted to executive officers as offset by the current year additional expense associated with the increase in the number of equity awards granted to the overall employee base.

Operating Income. Operating income for the six months ended June 30, 2008 was $72.0 million, a decrease of $26.9 million, or 27.2%, compared to that of $98.9 million for the comparable period of 2007. The decrease in operating income for the six-month period ended June 30, 2008 was largely as a result of the combined impact of the performance of our current theatrical release, Kung Fu Panda, as compared to the superior performance of Shrek the Third during the comparable period of 2007 and the additional revenue reported by our distributor in the second quarter of 2007 as a result of the completion of the transition of home entertainment fulfillment services from our prior distributor. This combined impact was partially offset by the stronger performance of the “Prior year theatrical releases” category during the six months ended June 30, 2008 as compared to the comparable period of 2007.

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Interest Income, Net. For the six months ended June 30, 2008, total net interest income was $5.4 million, a decrease of $7.2 million or 57.1% from $12.6 million for the same period of 2007. The decrease in net interest income for the first six months of 2008 as compared to the first six months of 2007 was due to a combination of lower average rates of interest earned on cash and cash equivalents and lower average balances of cash and cash equivalents largely due to the stock repurchases made throughout 2007 and continuing in first quarter of 2008.

Interest expense capitalized to production film costs was $1.6 million and $4.6 million for the six months ended June 30, 2008 and 2007, respectively. The $3.0 million decrease between the periods was primarily due to the decrease in amount of interest expense eligible for capitalization during the first six months of 2008 because of the repayment of debt in 2007.

Other Income, Net. For the six months ended June 30, 2008 and 2007, total other income was $1.8 million and $2.9 million respectively. Other income in both years consisted entirely of income recognized in connection with preferred vendor arrangements.

Increase in Income Tax Benefit Payable to Stockholder. As a result of the Tax Basis Increase, we are obligated to remit to the stockholder’s affiliate 85% of any such cash savings in U.S. Federal income tax and California franchise tax and certain other related tax benefits, subject to repayment if it is determined that these savings should not have been available to us. For the six months ended June 30, 2008, we recorded $20.5 million in net tax benefits associated with the Tax Basis Increase as a reduction in the provision for income taxes and recorded an expense of $17.4 million representing 85% of these recognized benefits to increase income tax benefit payable to stockholder.

For the six months ended June 30, 2007, we recognized $34.9 million in net tax benefits associated with the Tax Basis Increase as a reduction in the provision for income taxes and recorded an expense of $29.7 million representing 85% of these recognized benefits to increase income tax benefit payable to stockholder.

Provision for Income Taxes. For the six months ended June 30, 2008 and 2007, we recorded a provision for income taxes of $8.2 million and $7.5 million, respectively, or an effective tax rate of 10.4% and 6.5%, respectively. The period-over-period change in the effective tax rate is driven by changes in the valuation allowance required against the deferred tax assets. Our effective tax rate for both periods was lower than the 35% statutory federal rate because of the decrease in our valuation allowance for deferred tax assets primarily resulting from the increase in the net tax benefits recognized from the Tax Basis Increase as described above. However, when our provision for income taxes is combined with the amounts associated with the Increase in Income Tax Benefit Payable to Shareholder (see above), the combined percentages remain relatively consistent at 32.4% and 32.5% for the six months ended June 30, 2008 and June 30, 2007, respectively.

Net Income. Net income for the six months ended June 30, 2008 was $53.6 million, or $0.58 per diluted share, compared to a net income of $77.2 million, or $0.75 net income per diluted share, in the corresponding period in 2007.

Financing Arrangements

On June 24, 2008, we entered into a new $125.0 million revolving credit facility (“New Credit Facility”) with several banks. In connection therewith, we terminated our prior $100.0 million revolving credit facility (“Prior Credit Facility”). For further discussion of both our New Credit Facility and our Prior Credit Facility see Note 5 to the unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report.

Other than entering into our New Credit Facility and terminating our Prior Credit Facility, there have been no material changes during the period covered by this Quarterly Report to the financing arrangements specified in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operation” included in our 2007 Form 10-K.

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As of June 30, 2008, we were in compliance with all applicable financial debt covenants.

For a more detailed description of our various financing arrangements, please see Note 5 to the unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report and the “Management’s Discussion and Analysis of Financial Condition and Results of Operation” section of our 2007 Form 10-K.

Liquidity and Capital Resources

Current Financial Condition

Our primary operating needs are to fund the production and development costs of our films, make participation and residual payments, fund selling, general and administrative costs and capital expenditures. Our operating activities for the six months ended June 30, 2008 generated adequate cash to meet our operating needs. For the next 12 months, we expect that cash on hand and cash from operations will be sufficient to satisfy our anticipated cash needs for working capital, stock repurchases and technology capital expenditures. In the event that these cash flows are insufficient, we expect to be able to draw funds from our revolving credit facility to meet these needs. Over the next two years we expect to spend approximately $85 million to expand and make general improvements to our animation facility located in Glendale, California in order to accomodate general business growth, including 3D expansion. We are still currently evaluating the various alternatives for the funding of this project, including using existing cash on hand and several financing options.

As of June 30, 2008, we had cash and cash equivalents totaling $401.6 million, a $109.1 million increase compared to $292.5 million at December 31, 2007. Components of this change in cash for the six months ended June 30, 2008, as well as for the six months ended June 30, 2007, are provided below in more detail.

Operating Activities

Net provided by operating activities for the six months ended June 30, 2008 and 2007 is a follows (in thousands):

	2008		2007
Net cash provided by operating activities	$	216,969	$	21,866

Net cash provided by operating activities for the first six months of 2008 was primarily attributable to the collection of revenue associated with Shrek the Third’s worldwide home entertainment release, Bee Movie’s worldwide theatrical release, worldwide television revenue for Madagascar and, to a lesser extent, the collection of worldwide television and home entertainment revenues for our other films, including Over the Hedge, Shrek 2 and Shrek. The operating cash provided by the collection of revenues during the first six months of 2008 was offset by $37.6 million paid to an affiliate of a stockholder related to tax benefits realized in 2007 from the Tax Basis Increase, $21.1 million paid (net of refunds) for estimated federal and state income taxes and $44.4 million paid related to employee bonus plans. The operating cash provided by revenues was also partially offset by film production and development spending and participation and residual payments. Net cash provided by operating activities for the first six months of 2007 was $21.9 million and was primarily attributable to collection of revenue associated with Over the Hedge’s worldwide home entertainment sales and, to a lesser extent, the collection of worldwide television and home entertainment revenues for Madagascar, SharkTale and Shrek 2. The operating cash provided during the first six months of 2007 was offset by $22.0 million payment to an affiliate of a stockholder related to tax benefits realized in 2006 from the Tax Basis Increase, film production and development spending and participation and residual payments. In addition, during the first six months of 2007 we made payments totaling $46.9 million to our distributor for distribution costs that had been incurred and appropriately reflected in our consolidated financial statements, but not deducted from remittances, in prior years.

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Investing Activities

Net cash used in investing activities for the six months ended June 30, 2008 and 2007 is a follows (in thousands):

	2008			2007
Net cash used in investing activities	$	(18,765	)	$	(1,370	)

Net cash used in investing activities for the six months ended June 30, 2008 and 2007 was primarily related to the investment in property, plant and equipment. The increase in the investment in property, plant and equipment for the six months ended June 30, 2008 as compared to the same period of 2007 is related to new strategic technology initiatives and alliances as well as the expansion of our Glendale campus.

Financing Activities

Net cash used in financing activities for the six months ended June 30, 2008 and 2007 is as follows (in thousands):

	2008			2007
Net cash used in financing activities	$	(89,076	)	$	(43,220	)

Net cash used in financing activities for both six-month periods ended June 30, 2008 and 2007 was primarily comprised of repurchases of our Class A common stock.

Contractual Obligations

There have been no material changes during the period covered by this Quarterly Report to the contractual obligations specified in the table of contractual obligations included in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operation” included in our 2007 Form 10-K.

As of June 30, 2008 we had non-cancelable talent commitments totaling approximately $26.9 million that are payable over the next five years.

Critical Accounting Policies and Estimates

Our significant accounting policies are outlined in Note 2 to the audited consolidated financial statements contained in our 2007 Form 10-K. We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”). In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities including estimates of ultimate revenues and costs of film and television product, estimates of product sales that will be returned, the potential outcome of future tax consequences of events that have been recognized in our financial statements and estimates used in the determination of the fair value of stock options and other equity awards for the determination of stock-based compensation. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We believe that the application of the following accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management.

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Revenue Recognition

We recognize revenue from the distribution of our animated feature films when earned and reported to us by our distributor, as reasonably determinable in accordance with the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants Statement of Position 00-2, “Accounting by Producers or Distributors of Films” (the “SOP”).

Pursuant to our distribution and servicing arrangements, we recognize revenue net of reserves for returns, rebates and other incentives after our distributor has (i) retained a distribution fee of 8.0% of revenue (without deduction for any distribution and marketing costs or third-party distribution and fulfillment services fees) and (ii) recovered all of its distribution and marketing costs with respect to our films on a title-by-title basis. International results are generally reported to us by our distributor one month in arrears. Because a third party is the principal distributor of our films, in accordance with the SOP, the amount of revenue that we recognize from our films in any given period is dependent on the timing, accuracy and sufficiency of the information we receive from our distributor. As typical in the film industry, our distributor may make adjustments in future periods to information previously provided to us that could have a material impact on our operating results in later periods. Furthermore, management may, in its judgment, make material adjustments to the information reported by our distributor to ensure that revenues are accurately reflected in our financial statements. To date, our distributor has not made subsequent, nor has management made, material adjustments to information provided by our distributor and used in the preparation of our historical financial statements.

Revenue from the theatrical exhibition of films is recognized at the later of when a film is exhibited in theaters or when revenue is reported by our distributor.

Revenue from the sale of home video units is recognized at the later of when product is made available for retail sale and when video sales to customers are reported to us by third parties, such as fulfillment service providers or distributors. In addition, we and our distributor provide for future returns of home video product and for customer programs and sales incentives. We and our distributor calculate these estimates by analyzing a combination of historical returns, current economic trends, projections of consumer demand for our product and point-of-sale data available from certain retailers. Based on this information, a percentage of each sale is reserved, and in the case of product returns, provided that the customer has the right of return. Customers are currently given varying rights of return, from 15% up to 100%. However, although we and our distributor allow various rights of return for our customers, we do not believe that these rights are critical in establishing return estimates, because other factors, such as our historical experience with similar types of sales, information we receive from retailers and our assessment of the product’s appeal based on domestic box office success and other research, are more important to the estimation process.

Revenue from both free and pay television licensing agreements is recognized at the later of the time the production is made available for exhibition in those markets or it is reported to us by our distributor.

Revenue from licensing and merchandising is recognized when the associated films have been released and the criteria for revenue recognition have been met. In most instances, this generally results in the recognition of revenue in periods when royalties are reported by licensees or cash is received.

Film Costs Amortization

Once a film is released, the amount of film costs, participations and residual costs relating to that film are amortized and included in costs of revenues in the proportion that the revenue during the period for each film (“Current Revenue”) bears to the estimated remaining total revenue to be received from all sources (“Ultimate Revenue”) as of the beginning of the current fiscal year under the individual-film-forecast-computation method in accordance with the SOP. The amount of film costs that is amortized each period will therefore depend on the ratio of Current Revenue to Ultimate Revenue for each film for such period. We make certain estimates and

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judgments of Ultimate Revenue to be received for each film based on information received from our distributor and our knowledge of the industry. Historically, there has been a close correlation between the success of a film in the domestic box office market and the film’s success in the international theatrical and worldwide home entertainment markets. In general, films that achieve domestic box office success also tend to experience success in the home entertainment and international theatrical markets. While we continue to believe that domestic box office performance is a key indicator of a film’s potential performance in these subsequent markets, we do not believe that it is the only factor influencing the film’s performance in these markets and recognize that a range of other market and film-specific factors can have a significant impact.

Estimates of Ultimate Revenue and anticipated participation and residual costs are reviewed periodically and are revised if necessary. A change in any given period to the Ultimate Revenue for an individual film will result in an increase or decrease to the percentage of amortization of capitalized film costs relative to a previous period. An increase in estimate of Ultimate Revenues will lower the percentage rate of amortization while, conversely, a decrease in the estimate of Ultimate Revenue will raise the percentage rate of amortization. In addition, we evaluate film production costs for impairment each reporting period on a film-by-film basis in accordance with the requirements of the SOP. If estimated remaining revenue is not sufficient to recover the unamortized film costs for that film, the unamortized film costs will be written down to fair value determined using a net present value calculation. The cost of any such write downs are reflected in costs of revenues.

Stock-Based Compensation

We record employee stock-based compensation in accordance with the provisions of FAS No. 123 (revised 2004), “Share-Based Payment” (“FAS 123R”) which requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

The fair value of stock option grants with either service-based or performance-based vesting criteria is estimated on the date of grant using the Black-Scholes option-pricing model. Some of the primary input assumptions of the Black-Scholes option-pricing model are volatility, dividend yield, the weighted average expected option term and the risk-free interest rate. As permitted by and outlined in Staff Accounting Bulletin (“SAB”) 107, “Share-Based Payment” (“SAB 107”) released by the SEC, we apply the “simplified” method of calculating the weighted average expected term. The simplified method defines the weighted average expected term as being the average of the weighted average of the vesting period and contractual term of each stock option granted. Given our lack of sufficient historical exercise data for stock option grants and as permitted under SAB 110, “Use of a Simplified Method,” which was released by the SEC in December 2007, we continue to use the simplified method for calculating the expected term. Once sufficient information regarding exercise behavior, such as historical exercise data or exercise information from external sources, becomes available, we will be required to utilize another method to determine the weighted average expected term. In addition, in accordance with SAB 107, the estimated volatility incorporates both historical volatility and the implied volatility of publicly traded options. As required by FAS 123R, management made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest.

For equity awards of stock options to purchase and restricted shares of our common stock that contain certain performance-based measures, compensation costs are adjusted to reflect the estimated probability of vesting. For equity awards of stock appreciation rights to purchase and restricted shares of our common stock which contain a market-based condition (such as vesting based upon stock-price appreciation), we use a Monte-Carlo simulation option-pricing model to determine the award’s grant-date fair value. The Monte-Carlo simulation option-pricing model takes into account the same input assumptions as the Black-Scholes model as outlined above, however, it also further incorporates into the fair-value determination the possibility that the market condition may not be satisfied and impact of the possible differing stock price paths. Compensation costs related to awards with a market-based condition will be recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided.

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Estimates of the fair value of stock options are not intended to predict actual future events or the value ultimately realized by employees who receive stock option awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by us under FAS 123R. Changes to our underlying stock price or satisfaction of performance criteria for performance-based awards granted to employees could significantly affect compensation expense to be recognized in future periods.

Provision for Income Taxes

We account for income taxes pursuant to FAS No. 109, “Accounting for Income Taxes” (“FAS 109”). Under the asset and liability method of FAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FAS 109, the effect on deferred tax assets and liabilities of a change in tax rates or a change in tax status is recognized in income in the period that includes the enactment date. We record a valuation allowance to reduce our deferred income tax assets to the amount that is more likely than not to be realized. In evaluating our ability to recover our deferred income tax assets, management considers all available positive and negative evidence, including our operating results, ongoing prudent and feasible tax-planning strategies and forecasts of future taxable income.

At the time of our separation from DreamWorks Studios, affiliates controlled by a stockholder entered into a series of transactions that resulted in a partial increase in the tax basis of the Company’s tangible and intangible assets (previously defined above as the Tax Basis Increase). The Tax Basis increase was $1.61 billion, resulting in a potential tax benefit to us of approximately $595.0 million that is expected to be realized over 15 years if we generate sufficient taxable income. The Tax Basis Increase is expected to reduce the amount of tax that we may pay in the future to the extent we generate taxable income in sufficient amounts in the future. We are obligated to remit to our stockholder’s affiliate 85% of any such cash savings in U.S. Federal income tax and California franchise tax and certain other related tax benefits, subject to repayment if it is determined that these savings should not have been available to us.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”), which became effective for us on January 1, 2007. FIN 48 sets out the use of a single comprehensive model to address uncertainty in tax positions and clarifies the accounting for income taxes by establishing the minimum recognition threshold and a measurement attribute for tax positions taken or expected to be taken in a tax return in order to be recognized in the financial statements. We continue to follow the practice of recognizing interest and penalties related to income tax matters as part of the provision for income taxes.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements please see Note 1 to the unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market and Exchange Rate Risk

For quantitative and qualitative disclosures about our interest rate, foreign currency, and credit risks, please see Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” of our 2007 Form 10-K. Exposure to our interest rate, foreign currency and credit risks have not changed materially since December 31, 2007.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the second quarter to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accurately recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal controls over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

See discussion of Legal Proceedings in Note 10 to the unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report.

Item 1A. Risk Factors

Information concerning certain risks and uncertainties appears in Part I, Item 1A “Risk Factors” of the Company’s 2007 Form 10-K. You should carefully consider these risks and uncertainties before making an investment decision with respect to shares of our Class A common stock. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

During the period covered by this Quarterly Report, there have been no material changes from the risk factors previously disclosed in the Company’s 2007 Form 10-K or filings subsequently made with the SEC, except for the risk factor “We could be adversely affected by strikes and other union activity” included in our 2007 Form 10-K, which is updated as follows:

We could be adversely affected by strikes and other union activity.

A strike by one or more of the unions that provide personnel essential to the production of our feature films could delay or halt our ongoing production activities. Along with the major U.S. film studios, we employ members of IATSE on many of our productions. We are currently subject to collective bargaining agreements with IATSE, the Local 839 of IATSE (the Animation Guild and Affiliated Optical Electronic and Graphic Arts), the Local 700 of IATSE (the Motion Picture Editors Guild) and SAG. The collective bargaining agreements with IATSE (including our agreements with Local 700 and Local 839 of IATSE) expire in July 2009, respectively. The collective bargaining agreement with SAG expired in June 2008 and, as of the date of filing of this Quarterly Report on Form 10-Q, the parties have not entered into a replacement agreement. We may also become subject to additional collective bargaining agreements. A strike by SAG or any other halt or delay, depending on the length of time involved, could cause a delay of the release date of our feature films and thereby could adversely affect the revenue that the films generate. In addition, strikes by unions with which we do not have a collective bargaining agreement (such as the recent strike by the Writers Guild of America) can have adverse effects on the entertainment industry in general and, thus, indirectly on us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table shows Company repurchases of its Class A common stock for the three months ended June 30, 2008.

	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plan or Program(1)
April 1–April 30, 2008	185,431	$	25.52	185,431	$	61,830,000
May 1–May 31, 2008	—		N/A	—	$	61,830,000
June 1–June 30, 2008	—		N/A	—	$	61,830,000
Total	185,431	$	25.52	185,431

⁽¹⁾ On December 17, 2007, the Company disclosed that its Board of Directors had approved a new stock repurchase program. Under this program, the Company was authorized to repurchase up to an aggregate of $150 million of its outstanding Class A common stock. In July 2008, the Company’s Board of Directors terminated the December 2007 share repurchase program and approved a new stock repurchase program pursuant to which the Company may repurchase up to an aggregate of $150 million of its outstanding stock.

Items 3 is not applicable and has been omitted.

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Item 4. Submission of Matters to a Vote of Security Holders

On May 7, 2008, the Company held its Annual Meeting of stockholders. The agenda items for such meeting are shown below along with the vote of the Company’s Class A and Class B common stock with respect to such agenda items.

1. Elections of 12 directors to serve for the ensuing year or until their successors are duly elected and qualified.

	Votes Cast For	Votes Withheld
Jeffrey Katzenberg	241,068,265	18,249,092
Roger A. Enrico	259,064,275	307,748
Harry “Skip” Brittenham	258,873,703	498,320
Lewis. W Coleman	257,639,281	1,732,742
Thomas Freston	259,135,526	236,496
Judson C. Green	258,951,546	420,476
David Geffen	241,127,252	18,244,770
Mellody Hobson	259,068,819	303,205
Michael J. Montgomery	259,108,877	263,146
Nathan Myhrvold	259,066,156	305,866
Margaret C. Whitman	254,176,559	5,195,464
Karl M. von der Heyden	259,063,858	308,165

2. Approval of an amendment to the Company’s Restated Certificate of Incorporation to increase the maximum number of directors from 12 to 15.

	Number of Votes
Votes for	259,008,950
Votes against	347,311
Votes abstain	15,761
Broker non-votes	0

3. Approval of an amendment to the Company’s Restated Certificate of Incorporation to change the composition of the Nominating and Governance Committee.

	Number of Votes
Votes for	259,136,379
Votes against	174,090
Votes abstain	61,552
Broker non-votes	0

4. Approval of the adoption of the 2008 Omnibus Incentive Compensation Plan.

	Number of Votes
Votes for	243,566,973
Votes against	5,822,793
Votes abstain	1,330,281
Broker non-votes	8,651,975

5. Approval of the adoption of the 2008 Annual Incentive Plan.

	Number of Votes
Votes for	247,029,697
Votes against	2,347,258
Votes abstain	28,758
Broker non-votes	8,651,976

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6. Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered accounting firm for the year ending December 31, 2008.

	Number of Votes
Votes for:	259,281,415
Votes against:	61,848
Votes abstained:	28,758
Broker non-votes	0

Item 5. Other Information.

Transition of Roger Enrico to Non-executive Chairman Status

On July 24, 2008, the Company’s Board of Directors approved the transition of Roger Enrico, the Company’s executive Chairman of the Board, to non-executive Chairman status. As a result, the Company and Mr. Enrico have entered into a letter agreement dated July 24, 2008 which specifies that, except as specifically set forth in the letter agreement, his former employment agreement, dated October 25, 2007, has been terminated and provides for the treatment of outstanding equity awards previously granted to Mr. Enrico. The letter agreement generally provides that any unvested equity awards as of July 24, 2008 will continue to vest in accordance with their terms provided that Mr. Enrico remains a director until October 23, 2009. If Mr. Enrico remains a director until October 23, 2009 or he ceases to be a director prior to October 23, 2009 for any reason other than voluntary resignation, these awards will automatically vest as of such date (in the case of time-vested awards) or will continue to vest in accordance with their terms and dependent upon the achievement of specified performance criteria (in the case of performance-vested awards) and will remain exercisable for the remainder of the term of the grant. The letter agreement also provides for the treatment of stock options or stock appreciation rights that were vested as of July 24, 2008 or that become vested on or prior to October 23, 2009.

The foregoing description of the letter agreement is qualified in its entirety by reference to such agreement, which is attached as Exhibit 10.3 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Amended and Restated Employment Agreement with Lewis W. Coleman

On July 23, 2008, the Company’s Compensation Committee voted to approve an amended and restated employment agreement between the Company and Lewis W. Coleman (the “Restated Agreement”). The Restated Agreement amends and restates in its entirety the Company’s previous agreement with Mr. Coleman dated as of October 25, 2007 (the “Prior Agreement”).

Term. The Restated Agreement extends the term of Mr. Coleman’s employment to December 31, 2011.

Title. Pursuant to the Restated Agreement, Mr. Coleman’s title will remain President of the Company. In addition, Mr. Coleman is currently serving as the Company’s Chief Financial Officer.

Salary and Annual Incentive Awards. Under the Restated Agreement, Mr. Coleman will have an annual base salary of $1,262,000. As provided in the Prior Agreement, the Restated Agreement also provides that Mr. Coleman will receive an annual equity grant with a grant-date value of $500,000, in lieu of additional salary. In addition, subject in all instances to the discretion of the Company’s Compensation Committee, Mr. Coleman will continue to be eligible to receive annual cash or equity incentive awards with a target value of $1,000,000. The actual incentive awards received will depend on the Company’s performance.

Long-Term Equity Incentive Awards. As provided in the Prior Agreement, Mr. Coleman will continue to be eligible, subject to annual approval by the Compensation Committee, to receive annual equity incentive awards of restricted stock units (“RSUs”) and stock appreciation rights (or such other form of equity-based compensation as the Compensation Committee may determine) with a target grant-date value of $2,750,000.

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In addition to the compensation described above, Mr. Coleman is eligible for certain other benefits (such as reimbursement of business expenses).

Termination Events. As provided in the Prior Agreement, the Restated Agreement further provides that the Company may terminate Mr. Coleman’s employment during the employment period with or without cause (as defined in the Restated Agreement) and Mr. Coleman may terminate his employment for good reason (as defined in the Restated Agreement).

If the Company terminates Mr. Coleman’s employment other than for cause, incapacity or death, or Mr. Coleman terminates employment for good reason, the Company will generally continue his base salary (including the value of any equity awards made in lieu of salary) and benefits until expiration of the term of the Restated Agreement. Mr. Coleman will also receive an annual cash amount equal to the average annual bonuses that have been paid to him during the three immediately preceding years until the expiration of the employment agreement term. In addition, all equity-based compensation held by Mr. Coleman will generally accelerate vesting (with respect to grants having performance-based vesting criteria, on the basis that any target goals have been achieved) and remain exercisable for the remainder of the term of the grant. In addition, Mr. Coleman’s employment agreement provides that, if he is terminated prior to the Company making annual equity grants in 2008, he will be entitled to receive one additional grant of each of the following items: (i) an equity grant in lieu of an annual cash bonus (if no cash bonuses have been paid) at the target amount of $1,000,000, and (ii) an equity grant with a grant-date value of $2,750,000 in lieu of a long-term equity incentive award.

In the event that Mr. Coleman dies or becomes disabled during the term, the Restated Agreement provides for the receipt of continued salary and other benefits for a specified term. The Restated Agreement also provides, with respect to outstanding equity awards granted on or after January 1, 2009, that Mr. Coleman will be entitled to receive or exercise a percentage of each award determined base on the length of time he was employed prior to termination (in the case of awards having performance-based vesting criteria, subject to attainment of the applicable performance goals) and Mr. Coleman will receive credit for the shorter of (A) an additional year of service or (B) 50% of the remaining term of the Restated Agreement. The exercisable portion of any award will remain exercisable for the remaining term of the grant.

With respect to awards made before January 1, 2009, the Restated Agreement provides that, if Mr. Coleman’s employment terminates for any reason (including death or disability but excluding termination for cause or voluntary resignation without good reason), all of Mr. Coleman’s unvested awards will accelerate vesting (with respect to grants having performance-based criteria, subject to the achievement of any applicable performance goals), and remain exercisable for the remainder of the term of the grant.

Following the end of the term of the Restated Agreement (provided Mr. Coleman’s employment has not earlier terminated), the Restated Agreement provides that Mr. Coleman will not be required to perform any additional services for the awards granted to him to become fully vested, exercisable and nonforfeitable, provided that any such awards will continue to be subject to the achievement of any applicable performance goals. All options and other similar awards will remain exercisable for the remaining original term of the grant.

The Restated Agreement continues to provide (as did the Prior Agreement) that Mr. Coleman’s outstanding unvested equity awards granted before January 1, 2009 will become vested and exercisable (in the case of performance-vested awards, on the basis of achievement of target goals) upon a change in control (as defined in the Restated Agreement), and will remain exercisable for the remainder of the grant term. With respect to awards granted on or after January 1, 2009, the Restated Agreement provides that such awards will become vested and exercisable (in the case of performance-vested awards, on the basis of achievement of target goals) if Mr. Coleman is involuntarily terminated or he terminates for good reason within 12 months following a change in control. In addition, if Mr. Coleman is involuntarily terminated or he terminates for good reason within 12 months following a change in control, the Restated Agreement provides that the cash severance payments to him (as described above with respect to his base salary and annual cash incentive award) will continue for the greater of (i) the remaining term of the Restated Agreement or (ii) two years.

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If Mr. Coleman’s employment is terminated by the Company for cause, he will not be entitled to any equity-based compensation that has not already vested, although he will be entitled to payment for any unpaid base salary and any additional non-contingent cash compensation earned prior to termination.

Miscellaneous. The Company has agreed to indemnify Mr. Coleman to the fullest extent permitted by law against any claims or losses arising in connection with his service to the Company or any affiliate. In addition, the Company will indemnify Mr. Coleman, on a fully grossed-up basis, for any tax imposed by Section 4999 of the Code on “excess parachute payments” (as defined in Section 280G of the Code) in connection with certain changes in control; provided, however, that if the “excess parachute payments” are no more than 10% greater than the amount that could be paid without causing tax liability under Section 4999 then the payments to Mr. Coleman will be reduced such that no tax liability is incurred. If any payment due to Mr. Coleman is subject to a six-month delay pursuant to Section 409A of the Code, the Company will pay interest on such delayed payments. Mr. Coleman has agreed to non-solicitation and confidentiality provisions in the respective Restated Agreement. In certain instances (e.g., the treatment of Mr. Coleman’s outstanding equity award upon a change in control), if any other Company executive officer is entitled to more favorable treatment upon the occurrence of such event than provided in the Restated Agreement, Mr. Coleman will be entitled to be treated similarly.

As provided in the Prior Agreement, certain RSU awards granted to Mr. Coleman will automatically vest on December 31, 2008, although Mr. Coleman has agreed not to transfer any shares issued to him from such awards until the earliest of (i) December 31, 2011, (ii) the originally scheduled vesting date of such awards, (iii) 30 days following his death and (iv) the date the RSUs would have otherwise accelerated in accordance with the Restated Agreement.

The foregoing description of the Restated Agreement is qualified in its entirety by reference to the Restated Agreement, which is attached as Exhibit 10.4 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Item 6. Exhibits

Exhibit Number	Description
3.1	Certificate of Amendment of Restated Certificate of Incorporation of the Company (as filed June 20, 2008).
3.2	Restated Certificate of Incorporation of the Company (as amended through June 20, 2008).
4.1	Restated Certificate of Incorporation of the Company (filed as Exhibit 3.2 hereto).
10.1	Nonexclusive Aircraft Sublease Agreement dated as of June 11, 2008 by and between DreamWorks Animation SKG, Inc. and M&JK Dream LLC, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 13, 2008.
10.2	Credit Agreement dated as of June 24, 2008 among DreamWorks Animation SKG, Inc. and the lenders party thereto, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 27, 2008.
10.3	Letter Agreement dated as of July 24, 2008 by and between the Company and Roger Enrico.
10.4	Amended and Restated Employment Agreement dated as of July 24, 2008 by and between the Company and Lewis W. Coleman.
31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DREAMWORKS ANIMATION SKG, INC.
Date: July 29, 2008	By:	/s/    LEWIS W. COLEMAN
	Name:	Lewis W. Coleman
	Title:	President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description
3.1	Certificate of Amendment of Restated Certificate of Incorporation of the Company (as filed June 20, 2008).
3.2	Restated Certificate of Incorporation of the Company (as amended through June 20, 2008).
4.1	Restated Certificate of Incorporation of the Company (filed as Exhibit 3.2 hereto).
10.1	Nonexclusive Aircraft Sublease Agreement dated as of June 11, 2008 by and between DreamWorks Animation SKG, Inc. and M&JK Dream LLC, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 13, 2008.
10.2	Credit Agreement dated as of June 24, 2008 among DreamWorks Animation SKG, Inc. and the lenders party thereto, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 27, 2008.
10.3	Letter Agreement dated as of July 24, 2008 by and between the Company and Roger Enrico.
10.4	Amended and Restated Employment Agreement dated as of July 24, 2008 by and between the Company and Lewis W. Coleman.
31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-3.1

Exhibit 3.1

CERTIFICATE OF AMENDMENT

OF

RESTATED CERTIFICATE OF INCORPORATION

OF

DREAMWORKS ANIMATION SKG, INC.

DreamWorks Animation SKG, Inc., a Delaware corporation (the “Corporation”), does hereby certify as follows:

1. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on July 13, 2004 and the Restated Certificate of Incorporation (the “Restated Certificate”) was filed with the Secretary of State of the State of Delaware on October 25, 2004.

2. The Restated Certificate is hereby amended by striking out Section 1(a) of Article VI and by substituting the following in lieu thereof:

“SECTION 1. Board of Directors. (a) The business and affairs of the Corporation shall be managed by or under the direction of the Board, the exact number of directors comprising the entire Board to be not less than three nor more than fifteen (subject to any rights of the holders of Preferred Stock to elect additional directors under specified circumstances) as determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board. As used in this Restated Certificate of Incorporation, the term “entire Board” means the total number of directors that the Corporation would have if there were no vacancies or unfilled newly created directorships.”

3. The Restated Certificate is hereby amended by striking out Section 5(a) of Article VI and by substituting the following in lieu thereof:

“SECTION 5. Composition of Certain Committees of the Board. (a) Until the earlier of the Independence Date (as defined below) and the date that no shares of Class B Stock shall remain outstanding, the nominating and corporate governance committee of the Board shall be composed solely of (i) the director then in office who was designated as the JK Designee under the Stockholder Agreement, (ii) the director then in office who was designated as the DG Designee under the Stockholder Agreement (in each case for so long as the JK Designee and the DG Designee, as applicable, shall be entitled to remain on the Board in accordance with the Stockholder Agreement) and (iii) a director duly appointed by the Board. As used herein, the term “Independence Date” shall mean the date the Corporation, in the opinion of counsel to the Corporation, shall be required by law or the rules of any applicable securities exchange to have a nominating and corporate governance committee comprised solely of “independent directors” as defined by the requirements of law or such securities exchange.”

4. The foregoing amendments to the Restated Certificate have been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, I, Katherine Kendrick, General Counsel and Secretary of DreamWorks Animation SKG, Inc., have executed this Certificate of Amendment as of the 9th day of June, 2008.

/s/ Katherine Kendrick

Name:  Katherine Kendrick

Title:     General Counsel and Secretary

EX-3.2

Exhibit 3.2

The following constitutes the entire text of the Company’s Restated Certificate of Incorporation, including the amendments thereto that became effective on June 20, 2008 upon the Company’s filing of its Certificate of Amendment of Restated Certificate of Incorporation of DreamWorks Animation SKG, Inc. (the “Amendment”).

RESTATED CERTIFICATE OF INCORPORATION

OF

DREAMWORKS ANIMATION SKG, INC.

The corporation was incorporated under the name “DreamWorks Animation, Inc.” by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on July 13, 2004. This Restated Certificate of Incorporation of the corporation, which both restates and further amends the provisions of the corporation’s Certificate of Incorporation, was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware and by the written consent of its sole stockholder in accordance with Section 228 of the General Corporation Law of the State of Delaware. The Certificate of Incorporation of the corporation is hereby amended and restated to read in its entirety as follows:

ARTICLE I

Name

The name of this corporation (hereinafter the “Corporation”) is DreamWorks Animation SKG, Inc.

ARTICLE II

Address; Registered Agent

The address of the Corporation’s registered office in the State of Delaware, is Capitol Services, Inc., 615 South Dupont Highway, Dover, Kent County, Delaware. The name of the Corporation’s registered agent at such address is Capitol Services, Inc.

ARTICLE III

Purpose

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

ARTICLE IV

Capital Stock

SECTION 1. Authorized Capital Stock. The total number of shares of capital stock that the Corporation shall have authority to issue is six hundred million and one (600,000,001) shares, consisting of three hundred fifty million (350,000,000) shares of Class A Common Stock, par value of $0.01 per share (“Class A Stock”), one hundred fifty million (150,000,000) shares of Class B Common Stock, par value $0.01 per share (“Class B Stock”), one (1) share of Class C Common Stock, par value $0.01 per share (“Class C Stock” and, together with the Class A Stock and the Class B Stock, “Common Stock”), and one hundred million (100,000,000) shares of Preferred Stock, par value of $0.01 per share (“Preferred Stock”). Subject to Sections 4(c) and 4(d) of this Article IV, the number of authorized shares of any of the Class A Stock, the Class B Stock, the Class C Stock or the Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto), and no vote of the holders of any of the Class A Stock, Class B Stock, Class C Stock or Preferred Stock voting separately as a class shall be required therefor. Upon this Restated Certificate of Incorporation of the Corporation becoming effective pursuant to the DGCL (the “Effective Time”), each share of the Corporation’s common stock, par value $0.01 per share (the “Old Common Stock”), issued and outstanding immediately prior to the Effective Time, shall be automatically reclassified as and converted into one share of Class B Stock. Any stock certificate that, immediately prior to the Effective Time, represented shares of Old Common Stock will, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent the same number of shares of Class B Stock.

SECTION 2. Common Stock. (a) Except as otherwise provided in this Restated Certificate of Incorporation, the Class A Stock, the Class B Stock and the Class C Stock shall have the same rights and privileges and shall rank equally and share ratably as to all matters.

(b) Subject to Section 2(c) of this Article IV, and subject to the provisions of law and the terms of any outstanding Preferred Stock, dividends or other distributions with respect to the Class A Stock, the Class B Stock and the Class C Stock shall be made in an equal amount per share, at such times and in such amounts as may be determined by the board of directors of the Corporation (the “Board”) and declared out of any funds

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lawfully available therefor, and shares of Preferred Stock of any series shall not be entitled to share therein except as otherwise expressly provided in the resolution or resolutions of the Board providing for the issue of such series. Dividends and other distributions with respect to the Class A Stock, the Class B Stock and the Class C Stock shall be payable only when, as and if declared by the Board.

(c) Subject to the provisions of law and the terms of any outstanding Preferred Stock, if at any time a dividend or other distribution with respect to the Class A Stock, Class B Stock or Class C Stock is to be paid in shares of Class A Stock or Class B Stock or any other securities of the Corporation or any other corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust or legal entity (“Person”) (hereinafter sometimes called a “share distribution”), such share distribution shall be declared and paid only as follows:

(i) a share distribution consisting of shares of Class A Stock (or Convertible Securities that are convertible into, exchangeable for or evidence the right to purchase shares of Class A Stock) with respect to shares of Class A Stock and Class C Stock and, on an equal per share basis, shares of Class B Stock (or Convertible Securities that are convertible into, exchangeable for or evidence the right to purchase shares of Class B Stock) with respect to shares of Class B Stock; and

(ii) subject to Section 2(g) of this Article IV, a share distribution consisting of shares of any class or series of securities of the Corporation or any other Person other than Class A Stock, Class B Stock or Class C Stock (and other than Convertible Securities that are convertible into, exchangeable for or evidence the right to purchase shares of Class A Stock, Class B Stock or Class C Stock), on the basis of a distribution of identical securities, on an equal per share basis, with respect to shares of Class A Stock, Class B Stock and Class C Stock; provided, however, that if such share distribution consists of shares of any class or series of securities of the Corporation or any Subsidiary of the Corporation not formed for the purpose of circumventing Section 2(g) of this Article IV, then it shall be declared and paid on the basis of a distribution of one class or series of securities with respect to shares of Class A Stock and another class or series of securities with respect to shares of Class B Stock and another class or series of securities with respect to shares of Class C Stock, and the securities so distributed (and, if applicable, the securities into which the distributed securities are convertible, or for which they are exchangeable, or which the distributed securities evidence the right to purchase) shall differ with respect to, but solely with respect to, their relative voting rights and related differences in conversion and share distribution provisions, and all such differences shall be identical to the corresponding differences in voting rights, conversion and share distribution provisions between the Class A Stock, the Class B Stock and the Class C Stock, so as to preserve the relative voting rights of each Class as in effect immediately prior to such share distribution, and such distribution shall be made on an equal per share basis.

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As used herein, the term “Subsidiary” means, when used with respect to any Person, (i) a corporation in which such Person and/or one or more Subsidiaries of such Person, directly or indirectly, owns capital stock having a majority of the total voting power in the election of directors (“Voting Power”) of all outstanding shares of all classes and series of capital stock of such corporation entitled generally to vote in such election (“Voting Stock”); and (ii) any other Person (other than a corporation) in which such Person and/or one or more Subsidiaries of such Person, directly or indirectly, has (x) a majority ownership interest or (y) the power to elect or direct the election of a majority of the members of the governing body of such first-named Person.

As used herein, the term “Convertible Securities” shall mean any securities of the Corporation (other than any class of Common Stock) that are convertible into, exchangeable for or evidence the right to purchase any class of Common Stock, whether upon conversion, exercise or exchange, pursuant to anti-dilution provisions of such securities or otherwise.

(d) If the Corporation shall in any manner subdivide or combine the outstanding shares of Class A Stock, Class B Stock or Class C Stock, the outstanding shares of the other classes of Common Stock shall be proportionally subdivided or combined in the same manner and on the same basis as the outstanding shares of Class A Stock, Class B Stock or Class C Stock, as the case may be, that have been subdivided or combined so as to preserve the relative aggregate Voting Power of the outstanding shares of each class and the relative proportion of the equity of the Corporation represented by the outstanding shares of each class and the conversion rights of the outstanding shares of each class, immediately prior to the transaction giving rise to an adjustment pursuant to this paragraph.

(e) Upon the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, subject to any preferential or other amounts to be distributed to the holders of the Preferred Stock and any other class or series of stock then outstanding, the holders of Class A Stock, Class B Stock and Class C Stock shall be entitled to receive all the assets of the Corporation available for distribution to its stockholders ratably as a single class in proportion to the number of shares held by them.

(f)

(i) Each share of Class B Stock and each share of Class C Stock may at any time be converted by the record holder thereof into one fully paid and nonassessable share of Class A Stock. Shares of Class A Stock may be converted into shares of Class B Stock only as set forth in the proviso to subparagraph (vii) of this subsection (f) and in subparagraph (ix) of this subsection (f). Except as set forth in subparagraphs (vii) and (viii) of this subsection (f) and the proviso to Section 3.02 of the Stockholder Agreement, dated as of October 27, 2004, among the Corporation, DWA Escrow LLLP, M&J K B Limited Partnership, M&J K

4

Dream Limited Partnership, The JK Annuity Trust, The MK Annuity Trust, Katzenberg 1994 Irrevocable Trust, DG-DW L.P., DW Investment II, Inc., Jeffrey Katzenberg, David Geffen and Paul Allen (the “Stockholder Agreement”), the conversion right set forth in the first sentence of this subparagraph (i) shall be exercised by the surrender of the certificate representing such share of Class B Stock or Class C Stock to be converted to the Corporation at any time during normal business hours at the principal executive offices of the Corporation, or if an agent for the registration of transfer of shares of Class B Stock or Class C Stock is then duly appointed and acting (said agent being hereinafter called the “Transfer Agent”), then at the office of the Transfer Agent, accompanied by a written notice of the election by the record holder thereof to convert and (if so required by the Corporation or the Transfer Agent) by instruments of transfer, in form satisfactory to the Corporation and to the Transfer Agent, duly executed by such holder or such holder’s duly authorized attorney, and together with any necessary transfer tax stamps or funds therefor, if required pursuant to subparagraph (v) of this subsection (f).

(ii) As promptly as practicable after the surrender for conversion (or deemed surrender, as set forth in the proviso to Section 3.02 of the Stockholder Agreement) of a certificate or certificates representing shares of Class B Stock or Class C Stock in the manner provided in paragraph (i) of this subsection (f), or the automatic conversion of a share or shares of Class A Stock, Class B Stock or Class C Stock as set forth in subparagraphs (vii), (viii) and (ix) of this subsection (f), and the payment in cash of any amount required by the provisions of paragraphs (i) and (v) of this subsection (f), the Corporation will deliver or cause to be delivered at the office of the Transfer Agent to or upon the written order of the holder thereof, a certificate or certificates representing the number of full shares of Class A Stock or Class B Stock issuable upon such conversion, issued in such name or names as such holder may direct. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender (or deemed surrender, as set forth in the proviso to Section 3.02 of the Stockholder Agreement) of the certificates representing shares of Class B Stock or Class C Stock, or the automatic conversion of a share or shares of Class A Stock, Class B Stock or Class C Stock as set forth in subparagraphs (vii), (viii) and (ix) of this subsection (f), and all rights of the holder of such shares as such holder shall cease at such time and the person or persons in whose name or names the certificate or certificates representing the shares of Class A Stock or Class B Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Stock or Class B Stock at such time; provided, however, if any such surrender or such deemed surrender or such automatic conversion and payment is made on any date when the stock transfer books of the Corporation shall be closed, the person or persons in whose name or names the certificate or certificates representing shares of Class A Stock or Class B Stock are to be issued as the record holder or holders thereof shall be treated for all purposes as having become the record holder or holders of such shares immediately prior to the close of business on the next succeeding day on which such stock transfer books are open.

5

(iii) No adjustments in respect of dividends shall be made upon the conversion of any share of Class A Stock, Class B Stock or Class C Stock; provided, however, that if a share shall be converted subsequent to the record date for the payment of a dividend or other distribution on shares of Class A Stock, Class B Stock or Class C Stock, as applicable, but prior to such payment, the registered holder of such share at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on such share upon the date set for payment of such dividend or other distribution notwithstanding the conversion thereof or the Corporation’s default in payment of the dividend due on such date (provided, however, that if the applicable distribution is a share distribution then the type of security distributed in respect of such share shall be the type that would have been distributed had the conversion been made prior to such record date).

(iv) The Corporation will at all times reserve and keep available, solely for the purpose of issuance upon conversion of the outstanding shares of Class B Stock and Class C Stock, such number of shares of Class A Stock as shall be issuable upon the conversion of all such outstanding shares; provided, however, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Class B Stock and Class C Stock by delivery of purchased shares of Class A Stock which are held in the treasury of the Corporation. All shares of Class A Stock and Class B Stock which shall be issued upon conversion of the shares of Class A Stock, Class B Stock and Class C Stock will, upon issue, be fully paid and nonassessable and not subject to any preemptive rights.

(v) The issuance of certificates for shares of Class A Stock and Class B Stock upon conversion of shares of Class A Stock, Class B Stock or Class C Stock shall be made without charge for any stamp or other similar tax in respect of such issuance. However, if any such certificate is to be issued in a name other than that of the holder of the share or shares of Class A Stock, Class B Stock or Class C Stock converted, the person or persons requesting the issuance thereof shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Corporation that such tax has been paid.

(vi) Any shares of Class B Stock or Class C Stock which shall have been converted into Class A Stock at any time pursuant to the provisions of this subsection (f) shall, after such conversion, be retired. Any shares of Class A Stock which shall have been converted into Class B Stock at any time pursuant to the provisions of the proviso to subparagraph (vii) or the provisions of subparagraph (ix) of this subsection (f) shall, after such conversion, be retired.

(vii) Following consummation of the Holdco Contribution (as defined in the Formation Agreement), in the event that a holder of Class B Stock, other than DWA Escrow LLLP, (x) is not or ceases to be a Permitted Holder (including upon the death of a Permitted Holder) or (y) Transfers any shares of Class B Stock

6

other than a Transfer to a Permitted Holder or in a Permitted Tender Offer, then such shares of Class B Stock held by such holder or so Transferred, as applicable, shall automatically, without any further act or deed on the part of the Corporation or any other Person, be converted into shares of Class A Stock on a one-for-one basis; provided, however, that if the special call right set forth in Section 2.04 of the Stockholder Agreement, dated as of October 27, 2004, among DWA Escrow LLLP, M&J K B Limited Partnership, M&J K Dream Limited Partnership, The JK Annuity Trust, The MK Annuity Trust, Katzenberg 1994 Irrevocable Trust, DG DW L.P., Jeffrey Katzenberg and David Geffen (the “Class B Stockholder Agreement”) is exercised and consummated pursuant to the terms of such Section 2.04 within 45 days following such automatic conversion (as extended to the extent necessary to obtain any required antitrust or other required governmental approvals), then, upon the Transfer to the exercising Principal Holder (as defined in the Class B Stockholder Agreement) or its designee that is also a Permitted Holder, such shares of Class A Stock so Transferred shall automatically, without any further act or deed on the part of the Corporation or any other Person, be converted back into shares of Class B Stock on a one-for-one basis.

(viii) In the event that the holder of Class C Stock (x) is not or ceases to be Paul Allen or a Person Controlled By Paul Allen (including upon the death of Paul Allen) or (y) Transfers any shares of Class C Stock other than a Transfer to Paul Allen or a Person Controlled By Paul Allen, then such shares shall automatically, without any further act or deed on the part of the Corporation or any other Person, be converted into shares of Class A Stock on a one-for-one basis. In addition, on the first date after the Final Allocation that Paul Allen or Persons Controlled By Paul Allen do not continue to own (including upon the death of Paul Allen) at least an aggregate number of shares of Common Stock equal to one-third (1/3) of the sum of the total number of shares of Common Stock (A) held of record by Paul Allen and Persons Controlled By Paul Allen immediately after the Final Allocation and (B) held of record by DWA Escrow LLLP and allocated to Paul Allen or Persons Controlled By Paul Allen in the Final Allocation (as such one-third (1/3) number may be adjusted from time to time to take into account any stock split, reverse stock split, stock dividend or similar transaction), all shares of Class C Stock outstanding at such time shall automatically, without any further act or deed on the part of the Corporation or any other Person, be converted into shares of Class A Stock on a one-for-one basis. The date of conversion of the Class C Stock whether pursuant to this subparagraph (viii) or subparagraph (i) of this subsection (f) is referred to as the “Class C Conversion Date”. Promptly upon becoming aware of the occurrence of the Class C Conversion Date, the Corporation shall notify stockholders of such occurrence in any reasonably practicable manner, including by means of a press release reported by the Dow Jones News Service, Reuters Information Service or any similar or successor newswire service or in a communication distributed generally to stockholders or posted on the Corporation’s Internet website.

(ix) Each share of Class A Stock distributed to a Permitted Holder pursuant to the Residual DW Distribution (as defined in the Formation

7

Agreement) shall automatically, without any further act or deed on the part of the Corporation or any other Person, be converted into one fully paid and nonassessable share of Class B Stock.

As used herein, the term “Control” (including the terms “Controlled By” and “Under Common Control With”), with respect to the relationship between or among two or more Persons, shall mean (A) in the case of a subject Person that is not an Estate Planning Vehicle, both (x) the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of such subject Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise and (y) ownership, directly or indirectly, of a majority of the equity securities or equity interests of such subject Person and (B) in the case of a subject Person that is an Estate Planning Vehicle, the possession, directly or indirectly, of the sole and exclusive power (subject to applicable community property rights or laws and the status of a spouse as a co-trustee of an Estate Planning Vehicle) to direct or cause the direction of the affairs or management of such subject Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

As used herein, the term “Estate Planning Vehicle” shall mean a trust or partnership the principal beneficiaries or partners of which include only Jeffrey Katzenberg, his spouse, parents or issue, or issue thereof, and shall include M&J K B Limited Partnership, M&J K Dream Limited Partnership, The JK Annuity Trust, The MK Annuity Trust and Katzenberg 1994 Irrevocable Trust.

As used herein, the term “Final Allocation” shall have the meaning set forth in the Limited Liability Limited Partnership Agreement of DWA Escrow LLLP, dated as of October 27, 2004 (the “Holdco LLLP Agreement”) as in effect on the Closing Date (as hereinafter defined).

As used herein, the term “Formation Agreement” shall mean the Formation Agreement, dated as of October 27, 2004, among the Corporation, DreamWorks L.L.C., DWA Escrow LLLP, General Electric Company, NBC Universal, Inc., CJ Corp., Steven Spielberg, Jeffrey Katzenberg, David Geffen, Paul Allen and the stockholders of the Corporation party thereto.

As used herein, the term “Permitted Holder” shall mean any of Jeffrey Katzenberg, David Geffen or a Person Controlled By either or both of Jeffrey Katzenberg or David Geffen or a Person to whom shares of Class B Stock are Transferred in a Permitted Tender Offer.

As used herein, the term “Permitted Tender Offer” shall mean a bona fide third party tender offer or exchange offer made under Section 14(d) of the Securities Exchange Act of 1934, as amended, (or any successor provision thereto) (x) which is recommended by the Board or which has been publicly endorsed by each of Jeffrey Katzenberg and David Geffen (in each case to the extent he is or Controls a holder of Class B Stock at such time), (y) which is made to all holders of Common Stock and (z) in which Equivalent Consideration is offered in respect of each share of Common Stock.

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As used in subparagraphs (vii) and (viii) of this subsection (f), the term “Person” shall include an individual.

As used herein, the term “Transfer” shall mean, directly or indirectly, (i) to sell, transfer, assign or similarly dispose of, whether voluntarily, involuntarily or by operation of law, (ii) to enter into an agreement (other than the Stockholder Agreement, the Class B Stockholder Agreement, the Formation Agreement and the Holdco LLLP Agreement) to vote, consent, grant a proxy or power of attorney or deposit shares into a voting trust, or the execution of a written consent, the grant of a proxy or power of attorney or the deposit of shares into a voting trust or (iii) to enter into a contract, option or other arrangement or understanding that upon consummation or foreclosure would effect a sale, transfer, assignment or similar disposition, other than, in each case, a Permitted Transfer (as defined in the Stockholder Agreement).

(g) In the event of any merger, consolidation, share exchange, tender offer, reclassification of the outstanding shares of Class A Stock, Class B Stock or Class C Stock or other reorganization to which the Corporation is a party, in which the shares of Class A Stock, Class B Stock or Class C Stock will be exchanged for or converted into, or will receive a distribution of, cash or other property or securities of the Corporation or any other Person, each share of Common Stock shall be entitled to receive Equivalent Consideration (as defined herein) on a per share basis. As used herein, the term “Equivalent Consideration” shall mean consideration in the same form, in the same amount and with the same voting rights on a per share basis; provided, however, that in the event that securities of the Corporation (or any surviving entity or any direct or indirect parent of the surviving entity) are to be offered or paid with respect to shares of Class A Stock, Class B Stock or Class C Stock in a Control Transaction, then such securities shall only be offered or paid on the basis of one class or series of securities with respect to shares of Class A Stock and another class or series of securities with respect to shares of Class B Stock and another class or series of securities with respect to shares of Class C Stock, and such securities (and, if applicable, the securities into which such securities are convertible, or for which they are exchangeable, or which they evidence the right to purchase) shall differ with respect to, but solely with respect to, their relative voting rights and related differences in conversion and share distribution provisions and, in the case of the Class C Stock, director appointment rights under Section 4(e) of this Article IV, and all such differences shall be identical to the corresponding differences in voting rights, conversion and share distribution provisions and, in the case of the Class C Stock, director appointment rights under Section 4(e) of this Article IV, between the Class A Stock, the Class B Stock and the Class C Stock, so as to preserve the relative voting rights and, in the case of the Class C Stock, director appointment rights under Section 4(e) of this Article IV, of each Class as in effect immediately prior such transaction; and provided further, however, that for the avoidance of doubt, consideration to be paid or received by a holder of Class A Stock, Class B Stock or Class C Stock in connection with any merger, consolidation, share exchange, tender offer, reclassification or other reorganization pursuant to any employment, consulting, severance or other arrangement shall not be deemed to be “consideration” that is included in the determination of “Equivalent Consideration”. As used herein, the term “Control Transaction” shall mean any merger, consolidation, share exchange, tender

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offer, reclassification or other reorganization to which the Corporation is a party in which the holders of Common Stock of the Corporation immediately prior to consummation of such transaction continue to hold at least a majority of the equity or Voting Power in the Corporation (or any surviving entity or any direct or indirect parent of the surviving entity) immediately after consummation of such transaction.

(h) The Class A Stock, the Class B Stock and the Class C Stock are subject to all the powers, rights, privileges, preferences and priorities of any series of Preferred Stock as shall be stated and expressed in any resolution or resolutions adopted by the Board, pursuant to authority expressly granted to and vested in it by the provisions of this Article IV. Notwithstanding the foregoing, the issuance of Preferred Stock shall not eliminate or restrict the right of the holder of Class C Stock to elect the Class C Director (as defined below).

SECTION 3. Preferred Stock. Subject to Section 4(c) of this Article IV, the Board is hereby expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers (if any) of the shares of such series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.

SECTION 4. Stockholder Voting. (a) Except as otherwise provided in this Restated Certificate of Incorporation or required by law, with respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of any outstanding shares of Class A Stock, the holders of any outstanding shares of Class B Stock and the holders of any outstanding shares of Class C Stock shall vote together without regard to class, and every holder of the outstanding shares of Class A Stock shall be entitled to cast thereon one (1) vote in person or by proxy for each share of Class A Stock standing in such holder’s name, every holder of the outstanding shares of Class B Stock shall be entitled to cast thereon fifteen (15) votes in person or by proxy for each share of Class B Stock standing in such holder’s name and the holder of the outstanding shares of Class C Stock shall be entitled to cast thereon one (1) vote in person or by proxy for each share of Class C Stock standing in such holder’s name.

(b) In addition to any other vote required hereunder or by applicable law, the affirmative vote of the holders of a majority of the Voting Power of all outstanding shares of Class A Stock, voting separately as a class, shall be required for any amendment, alteration, change or repeal of Section 2 of Article IV, other than any amendment to Section 2(g) that (i) is approved by the requisite vote of the holders of Class B Stock and provides for shares of Class B Stock to be offered or paid securities in a Control Transaction that either have lesser voting rights than the shares of Class B Stock or that do not differ in any respect from the securities to be offered or paid with

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respect to shares of Class A Stock and does not otherwise affect the consideration to be offered or paid with respect to shares of Class A Stock and/or, as applicable, (ii) is approved by the requisite vote of the holder of Class C Stock and provides for shares of Class C Stock to be offered or paid securities in a Control Transaction that do not differ in any respect from the securities to be offered or paid with respect to shares of Class A Stock and does not otherwise affect the consideration to be offered or paid with respect to shares of Class A Stock.

(c) For so long as shares of Class B Stock are outstanding, and notwithstanding anything herein to the contrary, in addition to any other vote required hereunder or by applicable law, the affirmative vote of the holders of eighty-five percent (85%) of the Voting Power of all outstanding shares of Class B Stock, voting separately as a class, shall be required (i) for the authorization or issuance by the Corporation of shares of Class B Stock (other than pursuant to any dividend payable in shares of Class B Stock pursuant to Section 2(c)(i) of this Article IV or any automatic conversion of shares of Class A Stock into shares of Class B Stock pursuant to the proviso to subparagraph (vii) of Section 2(f) of this Article IV) or Class C Stock or the authorization or issuance by the Corporation of any securities convertible into or exchangeable for shares of Class B Stock or Class C Stock, or options, warrants or other rights to acquire shares of Class B Stock or Class C Stock or any securities convertible into or exchangeable for shares of Class B Stock or Class C Stock, (ii) for the authorization or issuance by the Corporation of shares of any series or class of capital stock (other than Class A Stock, Class B Stock or Class C Stock) having more than one vote per share or having any right to elect directors voting as a separate class or any class voting or consent rights, in each case other than as required by applicable law or the rules or regulations of any stock exchange upon which such series or class of capital stock is to be listed for trading (“Special Vote Stock”), or securities convertible into or exchangeable for shares of Special Vote Stock, or options, warrants or other rights to acquire shares of Special Vote Stock or any securities convertible into or exchangeable for shares of Special Vote Stock, (iii) except as otherwise provided in clause (iv) below, for any amendment, alteration, change or repeal of any provision of this Restated Certificate of Incorporation setting forth any of the rights, powers or preferences of the Class A Stock, Class B Stock or Class C Stock, (iv) for any amendment, alteration, change or repeal of Section 2 of Article IV, other than any amendment to Section 2(g) that is approved by the requisite vote of the holder of Class C Stock and provides for shares of Class C Stock to be offered or paid securities in a Control Transaction that do not differ in any respect from the securities to be offered or paid with respect to shares of Class A Stock and does not otherwise affect the consideration to be offered or paid with respect to shares of Class B Stock and (v) until such time as the outstanding shares of Class B Stock no longer represent at least fifty percent (50%) of the Voting Power of the outstanding Voting Stock (the “Trigger Date”), for the authorization or implementation by the Corporation of what is commonly known as a “poison pill” plan or stockholder rights plan or any similar plan, or the authorization of any series of Preferred Stock or other capital stock or securities of the Corporation for issuance, or the issuance of any such securities, in connection with any such plan. Notwithstanding anything herein to the contrary, the Trigger Date shall not occur as a result of a conversion of shares of Class B Stock into shares of Class A Stock pursuant to Section 2(f)(vii) of this Article IV which results from the death of Jeffrey Katzenberg or

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David Geffen (as applicable) or a judgment of a governmental entity or other involuntary action unless the special call right set forth in Section 2.04 of the Class B Stockholder Agreement is not exercised and consummated within the time period provided in Section 2(f)(vii) of this Article IV. Promptly upon becoming aware of the occurrence of the Trigger Date, the Corporation shall notify stockholders of such occurrence in any reasonably practicable manner, including by means of a press release reported by the Dow Jones News Service, Reuters Information Service or any similar or successor newswire service or in a communication distributed generally to stockholders or posted on the Corporation’s Internet website.

(d) For so long as shares of Class C Stock are outstanding, and notwithstanding anything herein to the contrary, in addition to any other vote required hereunder or by applicable law, the affirmative vote of the holder of the outstanding shares of Class C Stock, voting separately as a class, shall be required (i) for any amendment, alteration, change or repeal of Section 2 of Article IV, other than any amendment to Section 2(g) that is approved by the requisite vote of the holders of Class B Stock and provides for shares of Class B Stock to be offered or paid securities in a Control Transaction that either have lesser voting rights than the shares of Class B Stock or that do not differ in any respect from the securities to be offered or paid with respect to shares of Class A Stock and does not otherwise affect the consideration to be offered or paid with respect to shares of Class C Stock, (ii) for the authorization or issuance by the Corporation of shares of Class C Stock or the authorization or issuance by the Corporation of any securities convertible into or exchangeable for shares of Class C Stock, or options, warrants or other rights to acquire shares of Class C Stock or any securities convertible into or exchangeable for shares of Class C Stock or the reduction of the authorized number of shares of Class C Stock and (iii) except as otherwise provided in clause (i) above, for any amendment, alteration, change or repeal of any provision of this Restated Certificate of Incorporation setting forth any of the rights, powers or preferences of the Class C Stock.

(e) Commencing on the first business day (the “Class C Director Date”) following the date of the closing of the initial public offering of Class A Stock (the “Closing Date”) and for so long as shares of Class C Stock are outstanding, and notwithstanding anything herein to the contrary, the holder of the outstanding shares of Class C Stock, voting separately as a class, shall be entitled to elect one director of the Corporation (the “Class C Director”) at each annual meeting of stockholders for the election of directors of the Corporation (or special meeting if called to fill any vacancy in the office of the Class C Director); provided, however, that the initial Class C Director shall be elected by written consent of the holder of record of the outstanding shares of Class C Stock on the Class C Director Date or such later date as selected by the holder of the outstanding shares of Class C Stock. For so long as shares of Class C Stock are outstanding, the Class C Director may be removed, without cause, only by the vote or consent of the holder of record of the outstanding shares of Class C Stock, voting separately as a class. So long as shares of Class C Stock are outstanding, any vacancy resulting from death, resignation, disqualification, removal (including for cause) or other reason in the office of the Class C Director may be filled only by the person elected by the vote of the holder of record of the outstanding shares of Class C Stock, voting separately as a class.

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ARTICLE V

DGCL Section 203

The Company hereby expressly elects not to be governed by the provisions of Section 203 of the DGCL, and the restrictions and limitations set forth therein.

ARTICLE VI

Directors

SECTION 1. Board of Directors. (a) The business and affairs of the Corporation shall be managed by or under the direction of the Board, the exact number of directors comprising the entire Board to be not less than three nor more than fifteen (subject to any rights of the holders of Preferred Stock to elect additional directors under specified circumstances) as determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board. As used in this Restated Certificate of Incorporation, the term “entire Board” means the total number of directors that the Corporation would have if there were no vacancies or unfilled newly created directorships.

(b) Directors shall be elected at each annual meeting of stockholders, and each director elected shall hold office until such director’s successor has been elected and qualified, subject, however, to earlier death, resignation or removal from office.

SECTION 2. Removal; Filling of Newly Created Directorships and Vacancies. (a) Subject to the rights of the holders of any series of Preferred Stock then outstanding and subject to Section 4(e) of Article IV, any director or the entire Board may be removed, with or without cause, by the affirmative vote of a majority of the combined Voting Power of the outstanding Voting Stock. Notwithstanding the foregoing, whenever holders of outstanding shares of one or more series of Preferred Stock are entitled to elect directors of the Corporation pursuant to the provisions contained in the resolution or resolutions of the Board providing for the establishment of any such series, any such director of the Corporation so elected may be removed in accordance with the provisions of such resolution or resolutions.

(b) Except as otherwise provided for or fixed by or pursuant to the provisions of Article IV of this Restated Certificate of Incorporation relating to the rights of the holders of any series of Preferred Stock and subject to Section 4(e) of Article IV, (A) newly created directorships resulting from any increase in the number of directors shall be filled by the Board by the affirmative vote of a majority of the directors then in office, or by the stockholders by the affirmative vote of the holders of a majority of the combined Voting Power of the Voting Stock, voting together as a single class and (B) any vacancies on the Board resulting from death, resignation, removal or other cause

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shall be filled by the Board by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board, or by a sole remaining director, or by the stockholders by the affirmative vote of the holders of a majority of the combined Voting Power of the Voting Stock, voting together as a single class.

SECTION 3. Advance Notice of Nominations. Subject to Section 2 and Section 3 of Article VIII and Article IX of this Restated Certificate of Incorporation, advance notice of nominations for the election of directors shall be given in the manner and to the extent provided in the By-laws of the Corporation.

SECTION 4. Limitation on Director Liability. To the fullest extent that the DGCL or any other law of the State of Delaware as it exists or as it may hereafter be amended permits the limitation or elimination of the liability of directors, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. No amendment to or repeal of this Section 4 of this Article VI shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

SECTION 5. Composition of Certain Committees of the Board. (a) Until the earlier of the Independence Date (as defined below) and the date that no shares of Class B Stock shall remain outstanding, the nominating and corporate governance committee of the Board shall be composed solely of (i) the director then in office who was designated as the JK Designee under the Stockholder Agreement, (ii) the director then in office who was designated as the DG Designee under the Stockholder Agreement (in each case for so long as the JK Designee and the DG Designee, as applicable, shall be entitled to remain on the Board in accordance with the Stockholder Agreement) and (iii) a director duly appointed by the Board. As used herein, the term “Independence Date” shall mean the date the Corporation, in the opinion of counsel to the Corporation, shall be required by law or the rules of any applicable securities exchange to have a nominating and corporate governance committee comprised solely of “independent directors” as defined by the requirements of law or such securities exchange.

(b) In the event that the Board shall form an executive committee, or a committee that performs functions substantially similar to an executive committee, the JK Designee, the DG Designee and the Class C Director (if any) shall be included on such committee of the Board (for so long as such committee shall be in existence and, in the

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case of the JK Designee and the DG Designee, such Designee shall be entitled to remain on the Board in accordance with the Stockholder Agreement, and, in the case of the Class C Director, the Class C Conversion Date shall not have occurred). For purposes of the preceding sentence, an “executive committee” of the Board shall mean any committee of the Board that, to the extent permitted by law, exercises substantially all of the authority of the Board in the management of the business and affairs of the Company when the Board is not in session.

ARTICLE VII

Provisions Relating to the Founding Stockholders

SECTION 1. Founding Stockholders. In anticipation that the majority of the capital stock of the Corporation will cease to be owned, directly or indirectly, by Jeffrey Katzenberg, David Geffen and Persons Controlled By them (collectively, the “Founding Stockholders”), but that the Founding Stockholders will remain, directly or indirectly, stockholders of the Corporation, and in anticipation that the Corporation and the Founding Stockholders may engage, directly or indirectly, in the same or similar activities or lines of business and have an interest in the same areas of corporate opportunities, and in recognition of the benefits to be derived by the Corporation through its continued contractual, corporate and business relations with the Founding Stockholders (including potential service of officers, directors, members, stockholders, partners or employees of the Founding Stockholders as officers, directors and employees of the Corporation), the provisions of this Article VII are set forth to regulate, define and guide, to the fullest extent permitted by the DGCL, the conduct of certain affairs of the Corporation as they may involve the Founding Stockholders and their respective officers, directors, members, partners and employees and the powers, rights and duties of the Corporation and the Founding Stockholders and their respective officers, directors, employees, members, stockholders and partners in connection therewith. The following provisions shall be applicable to the maximum extent permitted by applicable Delaware law.

SECTION 2. Competition and Corporate Opportunities. None of the Founding Stockholders or any director, officer, member, partner, stockholder or employee of any Founding Stockholder (each a “Specified Party”), independently or with others, shall have any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Corporation and that might be in direct or indirect competition with the Corporation. In the event that any Founding Stockholder or Specified Party acquires knowledge of a potential transaction or matter that may be a corporate opportunity for any Founding Stockholder or Specified Party, as applicable, and the Corporation, none of the Founding Stockholders or Specified Parties shall have any duty to communicate or offer such corporate opportunity to the Corporation, and any Founding Stockholder and Specified Party shall be entitled to pursue or acquire such corporate opportunity for itself or to direct such corporate opportunity to another person or entity and the Corporation shall have no right in or to such corporate opportunity or to any income or proceeds derived therefrom.

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SECTION 3. Allocation of Corporate Opportunities. (a) To the maximum extent permitted by applicable Delaware law, in the event that a director, officer or employee of the Corporation who is also a Founding Stockholder or Specified Party acquires knowledge of a potential transaction or matter that may be a corporate opportunity or otherwise is then exploiting any corporate opportunity, subject to Section 3(b) of this Article VII, the Corporation shall have no interest in such corporate opportunity and no expectancy that any corporate opportunity be offered to the Corporation, any such interest or expectancy being hereby renounced, so that, as a result of such renunciation, and for the avoidance of doubt, such Specified Party (i) shall have no duty to communicate or present such corporate opportunity to the Corporation, (ii) shall have the right to hold any such corporate opportunity for its own account or to recommend, sell, assign or transfer such corporate opportunity to Persons other than the Corporation and (iii) shall not breach any fiduciary duty to the Corporation by reason of the fact that such Specified Party pursues or acquires any such corporate opportunity for itself or directs, sells, assigns or transfers such corporate opportunity to another Person or does not communicate information regarding such corporate opportunity to the Corporation.

(b) Notwithstanding the provisions of Sections 2 and 3(a) of this Article VII, the Corporation does not renounce any interest or expectancy it may have in any corporate opportunity that is offered to any Founding Stockholder or Specified Party, if such opportunity is expressly offered to such Founding Stockholder or Specified Party solely in, and as a direct result of, his or her capacity as a director, officer or employee of the Corporation.

(c) No amendment or repeal of this Section 3 of this Article VII shall apply to or have any effect on the liability or alleged liability of any Founding Stockholder or Specified Party for or with respect to any corporate opportunity of which such Founding Stockholder or Specified Party becomes aware prior to such amendment or repeal.

(d) Notwithstanding anything to the contrary in this Article VII, if the Chief Executive Officer of the Corporation shall be a Specified Party by virtue of his relationship to DreamWorks L.L.C., then any corporate opportunity offered to such officer shall be deemed to have been offered to such officer in his capacity as an officer of the Corporation (and shall belong to the Corporation) unless such offer clearly and expressly is presented to such officer solely in his capacity as an officer, employee, director or member of DreamWorks L.L.C.

SECTION 4. Certain Matters Deemed Not Corporate Opportunities. (a) In addition to and notwithstanding the foregoing provisions of this Article VII, a corporate opportunity shall not be deemed to belong to the Corporation, and the Corporation hereby renounces any interest therein, if it is a business opportunity that the Corporation is not financially able or contractually permitted or legally able to undertake, or that is, from its nature, not in the line of the Corporation’s business or is of no practical advantage to it or that is one in which the Corporation has no interest or reasonable expectancy.

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(b) For purposes of this Article VII only, (i) the term “Corporation” shall mean the Corporation and all corporations, limited liability companies, partnerships, joint ventures, associations and other entities in which the Corporation beneficially owns (directly or indirectly) fifty percent (50%) or more of the outstanding voting stock, voting power or similar voting interests, except that for purposes of determining those persons who are directors of the Corporation, such term shall mean the Corporation without regard to any other entities in which it may hold an interest, and (ii) the term “Founding Stockholder” shall mean a Founding Stockholder and all corporations, limited liability companies, partnerships, joint ventures, associations and other entities (other than, if applicable, the Corporation) in which such Founding Stockholder beneficially owns (directly or indirectly) fifty percent (50%) or more of the outstanding voting stock, voting power or similar interests and shall also include those entities that constitute its corporate members or partners.

SECTION 5. Expiration of Certain Provisions. Notwithstanding anything in this Restated Certificate of Incorporation to the contrary, the provisions of this Article VII shall expire as to any Founding Stockholder on (with respect to any corporate opportunity arising on or after) the date that both (i) such Founding Stockholder ceases to own beneficially Common Stock representing at least five percent (5%) of the Voting Power of outstanding shares of Common Stock of the Corporation and (ii) no person is a Specified Party. Notwithstanding anything in this Restated Certificate of Incorporation to the contrary, the provisions of this Article VII shall expire as to any Specified Party on the date that such person ceases to be a Specified Party. Neither the alteration, amendment, change or repeal of any provision of this Article VII nor the adoption of any provision of this Restated Certificate of Incorporation inconsistent with any provision of this Article VII shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article VII, would accrue or arise, prior to such alteration, amendment, repeal or adoption.

SECTION 6. Deemed Notice. Any person or entity purchasing or otherwise acquiring any interest in any shares of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article VII.

ARTICLE VIII

Stockholder Meetings

SECTION 1. Meetings Generally. Meetings of stockholders may be held within or without the State of Delaware, as the By-laws of the Corporation may provide. The books of the Corporation may be kept (subject to any provision of Delaware law) outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the By-laws of the Corporation. Elections of directors need not be by written ballot unless the By-laws of the Corporation shall so provide.

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SECTION 2. Special Meetings. Until the Trigger Date, special meetings of the stockholders shall be called only (i) upon the written request of (x) a record holder of Class B Stock or (y) the holders of not less than a majority of the combined Voting Power of the outstanding Voting Stock entitled to vote at such meeting, (ii) upon the request of a majority of the Board or (iii) upon request of the chief executive officer. Effective on and after the Trigger Date, special meetings of the stockholders shall be called only (i) upon the request of a majority of the Board or (ii) upon the written request of a record holder of Class B Stock. Special meetings of the stockholders may be held at such time and place as may be stated in the notice of meeting. Notwithstanding anything to the contrary in this Section 2 of this Article VIII, a special meeting of the holder of the outstanding shares of Class C Stock may be called by the record holder of the outstanding shares of Class C Stock at any time following the Closing Date for the purpose of filling any vacancy in the office of the Class C Director and such meeting shall not be subject to the advance notice procedures of the By-laws of the Corporation.

SECTION 3. Advance Notice Requirements. So long as the outstanding shares of Class B Stock represent thirty percent (30%) or more of the combined Voting Power of the outstanding Voting Stock, nominations and stockholder proposals by record holders of Class B Stock, as such, shall not be subject to the advance notice procedures of the By-laws of the Corporation. Until the Class C Conversion Date, nomination of the Class C Director by the record holder of the outstanding shares of Class C Stock shall not be subject to the advance notice procedures of the By-laws of the Corporation. Notwithstanding anything herein to the contrary, solely for purposes of this Section 3 of Article VIII, the foregoing thirty percent (30%) requirement shall not cease to be satisfied as a result of a conversion of shares of Class B Stock into shares of Class A Stock pursuant to Section 2(f)(vii) of Article IV which results from the death of Jeffrey Katzenberg or David Geffen (as applicable) or a judgment of a governmental entity or other involuntary action unless the special call right set forth in Section 2.04 of the Class B Stockholder Agreement is not exercised and consummated within the time period provided in Section 2(f)(vii) of Article IV.

ARTICLE IX

Action by Written Consent

Until the Trigger Date, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock of the Corporation entitled to vote thereon were present and voted. Effective on and after the Trigger Date, subject to the rights of the holders of any series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Notwithstanding anything to the contrary in this

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Article IX, the record holder of the outstanding shares of Class C Stock may take any action required or permitted to elect or remove the Class C Director without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by the record holder of the outstanding shares of Class C Stock.

ARTICLE X

By-laws

In furtherance and not in limitation of the powers conferred upon it by law, the Board is expressly authorized to adopt, repeal, alter or amend the By-laws of the Corporation by the vote of a majority of the entire Board. In addition to any requirements of law and any other provision of this Restated Certificate of Incorporation or any resolution or resolutions of the Board adopted pursuant to Article IV of this Restated Certificate of Incorporation (and notwithstanding the fact that a lesser percentage may be specified by law, this Restated Certificate of Incorporation or any such resolution or resolutions), (i) until the Trigger Date, the affirmative vote of the holders of a majority of the combined Voting Power of the outstanding Voting Stock, voting together as a single class, shall be required for stockholders to adopt, amend, alter or repeal any provision of the By-laws and (ii) on and after the Trigger Date, the affirmative vote of the holders of eighty percent (80%) of the combined Voting Power of the outstanding Voting Stock, voting together as a single class, shall be required for stockholders to adopt, amend, alter or repeal any provision of the By-laws.

ARTICLE XI

Amendment of Certain Articles

Notwithstanding any other provision of this Restated Certificate of Incorporation to the contrary, the provisions set forth in this Article XI and in Article V, Section 3 of Article VI, Article VII, Article VIII, Article IX and the last sentence of Article X may not be amended, altered, changed or repealed in any respect unless such amendment, alteration, change or repeal is approved by the affirmative vote of not less than eighty percent (80%) of the combined Voting Power of the outstanding Voting Stock.

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IN WITNESS WHEREOF, I, Katherine Kendrick, General Counsel and Secretary of DreamWorks Animation SKG, Inc., have executed this Restated Certificate of Incorporation as of the 25th day of October 2004.

/s/ Katherine Kendrick
Name:	Katherine Kendrick
Title:	General Counsel and Secretary

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EX-10.3

Exhibit 10.3

[DreamWorks Letterhead]

July 24, 2008

Mr. Roger A. Enrico

500 Crescent Court

Suite 250

Dallas, TX 75201

Dear Roger:

Reference is made to that certain Employment Agreement dated as of October 8, 2004 by and between DreamWorks Animation SKG, Inc., a Delaware corporation (the “Company”), and you (as amended by the waiver dated December 5, 2005, as amended and restated by the Amended and Restated Employment Agreement, dated as of December 6, 2006, and as further amended and restated by the Amended and Restated Employment Agreement dated as of October 25, 2007 (collectively, the “Prior Agreement”)), pursuant to which the Company agreed to employ you and you agreed to accept such employment upon the terms and conditions set forth therein. This letter agreement (this “Letter Agreement”) is being executed to evidence the mutual decision of you and the Company to conclude your employee status as of the date hereof. Capitalized terms used in this Agreement and not otherwise defined shall have the meanings given to such terms in the Prior Agreement.

It is hereby agreed by the Company and you as follows:

1. Conclusion of Employee Status. It is mutually agreed that your status as an employee of the Company shall conclude as of the date hereof. Accordingly, the Prior Agreement is terminated as of the date hereof and neither party shall have any further duties or obligations thereunder, except as otherwise provided in this Agreement. Notwithstanding the conclusion of your employment, you shall remain as non-executive Chairman of the Board of the Company’s Board of Directors, until your successor has been duly elected and qualified in accordance with the Restated Certificate of Incorporation and Bylaws of the Company.

2. Treatment of Equity Awards.

a. Vested Awards. Exhibit A hereto contains a list of all of your outstanding equity awards as of the date hereof (the “Equity Awards”), including restricted stock, performance compensation awards (“PCAs”), stock options and stock appreciation rights awards (“SARs”). Notwithstanding any other provision to the contrary in the applicable award agreement or the Prior Agreement, any stock options or SARs that are vested as of the

date hereof or that thereafter become vested (collectively, the “Vested Options”) shall continue to remain outstanding and exercisable for the balance of the term of the applicable grants, provided that you remain a director of the Company until October 23, 2009. In the event that you cease to be a director prior to October 23, 2009 as a result of the failure to reelect or otherwise maintain you as a director of the Company or as a result of your death or disability, the Vested Options shall thereafter continue to remain outstanding and exercisable for the balance of the term of the applicable grant. In the event that you cease to be a director of the Company prior to October 23, 2009 for any other reason, you shall have a period of 90 days following the date that you cease to be a director (the “Option Expiration Date”) to exercise any then-unexercised stock options or SARs, and any Vested Options that remain unexercised following the Option Expiration Date shall be forfeited and cancelled. In the event that you remain a director of the Company as of October 23, 2009, all of the then-unexercised Vested Options shall continue to remain outstanding and exercisable for the balance of the term of the applicable grant.

b. Unvested Awards. As of the date hereof, certain shares of restricted stock, performance compensation awards, stock options and SARs as set forth in Exhibit A (the “Current Unvested Awards”) are unvested. Notwithstanding any other provision to the contrary in the applicable award agreement or the Prior Agreement, the Current Unvested Awards shall continue to remain outstanding and vest in accordance with their original terms provided that you remain a director of the Company. For purposes of this Agreement, an award will be deemed to have vested when it is no longer subject to a substantial risk of forfeiture (within the meaning of Treasury Regulation Section 1.409A-1(d)). In the event that you remain a director of the Company as of October 23, 2009, with respect to any Equity Awards that remain unvested as of such date, (i) any Equity Awards that are subject to time-based vesting criteria shall become fully vested on such date, (ii) any Equity Awards that are subject to performance-based vesting criteria will continue to remain subject to the achievement of performance goals, as set forth or referred to in the applicable award agreement, provided that, in the event that a change of control (as defined in Paragraph 26.a of the Prior Agreement) occurs prior to the end of the applicable performance period, the vesting of such awards shall be determined in accordance with Paragraph 26.a of the Prior Agreement, (iii) all options, SARs and any similar equity-based awards will remain exercisable for the balance of the term of the applicable grant, and (iv) any restricted stock or performance compensation awards that are subject to performance-based vesting criteria (except as provided under Paragraph 26 of the Prior Agreement) will be settled on the seventieth (70th) day after the date that such awards become vested. In the event that you cease to be a director prior to October 23, 2009 as a result of the failure to reelect or otherwise maintain you as a director of the Company or as a result of your death or disability, any then-unvested Equity Awards shall accelerate vesting (with respect to grants having performance-based criteria, on the basis that any mid-range or “target” goals rather than premium goals are deemed to have been achieved) and will, subject to the other terms and conditions of the grants, remain exercisable for the balance of the term of the applicable grant. In the event that you cease to be a director on or before October 23, 2009 for any other reason, (i) any then-unvested Equity Awards shall be immediately forfeited and cancelled and (ii) you shall have a period of 90 days following the Option Expiration Date to

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exercise any then-exercisable stock options or SARs. Any vested stock options or SARs that remain unexercised following the Option Expiration Date shall be forfeited and cancelled.

3. Survival of Provisions of Prior Agreement. Notwithstanding the termination of the Prior Agreement, (i) your obligations under Paragraph 8 of the Prior Agreement shall remain in full force and effect for the entire period provided therein, (ii) the Company’s obligations under Paragraphs 6 (with respect to expenses incurred on or prior to the final date of employment), 7, 14, 26, 28 and 30 shall survive indefinitely and (iii) the provisions of Section 24 shall survive indefinitely.

4. Entire Understanding; Modification of Terms. Except as otherwise specifically provided herein, this Agreement contains the entire understanding of the parties hereto relating to the subject matter herein contained and can be changed only by a writing signed by both parties hereto.

5. Notices. All notices required to be given hereunder shall be given in writing, by personal delivery or by overnight courier and confirmed by fax at the respective addresses of the parties hereto set forth above, or at such address as may be designated in writing by either party, and in the case of the Company, to the attention of the General Counsel of Studio. A courtesy copy of any notice to you hereunder shall be sent to Robert Johnson, Munger, Tolles & Olson LLP, 355 South Grand Avenue, 35^th Floor, CA 90071-1560, Facsimile: (213) 683-5137, Attention: Robert Johnson, Esq.

6. Assignment. This Agreement may not be assigned by either party (other than your right to receive payments or other compensation, which may be assigned to a company, trust or foundation owned or controlled by you) and any purported assignment in violation of the foregoing shall be deemed null and void.

7. California Law. This Agreement and all matters or issues collateral thereto shall be governed by the laws of the State of California applicable to contracts entered into and performed entirely therein.

8. Beneficiaries. You are entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following your death, and may change such election, in either case by giving the Company written notice thereof.

9. Void Provisions. If any provision of this Agreement, as applied to either party or to any circumstances, shall be adjudged by a court to be void or unenforceable, the same shall be deemed stricken from this Agreement and shall in no way affect any other provision of this Agreement or the validity or enforceability of this Agreement. In the event any such provision (the “Applicable Provision”) is so adjudged void or unenforceable, you and the Company shall take the following actions in the following order: (i) seek judicial reformation of the Applicable Provision; (ii) negotiate in good faith with each other to replace the Applicable Provision with a lawful provision; and (iii) have an arbitration as provided in Paragraph 24 of the Prior Agreement to determine a lawful replacement

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provision for the Applicable Provision; provided, however, that no such action pursuant to either of clauses (i) or (iii) above shall increase in any respect your obligations pursuant to the Applicable Provision.

10. Amendment of Equity Award Agreements. This Letter Agreement shall be deemed to amend any equity award agreements with respect to the Equity Awards set forth in Exhibit A to the extent necessary to effectuate the provisions hereof. In the extent of any inconsistency between the terms of this Letter Agreement and any such equity award agreement, the terms of this Letter Agreement shall control.

11. Miscellaneous. You agree that the Company may deduct and withhold from any payments hereunder the amounts required to be deducted and withheld under the applicable provisions of federal, state and local laws and regulations. This Agreement may be executed in several counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same Agreement. The captions used in connection with the paragraphs of this Agreement are inserted only for the purpose of reference. Such captions shall not be deemed to govern, limit, modify or in any other manner affect the scope, meaning or intent of the provisions of this Agreement or any part thereof, nor shall such captions otherwise be given any legal effect.

If the foregoing correctly sets forth your understanding, please sign this letter and the attached copy, and return both documents to the undersigned, whereupon this letter shall constitute a binding agreement between you and the Company.

	Very truly yours,
ACCEPTED AND AGREED AS OF THE	DREAMWORKS ANIMATION SKG, INC.
DATE FIRST ABOVE WRITTEN:
/s/ Roger Enrico	By:	/s/ Lewis C. Coleman
ROGER ENRICO	Its:	President and Chief Financial Officer

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Exhibit A

OUTSTANDING EQUITY GRANTS

(as of July 24, 2008)

NONQUALIFIED STOCK OPTIONS

Grant Date	Exercise Price		Options Granted	Options Outstanding	Options Exercisable
10/27/04	$	28.00	89,286	89,286	-0-

STOCK APPRECIATION RIGHTS

Grant Date	Exercise Price		SARs Granted	SARs Outstanding	SARs Exercisable
11/28/06	$	28.80	104,166	104,166	26,041
11/02/07		31.37	108,673	108,673	-0-

RESTRICTED STOCK AWARDS

Grant Date	Shares Granted	Shares Vested	Shares Unvested
10/27/04	142,857	-0-	142,857
11/28/06	17,361	4,340	13,021
11/02/07	15,938	-0-	15,938

PERFORMANCE COMPENSATION AWARDS

Grant Date	Awards Granted	Awards Vested	Awards Unvested
1/13/05	142,857	-0-	142,857

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EX-10.4

Exhibit 10.4

DREAMWORKS ANIMATION SKG, INC.

1000 FLOWER STREET

GLENDALE, CA 91201

July 24, 2008

Lew Coleman

c/o Munger, Tolles & Olsen LLP

355 South Grand Avenue

35^th Floor

Los Angeles, CA 90071

Attn: Bob Johnson

Dear Lew:

Reference is made to that certain executed Employment Agreement, dated as of October 25, 2007, between DreamWorks Animation SKG, Inc., a Delaware corporation (“Studio” or “Employer”), and you (the “Prior Agreement”) whereby Studio agreed to employ you and you agreed to accept such employment until December 31, 2008, upon the terms and conditions set forth therein. Studio now wishes to continue your employment beyond December 31, 2008, and you wish to remain employed by Studio beyond such date, in each case, pursuant to the terms and conditions set forth below. Therefore, the parties now hereby agree to amend and restate the Prior Agreement in its entirety as set forth in this agreement (the “Agreement”), effective as of the date shown above:

1. Term. The term of your employment commenced on December 5, 2005 (the “Commencement Date”) and shall continue through December 31, 2011. This period shall hereinafter be referred to as the “Employment Term”.

2. Duties/Responsibilities/Reporting.

a. General. Your title shall be “President” of Studio. You shall have such duties and responsibilities as are consistent with the traditional position of President of publicly traded major entertainment and media corporations. In addition, you are currently serving as the Chief Financial Officer of Studio.

b. Services. During the Employment Term you shall render your exclusive full time business services to Studio and/or its divisions, subsidiaries or affiliates in accordance with the reasonable directions and instructions of the Chief Executive Officer (“CEO”) of Studio, all as hereinafter set forth.

c. Reporting. You shall report only to Jeffrey Katzenberg (“Katzenberg”); provided that if Katzenberg is not actively involved in the business of Studio or otherwise incapable of involvement in the day-to-day business of Studio, including by reason of death or disability, then you shall report to the individual (who will be Katzenberg’s successor)

designated by the Board of Directors of Studio to assume such duties. All other employees (other than the CEO and the Chairman) of Studio and such affiliates and subsidiaries as may hereafter be established shall report solely and directly to you or to you through such other personnel as you may designate.

3. Exclusivity. You shall not during the Employment Term perform services for any person, firm or corporation (hereinafter referred to collectively as a “person”) without the prior written consent of Studio and will not engage in any activity which would interfere with the performance of your services hereunder, or become financially interested in any other person engaged in the production, distribution or exhibition of motion pictures or television programs (including, without limitation, motion pictures produced for, distributed to or exhibited on free, cable, pay, satellite and/or subscription television, music and/or interactive), anywhere in the world. Nothing contained herein shall prevent you from (i) owning publicly traded minority stock interests not to exceed five percent (5%), limited partnership interests or other passive investment interests in businesses performing any of the aforesaid activities or (ii) serving on the Board of Directors of the companies listed on Exhibit A attached hereto.

4. Compensation.

a. Base Salary. For all services rendered under this Agreement, Studio will pay you a yearly base salary at a rate of One Million Two Hundred Sixty-two Thousand Dollars ($1,262,000) for each full year of the Employment Term, payable in accordance with Studio’s applicable payroll practices (“Base Salary”).

b. Equity-Based Compensation.

(i) Upon the Commencement Date, you received, pursuant to the 2004 Omnibus Incentive Compensation Plan, stock appreciation rights with respect to Studio’s Class A common stock (“SARs”) having a grant-date value of $687,500 and restricted shares of Studio’s Class A common stock (“Restricted Stock”) having a grant date value of $2,062,500 (the “Initial Grants”).

(ii) While you remain employed hereunder, commencing at the end of 2006, in lieu of receiving a larger base salary than the amount set forth in Paragraph 4.a. of this Agreement, you will be entitled to receive annual equity awards of SARs and Restricted Stock (or such other form of equity-based compensation as the Compensation Committee of the Board of Directors of Studio (the “Compensation Committee”) may determine) having an aggregate grant-date value of $500,000. For the avoidance of doubt, the initial grant of such annual awards shall be guaranteed and not subject to further approval by the Compensation Committee, but the vesting of such SARs and Restricted Stock (or such other form of equity-based compensation as the Compensation Committee may determine) shall be subject to vesting conditions.

(iii) You will also be eligible, while you remain employed hereunder, commencing at the end of the year 2006 (the amount of the award for 2006 was determined in the first quarter of 2007), subject to annual approval by the Compensation Committee, to

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receive annual awards of SARs and Restricted Stock (or such other form of equity-based compensation as the Compensation Committee may determine). It is Studio’s present expectation that such annual awards will have an aggregate grant-date value targeted at $1,000,000. In the event that such awards consist of SARs and Restricted Stock, they shall be divided, as determined by the Compensation Committee, between SARs and Restricted Stock. These annual awards shall be in lieu of annual cash bonuses in the event the Compensation Committee does not pay cash bonuses to Studio’s most senior executives; provided that if the Compensation Committee does elect to pay such cash bonuses in addition to such annual awards, such awards shall also be in addition to any cash bonuses granted by the Compensation Committee.

(iv) In addition, you will be eligible, while you remain employed hereunder, commencing at the end of 2006, subject to annual approval by the Compensation Committee, to receive annual equity incentive awards of SARs and Restricted Stock (or such other form of equity-based compensation as the Compensation Committee may determine). It is Studio’s present expectation that such annual awards will have an annual aggregate grant-date value targeted at $2,750,000. In the event that such awards consist of SARs and Restricted Stock, they shall be divided, as determined by the Compensation Committee, between SARs and Restricted Stock.

(v) All SARs and Restricted Stock (and any other equity-based awards) referred to in this Paragraph 4.b will (x) be valued using a method or methods (including where appropriate a Black-Scholes or other fair value method) as determined by the Compensation Committee from time to time, (y) (a) for the grants under Paragraph 4.b(ii) and (iii) become vested, exercisable (if applicable) and nonforteitable twenty-five percent (25%) per year for a period of four (4) years and (b) for the grants under Paragraph 4.b(iv) become fully vested, exercisable (if applicable) and nonforfeitable within a period not to exceed four (4) years from the date of any grant in a manner determined by the Compensation Committee, and will be contingent on both the continuing performance of services to Studio (subject to Paragraphs 4.b(vi), 4.b(vii), 4.b(viii), 9, 10, 11, 12, 13 and 25) and the achievement of performance goals as established by the Compensation Committee from time to time, and (z) otherwise be subject to such terms and conditions as may be set forth in the applicable equity compensation plan of Studio (each such plan, a “Plan”) or determined by the Compensation Committee from time to time.

(vi) Following the expiration of the Employment Term, but only if your employment hereunder has not been terminated earlier, you will not be required to perform any additional services to Studio in order for all of the equity-based compensation awards granted to you during the Employment Term to become fully vested, exercisable (if applicable) and nonforfeitable. For purposes of this Agreement, an award will be deemed to have vested when it is no longer subject to a substantial risk of forfeiture (within the meaning of Treasury Regulation Section 1.409A-1(d)). With respect to awards that are subject to time-based vesting criteria, the full amount of such awards will vest on December 31, 2011. With respect to equity-based compensation awards that are subject to performance-based vesting criteria, such awards will continue to remain subject to the achievement of performance goals, as provided pursuant to the Plan and the agreements

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evidencing such awards and to such other terms and conditions as may be determined by the Compensation Committee at the time of the grant, provided that, in the event that a change of control (as defined in Paragraph 25) occurs prior to the end of the applicable performance period, unless provision is made in connection with such change of control for assumption of such awards or substitution for such awards in the manner described in Paragraph 25.a, such awards shall be treated in accordance with the proviso of Paragraph 25.a. Subject to the foregoing, all SARs and any similar equity-based awards will remain exercisable for the balance of the term of the grant. In the case of restricted stock units that are subject to time-based vesting criteria, such awards will be settled within thirty (30) days following December 31, 2011. In the case of restricted stock units that are subject to performance-based vesting criteria, except as otherwise provided in Paragraph 25, such awards will be settled on the seventieth (70th) day after the date that such awards become vested.

(vii) Notwithstanding any provision in this Agreement to the contrary, upon a change of control (as defined in Paragraph 25) or upon termination of your employment as a result of death or incapacity (as defined in Paragraph 9.a), by Studio without cause (as defined in Paragraph 11) or by you for good reason (as defined in Paragraph 13), any equity compensation awards that would have become vested on December 31, 2008 pursuant to Paragraph 4.b(vi) of the Prior Agreement (such awards, the “Prior Agreement Awards”) shall become vested to the same extent that they would have vested on December 31, 2008 pursuant to the Prior Agreement. Furthermore, in the event that in connection with the extension or renewal of the employment agreement between Studio and any executive officer who is entitled to automatic accelerated vesting of equity compensation awards upon expiration of the term of such executive officer’s employment agreement, such executive officer becomes entitled to vesting of the equity compensation awards that would have vested upon expiration of his or her prior employment agreement on terms that are more favorable than those applicable to the Prior Agreement Awards, then you shall be entitled to vesting of the Prior Agreement Awards on terms that are as favorable as those applicable to such executive officer’s awards that are subject to vesting pursuant to his or her prior employment agreement.

(viii) In order to avoid taxes and penalties under Section 409A of the Code and the regulations thereunder as in effect from time to time (collectively, hereinafter, “Section 409A”), provided that you remain employed by Studio until December 31, 2008, all then outstanding restricted stock units that are subject to time-based vesting criteria and were granted to you either (A) prior to the date of this Agreement or (B) on or following the date of this Agreement pursuant to the obligations set forth in Paragraph 4.b(ii), (iii) or (iv) of the Prior Agreement (such restricted stock units, the “Prior Agreement RSUs”) shall, in accordance with Paragraph 4.b(vi) of the Prior Agreement, be settled within thirty (30) days following December 31, 2008; provided, however, that Studio shall withhold from the shares of Studio’s Class A common stock (“Shares”) to be delivered in settlement thereof a number of Shares sufficient to satisfy applicable tax withholding obligations and shall permit you to sell a number of additional Shares sufficient to pay any other marginal income taxes with respect thereto, and all other Shares delivered to you shall be nontransferable until the earliest of (1) December 31, 2011, (2) the originally scheduled vesting date of the applicable restricted stock units, (3) the 30th day following the date of your death and (4) the

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date that the vesting of such restricted stock units otherwise would have accelerated in accordance with this Agreement (including, without limitation, pursuant to Paragraph 4.b(vii)).

5. Benefits. In addition to the foregoing, during the period of your employment with Studio hereunder, you shall be entitled to participate in such other, medical, dental and life insurance, 401(k), pension and other benefit plans as Studio may have or establish from time to time for its most senior executives. During the Employment Term, unless earlier terminated as set forth below, you shall be entitled to utilize the Studio corporate jet for business-related air travel (subject to Studio policy), you shall be entitled to coverage in accordance with Studio’s standard leave of absence policy and you shall be entitled to vacation days and/or personal days to be taken subject to the demands of Studio (as determined by Studio) and consistent with the amount of days taken by other senior level executives; provided, however, no vacation time will be accrued during the Employment Term. The foregoing, however, shall not be construed to require Studio to establish any such plans or to prevent the modification or termination of such plans once established, and no such action or failure thereof shall affect this Agreement.

6. Business Expenses. Studio shall reimburse you for business expenses on a regular basis in accordance with its policy regarding the reimbursement of such expenses for executives of like stature to you (including travel, at Studio’s request, which, in accordance with company policy, is currently first class, a car and/or cellular phone and including the reimbursement or direct payment of business phone expenses on a regular basis in accordance with Studio’s policy regarding the reimbursement or payment of such expenses for executives of like stature to you). Expenses shall be eligible for reimbursement hereunder to the extent that they are incurred by you during the period of your employment with Studio pursuant to this Agreement. All reimbursable expenses shall be reimbursed to you as promptly as practicable and in any event not later than the last day of the calendar year after the calendar year in which the expenses are incurred, and the amount of expenses eligible for reimbursement during any calendar year will not affect the amount of expenses eligible for reimbursement in any other calendar year.

7. Indemnification. You shall be fully indemnified and held harmless by Studio to the fullest extent permitted by law from any claim, liability, loss, cost or expense of any nature (including attorney’s fees of counsel selected by you, judgments, fines, any amounts paid or to be paid in any settlement, and all costs of any nature) incurred by you (all such indemnification to be on an “after-tax” or “gross-up” basis) which arises, directly or indirectly, in whole or in part out of any alleged or actual conduct, action or inaction on your part in or in connection with or related in any manner to your status as an employee, agent, officer, corporate director, member, manager, shareholder, partner of, or your provision of services to, Studio or any of its affiliated entities or any entities to which you are providing services on behalf of Studio or which may be doing business with Studio. To the maximum extent allowed by law, all amounts to be indemnified hereunder including reasonable attorneys’ fees shall be promptly advanced by Studio until such time, if ever, as it is determined by final decision pursuant to Paragraph 24 below that you are not entitled to indemnification hereunder (whereupon you shall reimburse Studio for all sums theretofore

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advanced). Any tax gross-up payments that you become entitled to receive pursuant to this Paragraph 7 will be paid to you (or to the applicable taxing authority on your behalf) as promptly as practicable and in any event not later than the last day of the calendar year after the calendar year in which you remit the related taxes.

8. Covenants.

a. Confidential Information. You agree that you shall not, during the Employment Term or at any time thereafter, use for your own purposes, or disclose to or for any benefit of any third party, any trade secret or other confidential information of Studio or any of its affiliates (except as may required by law or in the performance of your duties hereunder consistent with Studio’s policies) and that you will comply with any confidentiality obligations of Studio known by you to a third party, whether under agreement or otherwise. Notwithstanding the foregoing, confidential information shall be deemed not to include information which (i) is or becomes generally available to the public other than as a result of a disclosure by you or any other person who directly or indirectly receives such information from you or at your direction or (ii) is or becomes available to you on a non-confidential basis from a source which you reasonably believe is entitled to disclose it to you.

b. Studio Ownership. The results and proceeds of your services hereunder, including, without limitation, any works of authorship resulting from your services during your employment and any works in progress, shall be works-made-for-hire and Studio shall be deemed the sole owner throughout the universe of any and all rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, with the right to use the same in perpetuity in any manner Studio determines in its sole discretion without any further payment to you whatsoever. If, for any reason, any of such results and proceeds shall not legally be a work for hire and/or there are any rights which do not accrue to Studio under the preceding sentence, then you hereby irrevocably assign and agree to assign any and all of your right, title and interest thereto, including, without limitation, any and all copyrights, patents, trade secrets, trademarks and/or other rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed by Studio, and Studio shall have the right to use the same in perpetuity throughout the universe in any manner Studio may deem useful or desirable to establish or document Studio’s exclusive ownership of any and all rights in any such results and proceeds, including, without limitation, the execution of appropriate copyright and/or patent applications or assignments. To the extent that you have any rights in the results and proceeds of your services that cannot be assigned in the manner described above, you unconditionally and irrevocably waive the enforcement of such rights. This Paragraph 8.b is subject to, and shall not be deemed to limit, restrict, or constitute any waiver by Studio of any rights of ownership to which Studio may be entitled by operation of law by virtue of Studio or any of its affiliates being your employer.

c. Return of Property. All documents, data, recordings, or other property, whether tangible or intangible, including all information stored in electronic form, obtained or prepared by or for you and utilized by you in the course of your employment with Studio

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or any of its affiliates shall remain the exclusive property of Studio. In the event of the termination of your employment for any reason, and subject to any other provisions hereof, Studio reserves the right, subject to Paragraph 27.b, to the extent required by law, and in addition to any other remedy Studio may have, to deduct from any monies otherwise payable to you the following: (i) the full amount of any specifically determined debt you owe to Studio or any of its affiliates at the time of or subsequent to the termination of your employment with Studio, and (ii) the value of Studio property which you retain in your possession after the termination of your employment with Studio following Studio’s written request for such item(s) return and your failure to return such items within thirty (30) days of receiving such notice. In the event that the law of any state or other jurisdiction requires the consent of an employee for such deductions, this Agreement shall serve as such consent.

d. Promise Not To Solicit. You will not, during the period of the Employment Term or for the period ending one (1) year after the earlier of expiration of the Employment Term or your termination hereunder, induce or attempt to induce any employees, exclusive consultants, exclusive contractors or exclusive representatives of Studio (or those of any of its affiliates) to stop working for, contracting with or representing Studio or any of its affiliates or to work for, contract with or represent any of Studio’s (or its affiliates’) competitors.

9. Incapacity.

a. In the event you are unable to perform the services required of you hereunder as a result of a physical or mental disability and such disability shall continue for a period of ninety (90) or more consecutive days or an aggregate of four (4) or more months during any twelve (12) month period during the Employment Term, Studio shall have the right, at its option and subject to applicable state and federal law, to terminate your employment hereunder, and Studio shall only be obligated to pay you (a) for a period commencing on the termination of your employment by Studio and ending on the earlier of the expiration of the Employment Term and the second anniversary of the termination of your employment, payments at a rate equal to 50% of your rate of Base Salary, and, except as otherwise provided in this Paragraph 9.a, such payments will be payable in accordance with Studio’s regular payroll practices applicable to similarly situated active employees, and (b) any additional compensation (including, without limitation, any grants of equity-based compensation made to you on or prior to the date of termination (it being understood you will not be entitled to receive any grants of equity-based compensation thereafter) as determined pursuant to Paragraph 9.b, and expense reimbursement for expenses incurred prior to your termination) earned by you prior to the termination of your employment. Notwithstanding the foregoing sentence, you further will be entitled to continuation of medical, dental, life insurance, financial counseling and other benefits (the “Continued Benefits”) for a period of twelve (12) months after termination of your employment pursuant to this paragraph (but not to exceed the end of the then current Employment Term). Except as specifically permitted by Section 409A, the Continued Benefits provided to you during any calendar year will not affect the Continued Benefits to be provided to you in any other calendar year. Whenever compensation is payable to you hereunder, during or with respect to a time when you are partially or totally disabled and such disability (except for the

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provisions hereof) would entitle you to disability income or to salary continuation payments from Studio according to the terms of any plan now or hereafter provided by Studio or according to any policy of Studio in effect at the time of such disability, the compensation payable to you hereunder shall be offset on a dollar-for-dollar basis by any such disability income or salary continuation and shall not be in addition thereto. If disability income is payable directly to you by an insurance company under an insurance policy paid for by Studio, the compensation payable to you hereunder shall be reduced on a dollar-for-dollar basis by the amounts paid to you by said insurance company and shall not be in addition thereto.

b. Unless otherwise specified in the Plan or in the agreement evidencing the grant, in each case as of the date of the grant, after termination of employment pursuant to Paragraph 9.a, your grants of equity-based compensation will be determined as follows. With respect to grants having performance-based vesting criteria, the amount of such award that is eligible to vest will be determined after the end of the performance period specified in the grant, or satisfaction of such other criteria pursuant to the Plan, subject to the applicable performance or other criteria, as if you had continued to remain employed with Studio throughout such performance period. With respect to grants having time-based vesting criteria, the full amount of such award will be eligible to vest. Vesting will be determined promptly following termination of employment. A ratable portion of the amount of each award that is eligible to vest will become vested by multiplying such amount by a fraction, the numerator of which is the sum of (i) your actual period of service in months through the date of termination plus (ii) the lesser of (A) twelve (12) months or (B) 50% of the remaining Employment Term in months determined as of the date of termination (but in no event will the numerator exceed the denominator), and the denominator of which is the total performance period in months (for grants having performance-based vesting criteria) or the total vesting period in months (for grants having time-based vesting criteria) specified in the grant. To avoid any double-counting, any part of any equity-based compensation award that has vested in accordance with the terms of the applicable award agreement shall be credited against any part of such award that you shall be entitled to receive or exercise pursuant to the determination set forth in the preceding sentence. The balance of such awards will be forfeited. Subject to this Paragraph 9.b and to the other terms and conditions of the grants, all SARs and any similar equity-based awards will remain exercisable for the remaining term of the grant. In the case of restricted stock units that are subject to performance-based vesting criteria, except as otherwise set forth in Paragraph 25, such awards will be settled on the seventieth (70th) day after the date that such awards become vested. In the case of restricted stock units that are subject to time-based vesting criteria, such awards will be settled within thirty (30) days following your termination of employment.

10. Death. If you die prior to the end of the Employment Term, this Agreement shall be terminated as of the date of death and your beneficiary or estate shall be entitled to receive (a) your Base Salary accrued up to and including the date of death and for the period commencing on such date and ending twelve (12) months thereafter, but in no event less than one (1) year thereafter, continued Base Salary payable in accordance with Studio’s regular payroll practices applicable to similarly situated active employees, (b) equity-based compensation to be determined in the same manner and at the same time as provided in

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Paragraph 9.b, under and in accordance with any stock plan of Studio, and (c) all other benefits pro-rated up to the date on which the death occurs.

11. Termination for Cause. Studio shall have the right to terminate this Agreement at any time for cause. As used herein, the term “cause” shall mean (i) misappropriation of any material funds or property of Studio or any of its related companies; (ii) failure to obey reasonable and material orders given by the Chief Executive Officer of Studio or by the Board of Directors of Studio; (iii) any material breach of this Agreement by you; (iv) conviction of or entry of a plea of guilty or nolo contendre to a felony or a crime involving moral turpitude; (v) any willful act, or failure to act, by you in bad faith to the material detriment of Studio; or (vi) material non-compliance with established Studio policies and guidelines (after which you have been informed in writing of such policies and guidelines and you have failed to cure such non-compliance); provided that in each such case (other than (i) or (iv) or a willful failure in (ii) or repeated breaches, failures or acts of the same type or nature) prompt written notice of such cause is given to you by specifying in reasonable detail the facts giving rise thereto and that continuation thereof will result in termination of employment, and such cause is not cured within ten (10) business days after receipt by you of the first such notice. If you are terminated as set forth in this Paragraph 11, then payment of the specified Base Salary and any additional noncontingent cash compensation (including, without limitation, any equity-based compensation which has vested and expense reimbursement for expenses incurred prior to your termination) theretofore earned by you shall be payment in full of all compensation payable hereunder. If Studio terminated you hereunder, then you shall immediately reimburse Studio for all paid but unearned sums.

12. Involuntary Termination. Studio may terminate your employment other than for cause or on account of incapacity, in which case you will receive any amounts that would be payable pursuant to Paragraph 11 and will also receive, for a period equal to the Continuation Period (as defined below), (i) continued Base Salary (provided that your yearly rate of Base Salary shall be deemed to have been increased by $500,000 to reflect that you will not receive any future grants pursuant to Paragraph 4.b(ii) following termination of your employment) payable in accordance with Studio’s regular payroll practices applicable to similarly situated active employees, and (ii) Continued Benefits. In the event that any cash bonuses have been paid to you with respect to any of the three fiscal years that ended prior to the date of termination of your employment (such period, the “Bonus Look Back Period”), or in the event that you have received a grant of equity-based awards in lieu of payment of a cash bonus with respect to any fiscal year during the Bonus Look Back Period, you shall also be entitled to receive, with respect to each complete or partial calendar year that ends on or prior to the expiration of the Continuation Period with respect to which, as of the date of termination of your employment, Studio has not yet paid annual bonuses (if any) under its short term incentive plan to similarly situated active employees (each such year, a “Bonus Entitlement Year”), an annual cash payment (such payment, a “Bonus Equivalent Payment”) in an amount equal to the average of the sum of (i) the annual cash bonuses that have been paid (whether or not deferred) to you, if any, during the Bonus Look Back Period, plus (ii) the aggregate grant-date value (which value shall be determined using the same methodology employed by the Compensation Committee for determining the value of the

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relevant award at the time of grant) of each equity-based award, if any, that was granted to you in lieu of all or a portion of a cash bonus during the Bonus Look Back Period. In the event that you become entitled to a Bonus Equivalent Payment in accordance with the preceding sentence, such Bonus Equivalent Payment will be made to you no earlier than January 1 and no later than December 31 of the calendar year following the Bonus Entitlement Year to which such Bonus Equivalent Payment relates, and the Bonus Equivalent Payment relating to the calendar year for the last year of the Continuation Period shall be pro-rated based on the number of days prior to the expiration of the Continuation Period during such calendar year. For purposes of this Paragraph 12, the term “Continuation Period” shall be defined as follows: (A) in the event that your employment is terminated by Studio other than for cause or incapacity, unless such termination is during the 12-month period following a Change of Control (as defined in Paragraph 25), then “Continuation Period” shall mean the period commencing on the date of such termination and ending on the expiration of the Employment Term and (B) in the event that your employment is terminated by Studio other than for cause or incapacity during the 12-month period following a Change of Control, then “Continuation Period” shall mean the period commencing on the termination of your employment and ending on the later of the expiration of the Employment Term and the second anniversary of the termination of your employment. In the event of termination of your employment without cause pursuant to this Paragraph 12, all the equity-based compensation specified in Paragraph 4.b hereof held by you shall accelerate vesting (on the basis that any mid-range or “target” goals rather than premium goals are deemed to have been achieved) and will, subject to the other terms and conditions of the grants, remain exercisable for the remainder of the term of the grant. All outstanding restricted stock units (whether subject to time-based or performance-based vesting criteria) will be settled not later than thirty (30) days following your termination of employment. In addition, in the event that your employment is terminated without cause following the date of this Agreement and prior to the date on which Studio makes a 2008 equity compensation grant to you, in accordance with Paragraph 12 of the Prior Agreement, you shall be entitled to receive one additional equity grant of each of the following: (i) in lieu of receiving a cash bonus (if no cash bonuses have been paid) pursuant to paragraph 4.b(iii) based on the target bonus; and (ii) long term equity incentive award pursuant to Paragraph 4.b(iv). If your services are terminated pursuant to this paragraph, you shall not be obligated to secure other employment to mitigate damages incurred by Studio or any payment due you as a result of your termination hereunder. You agree that you will have no rights or remedies in the event of your termination without cause other than those set forth in the Agreement to the maximum extent required by law.

13. Termination for Good Reason. You shall be entitled to terminate this Agreement at any time for “good reason.” As used herein, the term “good reason” shall mean only: (i) any material breach of this Agreement by Studio, (ii) any diminution in title; (iii) any time that Studio shall direct or require that you report to any person other than the Chief Executive Officer; (iv) if you do not remain a member of the Board of Directors by reason of Board action or inaction (rather than negative shareholder vote); or (v) any time that Studio shall direct or require that your principal place of business be anywhere other than the Los Angeles area; provided, however, that the removal of your title as Chief Financial Officer of Studio shall not, by itself, constitute “good reason” for purposes of the

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foregoing clauses (i) and (ii). Notwithstanding anything to the contrary contained herein, you will not be entitled to terminate your employment for good reason for purposes of this Agreement as the result of any event specified in the foregoing clauses (i) through (v) unless, within ninety (90) days following the occurrence of such event, you give Studio written notice of the occurrence of such event, which notice sets forth the exact nature of the event and the conduct required to cure such event. Studio shall have thirty (30) days from the receipt of such notice within which to cure (such period, the “Cure Period”). If, during the Cure Period, such event is remedied, then you will not be permitted to terminate your employment for good reason as a result of such event. If, at the end of the Cure Period, the event that constitutes good reason has not been remedied, you will be entitled to terminate your employment for good reason during the sixty (60) day period that follows the end of the Cure Period. If you do not terminate your employment during such sixty (60) day period, you will not be permitted to terminate your employment for good reason as a result of such event. In the event of your voluntary termination for good reason, you shall be entitled to the payments, benefits (including the post-term continuation of the applicable benefits) and equity-based compensation provided under Paragraph 12 for involuntary termination without cause. If your services are terminated pursuant to this paragraph, you shall not be obligated to secure other employment to mitigate damages incurred by Studio or any payment due you as a result of your termination hereunder. You agree that you will have no rights or remedies in the event of your termination for good reason other than those set forth in the Agreement to the maximum extent allowed by law.

14. Name/Likeness. During the Employment Term, Studio shall have the right to use your name, biography and likeness in connection with its business as follows: You shall promptly submit to Studio a biography of yourself. Provided that you timely submit such biography, Studio shall not use any other biographical information other than contained in such biography so furnished, other than references to your prior professional services and your services hereunder, without your prior approval (which approval shall not be unreasonably withheld). If you fail to promptly submit a biography, then you shall not have the right to approve any biographical material used by Studio. You shall have the right to approve any likeness of you used by Studio. Nothing herein contained shall be construed to authorize the use of your name, biography or likeness to endorse any product or service or to use the same for similar commercial purposes.

15. Section 317 and 508 of the Federal Communications Act. You represent that you have not accepted or given, nor will you accept or give, directly or indirectly, any money, services or other valuable consideration from or to anyone other than Studio for the inclusion of any matter as part of any film, television program or other production produced, distributed and/or developed by Studio and/or any of its affiliates.

16. Equal Opportunity Employer. You acknowledge that Studio is an equal opportunity employer. You agree that you will comply with Studio policies regarding employment practices and with applicable federal, state and local laws prohibiting discrimination or harassment.

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17. Notices. All notices required to be given hereunder shall be given in writing, by personal delivery or by mail and confirmed by fax at the respective addresses of the parties hereto set forth above, or at such address as may be designated in writing by either party, and in the case of Studio, to the attention of the General Counsel of Studio. A courtesy copy of any notice to you hereunder shall be sent to Munger, Tolles & Olson LLP, 355 South Grand Avenue, 35th Floor, Los Angeles, CA 90071-1560, Fax: (213) 683-5137, Attn: Rob Knauss. Any notice given by mail shall be deemed to have been given three (3) business days following such mailing.

18. Assignment. This is an Agreement for the performance of personal services by you and may not be assigned by you (other than the right to receive payments which may be assigned to a company, trust or foundation owned or controlled by you) and any purported assignment in violation of the foregoing shall be deemed null and void. Studio may assign this Agreement or all or any part of its rights hereunder to any entity which acquires all or substantially all of the assets of Studio and this Agreement shall inure to the benefit of such assignee, provided your duties do not materially change.

19. California Law. This Agreement and all matters or issues collateral thereto shall be governed by the laws of the State of California applicable to contracts entered into and performed entirely therein.

20. No Implied Contract. The parties intend to be bound only upon execution of this Agreement and no negotiation, exchange or draft or partial performance shall be deemed to imply an agreement. Neither the continuation of employment or any other conduct shall be deemed to imply a continuing agreement upon the expiration of this Agreement.

21. Entire Understanding. This Agreement contains the entire understanding of the parties hereto relating to the subject matter herein contained, and can be changed only by a writing signed by both parties hereto.

22. Void Provisions. If any provision of this Agreement, as applied to either party or to any circumstances, shall be adjudged by a court to be void or unenforceable, the same shall be deemed stricken from this Agreement and shall in no way affect any other provision of this Agreement or the validity or enforceability of this Agreement. In the event any such provision (the “Applicable Provision”) is so adjudged void or unenforceable, you and Studio shall take the following actions in the following order: (i) seek judicial reformation of the Applicable Provision; (ii) negotiate in good faith with each other to replace the Applicable Provision with a lawful provision; and (iii) have an arbitration as provided in Paragraph 24 hereof determine a lawful replacement provision for the Applicable Provision; provided, however, that no such action pursuant to either of clauses (i) or (iii) above shall increase in any respect your obligations pursuant to the Applicable Provision.

23. Survival Modification of Terms. Your obligations under Paragraph 8 hereof shall remain in full force and effect for the entire period provided therein,

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notwithstanding the termination of the Employment Term pursuant to Paragraph 11 hereof or otherwise. Studio’s obligations under Paragraphs 6 (with respect to expenses theretofore incurred) and 7 hereof shall survive indefinitely the termination of this Agreement regardless of the reason for such termination. Further, Paragraphs 4.b(vi), 9, 10, 12 and 13 will continue to govern your entitlement, if any, to benefits and equity based compensation after the termination of the Employment Term, and Paragraph 24 will continue to govern any Claims (as defined below) by one party against the other.

24. Arbitration of Disputes. Any controversy or claim by you against Studio or any of its parent companies, subsidiaries, affiliates (and/or officers, directors, employees, representatives or agents of Studio and such parent companies, subsidiaries and/or affiliates), including any controversy or claim arising from, out of or relating to this Agreement, the breach thereof, or the employment or termination thereof of you by Studio which would give rise to a claim under federal, state or local law (including, but not limited to, claims based in tort or contract, claims for discrimination under state or federal law, and/or claims for violation of any federal, state or local law, statute or regulation), or any claim against you by Studio (individually and/or collectively, “Claim(s)”) shall be submitted to an impartial mediator (“Mediator”) selected jointly by the parties. Both parties shall attend a mediation conference in Los Angeles County, California and attempt to resolve any and all Claims. If the parties are not able to resolve all Claims, then upon written demand for arbitration to the other party, which demand shall be made within a reasonable time after the Claim has arisen, any unresolved Claims shall be determined by final and binding arbitration in Los Angeles, California, in accordance with the Model Employment Procedures of the American Arbitration Association (collectively, “Rules”) by a neutral arbitrator experienced in employment law, licensed to practice law in California, in accordance with the Rules, except as herein specified. In no event shall the demand for arbitration be made after the date when the institution of legal and/or equitable proceedings based upon such Claim would be barred by the applicable statute of limitations. Each party to the arbitration will be entitled to be represented by counsel and will have the opportunity to take depositions in Los Angeles, California of any opposing party or witnesses selected by such party and/or request production of documents by the opposing party before the arbitration hearing. By mutual agreement of the parties, additional depositions may be taken at other locations. In addition, upon a party’s showing of need for additional discovery, the arbitrator shall have discretion to order such additional discovery. You acknowledge and agree that you are familiar with and fully understand the need for preserving the confidentiality of Studio’s agreements with third parties and compensation of Studio’s employees. Accordingly, you hereby agree that to the extent the arbitrator determines that documents, correspondence or other writings (or portions thereof) whether internal or from any third party, relating in any way to your agreements with third parties and/or compensation of other employees are necessary to the determination of any Claim, you and/or your representatives may discover and examine such documents, correspondence or other writings only after execution of an appropriate confidentiality agreement. Each party shall have the right to subpoena witnesses and documents for the arbitration hearing. A court reporter shall record all arbitration proceedings. With respect to any Claim brought to arbitration hereunder, either party may be entitled to recover whatever damages would otherwise be available to that party in any legal proceeding based upon the federal and/or

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state law applicable to the matter. The arbitrator shall issue a written decision setting forth the award and the findings and/or conclusions upon which such award is based. The decision of the arbitrator may be entered and enforced in any court of competent jurisdiction by either Studio or you. Notwithstanding the foregoing, the result of any such arbitration shall be binding but shall not be made public (including by filing a petition to confirm the arbitration award), unless necessary to confirm such arbitration award after non-payment of the award for a period of at least fifteen (15) days after notice to Studio of the arbitrator’s decision. Each party shall pay the fees of their respective attorneys (except as otherwise awarded by the arbitrator), the expenses of their witnesses, and all other expenses connected with presenting their Claims or defense(s). Other costs of arbitration shall be borne by Studio. Except as set forth below, should you or Studio pursue any Claim covered by this Paragraph 24 by any method other than said arbitration, the responding party shall be entitled to recover from the other party all damages, costs, expenses, and reasonable outside attorneys’ fees incurred as a result of such action. The provisions contained in this Paragraph 24 shall survive the termination of your employment with Studio. Notwithstanding anything set forth above, you agree that any breach or threatened breach of this Agreement (particularly, but without limitation, with respect to Paragraphs 3 and 8, above) may result in irreparable injury to Studio, and therefore, in addition to the procedures set forth above, Studio may be entitled to file suit in a court of competent jurisdiction to seek a Temporary Restraining Order and/or preliminary or permanent injunction or other equitable relief to prevent a breach or contemplated breach of such provisions.

25. Change of Control.

a. Except as set forth in Paragraph 25.b, 25.c or 25.g below, in the event of a “change of control” all unvested equity-based compensation held by you shall remain unvested and shall continue to vest in accordance with its terms, without regard to the occurrence of the change of control; provided, however, that unless provision is made in connection with the change of control for (i) assumption of such outstanding equity-based compensation or (ii) substitution for such equity-based compensation of new awards covering stock of a successor corporation or its “parent corporation” (as defined in Section 424(e) of the Code) or “subsidiary corporation” (as defined in Section 424(f) of the Code) with appropriate adjustments as to the number and kinds of shares and the exercise price, if applicable, in each case, that preserve the material terms and conditions of such outstanding equity-based compensation as in effect immediately prior to the change of control (including, without limitation, with respect to the vesting schedules, the intrinsic value of the awards (if any) as of the change of control and transferability of the shares underlying such awards), all such equity-based compensation shall accelerate vesting (on the basis that any mid-range or “target” goals rather than premium goals are deemed to have been achieved) immediately prior to such change of control, in which case, all outstanding restricted stock units (whether subject to time-based or performance-based vesting criteria) will be settled not later than the tenth (10th) day following the date of such change of control. Notwithstanding the foregoing, in the event that payment of any amount that would otherwise be paid pursuant to the proviso in the immediately preceding sentence would result in a violation of Section 409A, then your rights to payment of such amount will become vested pursuant to such proviso and the amount of such payment shall be determined as of the change of control, but such amount shall not be paid to you until the earliest time permitted under Section 409A.

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b. Except as set forth in Paragraph 25.g below, in the event that, during the 12-month period following a change of control, your employment is terminated by Studio other than for cause or by you for good reason, then notwithstanding any provision of this Agreement or any other agreement between you and Studio, all equity-based compensation held by you shall accelerate vesting (on the basis that any mid-range or “target” goals rather than premium goals are deemed to have been achieved) and, subject to the other terms and conditions of the grants, remain exercisable for the remainder of the term of the grant. All outstanding restricted stock units (whether subject to time-based or performance-based vesting criteria) will be settled not later than the tenth (10th) day following the date of termination of your employment.

c. Notwithstanding any provision in this Agreement to the contrary, in order to avoid taxes and penalties under Section 409A, in the event that a change of control (as defined in the Prior Agreement) occurs prior to December 31, 2008, provided that you remain employed by Studio until the occurrence of such change of control, all then outstanding Prior Agreement RSUs shall, in accordance with Paragraph 25 of the Prior Agreement, be settled within 10 (ten) days following such change of control; provided, however, that Studio shall withhold from the Shares to be delivered in settlement thereof a number of Shares sufficient to satisfy applicable tax withholding obligations and shall permit you to sell a number of additional Shares sufficient to pay any other marginal income taxes with respect thereto, and all other Shares delivered to you shall be nontransferable until the earliest of (i) December 31, 2011, (ii) the originally scheduled vesting date of the applicable restricted stock units, (iii) the 30th day following the date of your death or (iv) the date that the vesting of such restricted stock units otherwise would have accelerated in accordance with this Agreement.

d. Except as set forth in Paragraph 25.g below, for purposes of this Agreement, “change of control” shall mean the occurrence of any of the following events:

(i) during any period of fourteen (14) consecutive calendar months, individuals who were directors of Studio on the first day of such period (the “Incumbent Directors”) cease for any reason to constitute a majority of the Board of Directors of Studio (the “Board”); provided, however, that any individual becoming a director subsequent to the first day of such period whose election, or nomination for election, by Studio’s stockholders was approved by a vote of at least a majority of the Incumbent Directors shall be considered as though such individual were an Incumbent Director, but excluding, for purposes of this proviso, any such individual whose initial assumption of office occurs as a result of an actual or threatened proxy contest with respect to election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a “person” (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (each, a “Person”), in each case other than the management of Studio, the Board or the holders of Studio’s Class B common stock par value $0.01;

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(ii) the consummation of (A) a merger, consolidation, statutory share exchange or similar form of corporate transaction involving (x) Studio or (y) any of its Subsidiaries, but in the case of this clause (y) only if Studio Voting Securities (as defined below) are issued or issuable (each of the events referred to in this clause (A) being hereinafter referred to as a “Reorganization”) or (B) the sale or other disposition of all or substantially all the assets of Studio to an entity that is not an Affiliate (a “Sale”), in each such case, if such Reorganization or Sale requires the approval of Studio’s stockholders under the law of Studio’s jurisdiction of organization (whether such approval is required for such Reorganization or Sale or for the issuance of securities of Studio in such Reorganization or Sale), unless, immediately following such Reorganization or Sale, (1) all or substantially all the individuals and entities who were the “beneficial owners” (as such term is defined in Rule 13d-3 under the Exchange Act (or a successor rule thereto)) of the securities eligible to vote for the election of the Board (“Studio Voting Securities”) outstanding immediately prior to the consummation of such Reorganization or Sale beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities of the corporation resulting from such Reorganization or Sale (including, without limitation, a corporation that as a result of such transaction owns Studio or all or substantially all Studio’s assets either directly or through one or more subsidiaries) (the “Continuing Corporation”) in substantially the same proportions as their ownership, immediately prior to the consummation of such Reorganization or Sale, of the outstanding Studio Voting Securities (excluding any outstanding voting securities of the Continuing Corporation that such beneficial owners hold immediately following the consummation of the Reorganization or Sale as a result of their ownership prior to such consummation of voting securities of any company or other entity involved in or forming part of such Reorganization or Sale other than Studio), (2) no Person (excluding (x) any employee benefit plan (or related trust) sponsored or maintained by the Continuing Corporation or any corporation controlled by the Continuing Corporation, (y) Jeffrey Katzenberg and (z) David Geffen) beneficially owns, directly or indirectly, 40% or more of the combined voting power of the then outstanding voting securities of the Continuing Corporation and (3) at least 50% of the members of the board of directors of the Continuing Corporation were Incumbent Directors at the time of the execution of the definitive agreement providing for such Reorganization or Sale or, in the absence of such an agreement, at the time at which approval of the Board was obtained for such Reorganization or Sale;

(iii) the stockholders of Studio approve a plan of complete liquidation or dissolution of Studio; or

(iv) any Person, corporation or other entity or “group” (as used in Section 14(d)(2) of the Exchange Act) (other than (A) Studio, (B) any trustee or other fiduciary holding securities under an employee benefit plan of Studio or an Affiliate or (C) any company owned, directly or indirectly, by the stockholders of Studio in substantially the same proportions as their ownership of the voting power of Studio Voting Securities) becomes the beneficial owner, directly or indirectly, of securities of Studio representing 40% or more of the combined voting power of Studio Voting Securities but only if the percentage so owned exceeds the aggregate percentage of the combined voting power of

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Studio Voting Securities then owned, directly or indirectly, by Jeffrey Katzenberg and David Geffen; provided, however, that for purposes of this subparagraph (iv), the following acquisitions shall not constitute a change of control: (x) any acquisition directly from Studio or (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Studio or an Affiliate.

e. In the event that it is determined that any payment (other than the Gross-Up Payments provided for in this Paragraph 25.e) or distribution by Studio or any of its affiliates to you or for your benefit, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto), by reason of being considered “contingent on a change in the ownership or effective control” of Studio, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the “Excise Tax”), then subject to Paragraphs 25.f and 25.g, you will be entitled to receive (or have paid to the applicable taxing authority on your behalf) an additional payment or payments (collectively, a “Gross-Up Payment”). Any Gross-Up Payment that you become entitled to pursuant to this Paragraph 25.e will be paid to you (or to the applicable taxing authority on your behalf) as promptly as practicable and in any event not later than the last day of the calendar year after the calendar year in which the applicable Excise Tax is paid. The Gross-Up Payment will be in an amount such that, after payment by you of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, you retain (or receive the benefit of a payment to the applicable taxing authority of) an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. For purposes of determining the amount of the Gross-Up Payment, you will be considered to pay (i) federal income taxes at the highest generally applicable rate (plus any applicable Excise Tax) in effect in the year in which the Gross-Up Payment will be made and (ii) state and local income taxes at the highest generally applicable rate (plus any applicable Excise Tax) in effect in the state or locality in which the Gross-Up Payment would be subject to state or local tax, net of the maximum reduction in federal income tax that could be obtained from deduction of such state and local taxes.

f. Notwithstanding any provision of the foregoing Paragraph 25.e but subject to Paragraph 25.g, if it shall be determined (by the reasonable computation by a nationally recognized certified public accounting firm that shall be selected by Studio (the “Accountant”), which determination shall be certified by the Accountant and set forth in a certificate delivered to you) that the aggregate amount of the payments, distributions, benefits and entitlements of any type payable by Studio or any affiliate to or for your benefit (including any payment, distribution, benefit or entitlement made by any person or entity effecting a change of control), in each case, that could be considered “parachute payments” within the meaning of Section 280G of the Code (such payments, the “Parachute

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Payments”) that, but for this Paragraph 25.f, would be payable to you, does not exceed 110% of the greatest amount of Parachute Payments that could be paid to you without giving rise to any liability for the Excise Tax in connection therewith (such greatest amount, the “Floor Amount”), then: (A) no Gross-Up Payment shall be made to you; and (B) the aggregate amount of Parachute Payments payable to you shall be reduced (but not below the Floor Amount) to the largest amount which would both (1) not cause any Excise Tax to be payable by you, and (2) not cause any portion of the Parachute Payments to become nondeductible by reason of Section 280G of the Code (or any successor provision). You shall be permitted to provide Studio with written notice specifying which of the Parachute Payments will be subject to reduction or elimination; provided, however, that to the extent that your ability to exercise such authority would cause any Parachute Payment to become subject to any taxes or penalties pursuant to Section 409A, or if you do not provide Studio with any such written notice, Studio shall reduce or eliminate the Parachute Payments by first reducing or eliminating the portion of the Parachute Payments that are payable in cash and then by reducing or eliminating the non-cash portion of the Parachute Payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the date of the Accountant’s determination. Except as set forth in the preceding sentence, any notice given by you pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing your rights and entitlements to any benefits or compensation.

g. If, (i) at the time of a change of control (within the meaning of either Paragraph 25.d or this Paragraph 25.g) or (ii) upon the occurrence of a change in the ownership or effective control of Studio or a change in the ownership of a substantial portion of Studio’s assets (within the meaning of Section 280G of the Code), any other executive officer of Studio has an employment agreement that provides for (A) in the case of the foregoing clause (i), (1) accelerated vesting of equity compensation awards on terms that are more favorable to such executive officer than Paragraphs 25.a and 25.b, (2) a definition of “change of control” that is more favorable to such executive officer than the definition set forth in Paragraph 25.d or (3) a period of protection following a change of control during which enhanced severance will be paid if the executive officer is terminated during such period that is longer than the 12-month period set forth in the definition of Continuation Period (as defined in Paragraph 12), or (B) in the case of the foregoing clause (ii), a gross-up for the excise tax imposed by Section 4999 of the Code on terms that are more favorable to such executive officer than Paragraphs 25.e and 25.f, then, in each case, notwithstanding any provision of this Paragraph 25 to the contrary, you shall be entitled to the more favorable terms applicable to such executive officer.

26. Miscellaneous. You agree that Studio may deduct and withhold from your compensation hereunder the amounts required to be deducted and withheld under the provisions of the Federal and California Income Tax Acts, Federal Insurance Contributions Act, California Unemployment Insurance Act, any and all amendments thereto, and other statutes heretofore or hereafter enacted requiring the withholding of compensation. All of Studio’s obligations in this Agreement are expressly conditioned upon you completing and delivering to Studio an Employment Eligibility Form (“Form I-9”) (in form satisfactory to Studio) and in connection therewith, you submitting to Studio original documentation demonstrating your employment eligibility.

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27. Section 409A.

a. It is intended that the provisions of this Agreement comply with Section 409A, and all provisions of this Agreement shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A.

b. Neither you nor any of your creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A) payable under this Agreement or under any other plan, policy, arrangement or agreement of or with Studio or any of its affiliates (this Agreement and such other plans, policies, arrangements and agreements, the “Company Plans”) to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to you or for your benefit under any Company Plan may not be reduced by, or offset against, any amount owing by you to Studio or any of it affiliates.

c. If, at the time of your separation from service (within the meaning of Section 409A), (i) you shall be a specified employee (within the meaning of Section 409A and using the identification methodology selected by Studio from time to time) and (ii) Studio shall make a good faith determination that an amount payable under a Company Plan constitutes deferred compensation (within the meaning of Section 409A) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then Studio (or its affiliate, as applicable) shall not pay such amount on the otherwise scheduled payment date but shall instead accumulate such amount and pay it, together with interest credited at the Applicable Federal Rate in effect as of the date of your termination of employment, on the first business day after such six-month period.

d. Notwithstanding any provision of this Agreement or any Company Plan to the contrary, in light of the uncertainty with respect to the proper application of Section 409A, Studio reserves the right to make amendments to any Company Plan as Studio deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A. In any case, except as provided in Paragraph 25.e of this Agreement, you are solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on you or for your account in connection with any Company Plan (including any taxes and penalties under Section 409A), and neither Studio nor any affiliate shall have any obligation to indemnify or otherwise hold you harmless from any or all of such taxes or penalties.

Page 19

e. For purposes of Section 409A, each of (i) the installments at a rate equal to 50% of your Base Salary, as provided in Paragraph 9, and (ii) the installments of continued Base Salary, as provided in Paragraphs 10 and 12, will be deemed to be a separate payment as permitted under Treasury Regulation Section 1.409A-2(b)(2)(iii).

If the foregoing correctly sets forth your understanding, please sign one copy of this letter and return it to the undersigned, whereupon this letter shall constitute a binding agreement between us.

Very truly yours,
DREAMWORKS ANIMATION SKG, INC.
By:	/s/ Roger Enrico
Its:	Chairman

ACCEPTED AND AGREED AS OF THE

DATE FIRST ABOVE WRITTEN:

/s/ Lew Coleman

LEW COLEMAN

Page 20

EXHIBIT A

Northrup Grumman Corporation

Diversified Credit Investment

Page 21

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULE 13A – 14(A) OR 15D – 14(A),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey Katzenberg, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of DreamWorks Animation SKG, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 29, 2008	/s/    JEFFREY KATZENBERG
	Jeffrey Katzenberg, Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13A – 14(A) OR 15D – 14(A),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lewis W. Coleman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of DreamWorks Animation SKG, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 29, 2008	/s/    LEWIS W. COLEMAN
	Lewis W. Coleman, President and Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification Pursuant to

18 U.S.C. Section 1350

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of DreamWorks Animation SKG, Inc., a Delaware corporation (the “Company”), for the period ending June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 29, 2008	/s/    JEFFREY KATZENBERG
	Jeffrey Katzenberg Chief Executive Officer
Dated: July 29, 2008	/s/    LEWIS W. COLEMAN
	Lewis W. Coleman President and Chief Financial Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002, or other document authenticating, acknowledging or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.