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                                                                   Exhibit 10.18

                         DREAMWORKS ANIMATION SKG, INC.
                               1000 FLOWER STREET
                               GLENDALE, CA 91201

                              As of October 8, 2004

Katherine Kendrick
c/o Munger, Tolles & Olsen LLP
355 South Grand Avenue
35th Floor
Los Angeles, CA 90071
Attn: Rob Knauss

Dear Katherine:

      Upon the date ("Effective Date") of the closing ("Closing") of the initial
public offering ("IPO") of DreamWorks Animation SKG, Inc. ("Studio"), Studio
agrees to employ you and you agree to accept such employment upon the terms and
conditions set forth below. In the event the Closing fails to occur for any
reason by June 28, 2005, this agreement ("Agreement") shall be null and void.

      1. TERM. The term of your employment hereunder shall commence on the
Effective Date and shall continue for a period of five (5) years thereafter.
This period shall hereinafter be referred to as the "Employment Term."

      2. DUTIES/RESPONSIBILITIES.

      a. General. Your title shall be "General Counsel" of Studio. You shall
have such duties and responsibilities as are consistent with the traditional
positions of General Counsel of publicly traded major entertainment and media
corporations.

      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 and Chief Operating Officer of Studio, all as
hereinafter set forth. Notwithstanding the foregoing, Studio may not require you
to render services on a permanent basis outside Los Angeles County without your
consent. If Studio moves its primary operations outside of Los Angeles County
and you do not consent to render permanent services at such new location, then
you may elect to terminate this Agreement.

      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 Studio's services
hereunder, or become financially interested in any other person engaged in the
production, distribution or exhibition of motion

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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 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.

      4. COMPENSATION.

            a. Base Salary. For all services rendered under this Agreement,
Studio will pay you a yearly base salary rate of Five Hundred Seventy Five
Thousand Dollars ($575,000.00) for the first full year of the Employment Term,
and Six Hundred Thousand Dollars ($600,000.00) for each of the second, third,
fourth and fifth full years of the Employment Term, payable in accordance with
Studio's applicable payroll practices ("Base Salary").

            b. Equity-Based Compensation.

            (i) It is Studio's present expectation, subject to the approval of
the Compensation Committee of the Board of Directors of Studio (the
"Compensation Committee"), that, upon the pricing date of the IPO, you will
receive, pursuant to the equity compensation plan to be adopted by Studio (the
"Plan"), stock options with respect to Studio's Class A common stock ("Options")
having a grant-date value of approximately $820,000 vesting over four (4) years,
and restricted stock units ("RSUs") having a grant-date value of $2,330,000
which shall be fully vested on the grant-date (or, in lieu of Options and RSUs,
such other form of equity-based compensation as the Compensation Committee may
determine) (the "Initial Grants"). In the event that the Closing fails to occur
for any reason by June 28, 2005, then the Initial Grants will be automatically
canceled and you will be entitled to no payments or benefits with respect
thereto.

            (ii) You will also be eligible, while you remain employed hereunder,
commencing for the year 2005 (with the amount of the award for 2005 anticipated
to be determined in the first quarter of 2006), subject to annual approval by
the Compensation Committee, to receive annual awards of Options and restricted
shares of Studio's Class A common stock ("Restricted Stock") vesting over four
(4) years (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, depending on company
performance, ranging between $300,000 (bonus target) and $600,000 (in the case
of superior company performance). In the event that such awards consist of
Options and Restricted Stock, they shall be divided, as determined by the
Compensation Committee, between Options 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.


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            (iii) In addition, you will be eligible, while you remain employed
hereunder, commencing in 2006, subject to annual approval by the Compensation
Committee, to receive annual equity incentive awards of Options and Restricted
Stock vesting over four (4) years (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 $1,500,000. In the event that such awards consist
of Options and Restricted Stock, they shall be divided, as determined by the
Compensation Committee, between Options and Restricted Stock.

            (iv) All Options, RSUs 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
(and, in the case of the Initial Grants, taking into account the IPO price to
the public without regard to the underwriters' discount), (y) become fully
vested, exercisable (if applicable) and nonforfeitable within a period not to
exceed four (4) years from the date of 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 9, 10, 11, 12 and 13)
and the achievement of performance goals as established by the Compensation
Committee from time to time (except that the Initial Grants shall not be subject
to the achievement of performance goals and the Initial Grants that are fully
vested RSUs shall not be subject to the continuing performance of services), and
(z) otherwise be subject to such terms and conditions as may be set forth in the
Plan or determined by the Compensation Committee from time to time. Upon the
expiration of the Employment Term (i.e., five (5) years after the Effective
Date) but only if your employment hereunder has not been terminated earlier, (x)
you will be entitled to all equity based compensation vested as of such date,
and (y) provided Studio does not continue to employ you and solely with respect
to any grant of equity based compensation previously awarded to you that is
subject to cliff vesting (i.e., is not eligible for vesting prior to the end of
the applicable four-year period), you will have the opportunity, on the
previously established vesting date for such grant and provided that all the
terms and conditions of such grant (including any performance-based criteria)
have been satisfied, to vest in the portion of such grant that would have been
eligible for vesting prior to the expiration of the Employment Term if such
grant had been eligible for 25% vesting on each of the anniversaries of such
grant.

      5. BENEFITS. In addition to the foregoing, 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 coverage in accordance
with Studio's standard leave of absence policy and 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


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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 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). Studio will provide you with a monthly car
allowance of One Thousand Dollars ($1,000), which shall be administered in
accordance with Studio's then-current policy for similarly situated executives.

      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
entity 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 advanced).

      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 be
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


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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 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,
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) day 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.


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      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 term hereof, 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) 50% of the specified Base Salary
for the remainder of the then current Employment Term, but not to exceed two (2)
years, 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
below, car allowance which has accrued prior to your termination, 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 and other 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). 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 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 inclusive of 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 inclusive of 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 your grants of equity-based compensation will be determined as
follows. Your rights to receive or exercise the awards provided by the grants
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. You will be entitled to
receive or exercise a ratable portion of the amount of each award determined in
the preceding sentence, calculated 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 specified in
the grant. 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 Options
any similar equity-based awards will remain exercisable for the remaining term
of the grant.

      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


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receive (a) your Base Salary accrued to date and for 12 months thereafter, but
not to exceed the end of the then current Employment Term, (b) equity-based
compensation to be determined in the same manner and at the same time as
provided in 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 and Chief Operating 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
continuation of Base Salary and benefits as specified herein, until the end of
the Employment Term. In the event that cash bonuses have been paid, you shall
also be entitled to receive through the end of the Employment Term an annual
cash amount equal to the average annual cash bonuses that had been paid to you,
if any (e.g., if you are terminated pursuant to this Paragraph 12 after three
and one-half (3-1/2) years of employment, the annual cash bonus payable to you
at the end of each of years four and five will be an amount equal to the
aggregate of the cash bonuses, if any, paid to you at the end of years one, two
and three divided by the number of full years of your employment prior to
termination [i.e., three (3), in this example]). 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; however, you will not be entitled to receive any
future equity-based compensation. 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


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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) failure to be the most senior legal officer
of Studio; (iv) any time that Studio shall direct or require that you report to
any person other than the Chief Executive Officer and Chief Operating Officer;
or (v) any time that Studio shall direct or require that your principal place of
business be anywhere other than the Los Angeles area. Notwithstanding anything
to the contrary contained herein, you will give Studio written notice prior to
terminating this Agreement pursuant to the foregoing, setting forth the exact
nature of any alleged breach and the conduct required to cure such breach.
Studio shall have thirty (30) days from the receipt of such notice within which
to cure. In the event of your voluntary termination for good reason, you shall
be entitled to the payments, benefits (including the post-term assumption of the
applicable benefits) and equity-based compensation proved 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 Corporate Secretary 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.


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      23. SURVIVAL MODIFICATION OF TERMS. Your obligations under Paragraph 8
hereof shall remain in full force and effect for the entire period provided
therein, 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(iv), 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


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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 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. In the event of a "change of control", 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.

      a. For purposes of this Agreement, "change of control" shall mean the
occurrence of any of the following events, not including any events occurring
prior to or in connection with the Closing (including the occurrence of the
Closing):

            (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


                                      -11-
<PAGE>

"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;

            (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, 20% or more of the combined voting power of the then
outstanding voting securities of the Continuing Corporation and (3) at least a
majority 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)


                                      -12-
<PAGE>

becomes the beneficial owner, directly or indirectly, of securities of Studio
representing 20% 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 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.

      b. In the event that it is determined that any payment (other than the
Gross-Up Payments provided for in this Paragraph 25.b) 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 Internal Revenue Code of 1986, as amended (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 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").
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 rate in effect in the
year in which the Gross-Up Payment will be made and (ii) state and local income
taxes at the highest rate 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.

      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.


                                      -13-
<PAGE>


      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/ Kristina M. Leslie
                                         ---------------------------------------
                                      Its: Chief Financial Officer
                                          --------------------------------------


ACCEPTED AND AGREED AS OF THE
DATE FIRST ABOVE WRITTEN:




/s/ Katherine Kendrick
------------------------------------
KATHERINE KENDRICK



                                      -14-