Document:

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                                                                   EXHIBIT 10.25

                              STANDSTILL AGREEMENT

                                      Among

                         DREAMWORKS ANIMATION SKG, INC.,

                                STEVEN SPIELBERG,

                                 DW LIPS, L.P.,

                          M&J K B LIMITED PARTNERSHIP,

                                   DG-DW, L.P.

                                       and

                             DW INVESTMENT II, INC.

                          Dated As Of October [ ], 2004
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                                    STANDSTILL AGREEMENT, dated as of October
                           [ ], 2004, among DREAMWORKS ANIMATION SKG, INC., a
                           Delaware corporation (the "Company"), DW LIPS, L.P.,
                           a California limited liability partnership ("DW
                           Lips"), M&J K B LIMITED PARTNERSHIP, a Delaware
                           limited partnership ("M&J K B") (solely for purposes
                           of Section 4.06(b)), DG-DW, L.P., a Delaware limited
                           partnership ("DG-DW") (solely for purposes of Section
                           4.06(b)), DW INVESTMENT II, INC., a Washington
                           corporation ("DWI II") (solely for purposes of
                           Section 4.06(b)), and STEVEN SPIELBERG.

                  WHEREAS, DreamWorks L.L.C., a Delaware limited liability
company ("DW"), and the Company, together with other parties, have entered into
a Separation Agreement dated as of October [ ], 2004, providing for the
separation of the animation business (the "Separation") from DW;

                  WHEREAS, after the Separation, the Company intends to sell
shares of its Class A Common Stock, par value $0.01 per share ("Class A Stock"),
in a public offering (the "Offering");

                  WHEREAS, immediately following the consummation of the
Offering, DW Lips will own approximately [ ]% of the Company's issued and
outstanding Class A Stock; and

                  WHEREAS, each of the parties desires to enter into this
Agreement (as defined below);

                  NOW, THEREFORE, in consideration of the foregoing and the
respective covenants and agreements set forth herein, and intending to be
legally bound hereby, the parties hereto agree as follows:

                                   ARTICLE I

                                   Definitions

                  Section 1.01. Certain Defined Terms. As used in this
Agreement:

                  "Affiliate" means, with respect to any Person, any other
Person that directly, or indirectly through one or more intermediaries,
Controls, is Controlled By or is Under Common Control With, such specified
Person.

                  "Agreement" means this Standstill Agreement, as it may be
amended, supplemented, restated or modified from time to time.

                  "Beneficial Owner" or "Beneficially Own" has the meaning
assigned to such term in Rule 13d-3 under the Exchange Act and a Person's
beneficial ownership of Common Stock shall be calculated in accordance with the
provisions of such Rule.

                  "Board" means the Board of Directors of the Company.
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                  "Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
The City of New York.

                  "By-laws" means the By-laws of the Company, as amended or
restated from time to time.

                  "Charter" means the Restated Certificate of Incorporation of
the Company, as amended or restated from time to time.

                  "Class A Stock" has the meaning assigned to such term in the
recitals hereto.

                  "Class B Holder" means any Person who shall hold of record
shares of Class B Stock.

                  "Class B Stock" has the meaning assigned to such term in the
Vulcan Stockholder Agreement.

                  "Common Stock" has the meaning assigned to such term in the
Vulcan Stockholder Agreement.

                  "Company" has the meaning assigned to such term in the
preamble hereto.

                  "Control" (including the terms "Controlled By" and "Under
Common Control With") has the meaning assigned to such term in the Charter as in
effect at consummation of the Offering.

                  "DG-DW" has the meaning assigned to such term in the preamble
hereto.

                  "Director" means any member of the Board.

                  "DW" has the meaning assigned to such term in the recitals
hereto.

                  "DW Lips" has the meaning assigned to such term in the
preamble hereto.

                  "DWI II" has the meaning assigned to such term in the preamble
hereto.

                  "Exchange Act" means the U.S. Securities Exchange Act of 1934,
as amended.

                  "Family Group" has the meaning assigned to such term in the
Vulcan Stockholder Agreement.

                  "Final Allocation" has the meaning assigned to such term in
the Holdco LLLP Agreement as in effect at consummation of the Offering.

                  "Group" has the meaning assigned to such term in Section
13(d)(3) of the Exchange Act.

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                  "Holdco LLLP Agreement" means the limited liability limited
partnership agreement of Holdco, dated as of October [ ], 2004, as it may be
amended, supplemented, restated or modified from time to time.

                  "KG Termination Date" has the meaning assigned to such term in
the Vulcan Stockholder Agreement.

                  "M&J K B" has the meaning assigned to such term in the
preamble hereto.

                  "Offering" has the meaning assigned to such term in the
recitals hereto.

                  "Person" has the meaning assigned to such term in the Charter
(as modified in Section 2(f) of Article IV thereof) as in effect at consummation
of the Offering.

                  "Principal Holder" has the meaning assigned to such term in
the Vulcan Stockholder Agreement.

                  "Proceeding" has the meaning assigned to such term in Section
4.09.

                  "SEC" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act or the Exchange Act.

                  "Securities Act" means the U.S. Securities Act of 1933, as
amended.

                  "Separation" has the meaning assigned to such term in the
recitals hereto.

                  "Separation Date" has the meaning assigned to such term in the
Vulcan Stockholder Agreement.

                  "Spielberg Parties" means Steven Spielberg, DW Lips and any
Person Controlled By Steven Spielberg.

                  "Vulcan Stockholder Agreement" means the Stockholder
Agreement, dated as of October [ ], 2004, among the Company, [Holdco] LLLP, M&J
K B, M&J K Dream Limited Partnership, The JK Annuity Trust, The MK Annuity
Trust, Katzenberg 1994 Irrevocable Trust, DG-DW, DWI II, Jeffrey Katzenberg,
David Geffen and Paul Allen as in effect at consummation of the Offering.

                  Section 1.02. Other Definitional Provisions. (a) The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Article and Section references are to this
Agreement unless otherwise specified. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".

                  (b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.

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                                   ARTICLE II

                                   Standstill

                  Section 2.01. Standstill Restrictions. Each of Steven
Spielberg and DW Lips covenants and agrees with the Company that they shall not,
and shall cause each Spielberg Party not to, prior to the earlier of (i) the
fifth anniversary of the date of this Agreement and (ii) the KG Termination
Date, directly or indirectly, alone or in concert with others, unless
specifically requested in writing by a Principal Holder or by a resolution of a
majority of the Directors or pursuant to a transaction (x) in which the Company
has entered into a definitive agreement or (y) the Board has recommended in
favor of, take any of the actions set forth below (or take any action that would
require the Company to make an announcement regarding any of the following):

                  (a) effect, seek, offer, engage in, propose (whether publicly
or otherwise) or cause or participate in, or assist any other Person to effect,
seek, engage in, offer or propose (whether publicly or otherwise) or participate
in:

                  (i) any tender or exchange offer, merger, consolidation, share
         exchange, business combination, recapitalization, restructuring,
         liquidation, dissolution or other extraordinary transaction involving
         the Company or any of its subsidiaries or any material portion of its
         or their business or any purchase of all or any substantial part of the
         assets of the Company or any of its subsidiaries or any material
         portion of its or their business; or

                  (ii) any "solicitation" of "proxies" (as such terms are used
         in the proxy rules of the SEC but without regard to the exclusion set
         forth in Section 14a-1(1)(2)(iv) from the definition of "solicitation")
         with respect to the Company or any of its Affiliates or any action
         resulting in Steven Spielberg, DW Lips, any Affiliate of Steven
         Spielberg or DW Lips or such other Person becoming a "participant" in
         any "election contest" (as such terms are used in the proxy rules of
         the SEC) with respect to the Company or any of its subsidiaries;

                  (b) propose any matter for submission to a vote of
stockholders of the Company or call or seek to call a meeting of the
stockholders of the Company;

                  (c) seek election to, seek to place a representative on or
seek the removal of any Director; provided, however, that nothing in this
Section 2.01(c) shall restrict the manner in which a Spielberg Party may vote
its shares of Common Stock (if any);

                  (d) grant any proxy with respect to any Common Stock (other
than to a Principal Holder, the Chief Executive Officer of the Company or a bona
fide financial institution in connection with a bona fide recourse borrowing);

                  (e) execute any written consent with respect to any Common
Stock other than at the request of a Principal Holder or the Chief Executive
Officer of the Company;

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                  (f) form, join or participate in a Group with respect to any
Common Stock or deposit any Common Stock in a voting trust or subject any Common
Stock to any arrangement or agreement with respect to the voting of such Common
Stock or other agreement having similar effect (in each case except with the
Class B Holders);

                  (g) take any other action to seek to affect the control of the
management or Board of the Company or any of its Affiliates, including publicly
suggesting or announcing its willingness to engage in or have another Person
engage in a transaction that could reasonably be expected to result in a
transaction of the type described in Section 2.01(a)(i); provided, however, that
nothing in this Section 2.01(g) shall restrict the manner in which a Spielberg
Party may vote its shares of Common Stock (if any);

                  (h) enter into any discussions, negotiations, arrangements or
understandings with any Person with respect to any of the foregoing, or advise,
assist, encourage or seek to persuade others to take any action with respect to
any of the foregoing (in each case except with the Class B Holders);

                  (i) disclose to any Person, or otherwise induce, encourage,
discuss or facilitate, any intention, plan or arrangement inconsistent with the
foregoing or which would result in the Company or any of its Affiliates or any
Class B Holder or any Affiliates of any Class B Holder being required to make
any such disclosure in any filing with a governmental entity or being required
to make a public announcement with respect thereto;

                  (j) bring any action or otherwise act to contest the validity
of this Article II (including this Section 2.01) or seek a release from the
restrictions contained in this Article II; or

                  (k) request the Company or any of its Affiliates, directors,
officers, employees, representatives, advisors or agents, or any party hereto,
directly or indirectly, to amend or waive this Article II, the Charter or the
By-laws (or similar constituent documents) of the Company or any of its
Affiliates.

                  Section 2.02. Exceptions to Standstill. Notwithstanding
Section 2.01, no Spielberg Party shall be subject to any of the restrictions set
forth therein if (a) the Company shall have entered into a definitive agreement
providing for, or, in the case of clause (ii) below, the Board shall have
recommended in favor of, (i) any direct or indirect acquisition or purchase by
any Person or Group of a majority of the Common Stock of the Company, (ii) any
tender offer or exchange offer that if consummated would result in any Person or
Group acquiring a majority of the Common Stock of the Company or (iii) any
merger, consolidation, share exchange or other business combination involving
the Company which, if consummated, would result in the stockholders of the
Company immediately prior to the consummation of such transaction ceasing to own
at least a majority of the equity interests in the surviving entity (or any
direct or indirect parent of such surviving entity); (b) any Person or Group
(other than the Company, any Class B Holder, any Spielberg Party or any Group
that includes a Spielberg Party) acquires 25% or more of the number of then
outstanding shares of Common Stock or other voting securities of the Company
having the right to vote generally in the election of Directors; (c) any Class B
Holder, Principal, Family Group member or any of their respective Affiliates
commences (x) a "going private" transaction subject to Rule 13e-3 under Section
13(e) of the

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Exchange Act involving the Company or any of its material subsidiaries or (y) a
transaction of the type contemplated in clause (a) above; or (d) the KG
Termination Date shall have occurred.

                                  ARTICLE III

                                      Term

                  Section 3.01. Term. This Agreement shall become effective on
the Separation Date and shall continue in effect until the earliest of (i) the
KG Termination Date, (ii) the fifth anniversary hereof and (iii) such time,
following the Final Allocation, as the Spielberg Parties shall cease to
Beneficially Own in the aggregate at least 5% of the issued and outstanding
Common Stock.

                                   ARTICLE IV

                               General Provisions

                  Section 4.01. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed duly given and received (a) on
the date of delivery if delivered personally, or by facsimile upon confirmation
of transmission by the sender's fax machine if sent on a Business Day (or
otherwise on the next Business Day) or (b) on the first Business Day following
the date of dispatch if delivered by a recognized next-day courier service. All
notices hereunder shall be delivered as set forth below, or pursuant to such
other instructions as may be designated in writing by the party to receive such
notice:

                  (i) if to the Company, to:

                           DreamWorks Animation SKG, Inc.
                           Grandview Building
                           1000 Flower Street
                           Glendale, California 91201
                           Fax: (818) 659-6123
                           Attention: Katherine Kendrick, General Counsel

                           with a copy to:

                           Cravath, Swaine & Moore LLP
                           Worldwide Plaza
                           825 Eighth Avenue
                           New York, NY 10019-7475
                           Fax:  (212) 474-3700
                           Attention:  Faiza J. Saeed

                  (ii) if to any Spielberg Party, to:

                           [          ]
                           Fax: [             ]
                           Attention: [            ]

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                  (iii) if to any other party hereto, to the address of such
party specified on the signature page hereto.

                  Section 4.02. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.

                  Section 4.03. Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.

                  (b) This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.

                  Section 4.04. Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of New York without
giving effect to applicable principles of conflict of laws, except to the extent
the substantive laws of the State of Delaware are mandatorily applicable under
Delaware law.

                  Section 4.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.

                  Section 4.06. Assignment; Amendments. (a) Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto, in whole or in part (whether by operation
of law or otherwise), without the prior written consent of the other parties,
and any attempt to make any such assignment without such consent shall be null
and void. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by, the parties and their
respective successors (including any executor or administrator of a party's
estate) and permitted assigns.

                  (b) No amendment to or waiver of this Agreement shall be
effective unless it shall be in writing and signed by the Company and each of
the parties hereto.

                  Section 4.07. Enforcement. (a) Each of the Company and each
party hereto acknowledges that the other parties would not have an adequate
remedy at law for money

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damages in the event that any of the covenants or agreements of any of the other
parties in this Agreement were not performed in accordance with its terms, and
it is therefore agreed that each of the Company and each party hereto, in
addition to and without limiting any other remedy or right it may have, will
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such actual or potential breach and
enforcing specifically the terms and provisions hereof, and each of the Company
and each party hereto hereby waives (i) any and all defenses they may have on
the ground of lack of jurisdiction or competence of the court to grant such an
injunction or other equitable relief and (ii) the need to post any bond that may
be required in connection with the granting of such an injunction or other
equitable relief.

                  (b) All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise or beginning of the exercise of
any thereof by any party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such party.

                  Section 4.08. Titles and Subtitles. The titles of the sections
and subsections of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

                  Section 4.09. Submission to Jurisdiction; Waivers. With
respect to any suit, action or proceeding relating to this Agreement
(collectively, a "Proceeding"), each party to this Agreement irrevocably (a)
consents and submits to the exclusive jurisdiction of the courts of the States
of New York and the Court of Chancery of the State of Delaware and any court of
the United States located in the Borough of Manhattan in New York City; (b)
waives any objection which such party may have at any time to the laying of
venue of any Proceeding brought in any such court, waives any claim that such
Proceeding has been brought in an inconvenient forum and further waives the
right to object, with respect to such Proceeding, that such court does not have
jurisdiction over such party; (c) consents to the service of process at the
address set forth for notices in Section 4.01 herein; provided, however, that
such manner of service of process shall not preclude the service of process in
any other manner permitted under applicable law; and (d) waives, to the fullest
extent permitted by applicable law, any and all rights to trial by jury in
connection with any Proceeding.

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                  IN WITNESS WHEREOF, the parties hereto have duly executed this
Standstill Agreement as of the date first written above.

                             DREAMWORKS ANIMATION SKG, INC.,

                                  By

                                         --------------------------------------
                                         Name:
                                         Title:

                             DW LIPS, L.P.,

                                  By     DW SUBS, INC.,
                                         General Partner

                                         By

                                              ---------------------------------
                                              Name: Steven Spielberg
                                              Title: President

                             M&J K B LIMITED PARTNERSHIP,

                                  By     M&J K DREAM CORP.,
                                         General Partner

                                         By

                                              ---------------------------------
                                              Name: Jeffrey Katzenberg
                                              Title: President

                             Address:

                             DG-DW, L.P.,

                                  By     DG-DW, INC.,
                                         General Partner

                                         By

                                              ---------------------------------
                                              Name: David Geffen
                                              Title: President

                              Address:

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                              DW INVESTMENT II, INC.,

                                  by

                                         --------------------------------------
                                         Name:
                                         Title:

                              Address:

                              STEVEN SPIELBERG

                                         --------------------------------------

                                       10<PAGE>

                                                                   EXHIBIT 10.26

                                   APPENDIX A

                      FORM OF AGREEMENT AND PLAN OF MERGER

         This Agreement and Plan of Merger (the "Agreement") is made and entered
into as of October 7, 2004 between Pacific Data Images, Inc., a California
corporation ("Target" and after the Effective Time of the Merger (as defined
below) the "Surviving Corporation"), DreamWorks Animation, Inc., a Delaware
corporation (the "Acquiror"), and DWA Acquisition Corp., a Delaware corporation
("Sub"). Target and Sub are hereinafter collectively referred to as the
"Constituent Corporations."

         The Constituent Corporations hereby agree as follows:

1. THE MERGER.

         (a) MERGER OF SUB WITH AND INTO TARGET.

                  (i) AGREEMENT TO ACQUIRE TARGET. Subject to the terms of this
Agreement (the "Merger Agreement"), Target shall be acquired by Acquiror through
a merger (the "Merger") of Sub with and into Target. The closing of the Merger
(the "Closing") will take place at 10:00 a.m., New York time, on a date to be
specified by the parties (the "Closing Date") at the offices of Cravath, Swaine
& Moore LLP, 825 Eighth Avenue, New York, NY 10019.

                  (ii) EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective (the "Effective Time") upon the filing of this Agreement and the
officers' certificate of Target with the Secretary of State of the State of
California pursuant to Section 1103 of the California General Corporation Law
(the "CGCL") and upon the filing of a certificate of merger with the Secretary
of State of the State of Delaware pursuant to Section 252 of the General
Corporation Law of the State of Delaware (the "DGCL").

                  (iii) SURVIVING CORPORATION. At the Effective Time of the
Merger, Sub shall be merged with and into Target and the separate corporate
existence of Sub shall thereupon cease. Target shall be the surviving
corporation in the Merger and the separate corporate existence of Target, with
all its purposes, objects, rights, privileges, powers, immunities and
franchises, shall continue unaffected and unimpaired by the Merger.

         (b) EFFECT OF THE MERGER; ADDITIONAL ACTIONS.

                  (i) EFFECTS. The Merger shall have the effects set forth in
Section 1107 of the CGCL and Section 259 of the DGCL.

                  (ii) ADDITIONAL ACTIONS. If, at any time after the Effective
Time of the Merger, Target shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable (i) to vest, perfect or confirm of record or otherwise in Target its
right, title or interest in, to or under any of the rights, properties or assets
of either Constituent Corporation acquired or to be acquired by Target as a
result of, or in connection with, the Merger or (ii) to otherwise carry out the
purposes of this Agreement, each Constituent Corporation and its officers and
directors shall be deemed to have granted to Target
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an irrevocable power of attorney to execute and deliver all such deeds, bills of
sale, assignments and assurances and to take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
Target and otherwise to carry out the purposes of this Agreement; and the
officers and directors of Target are fully authorized in the name of each
Constituent Corporation or otherwise to take any and all such actions.

2. THE CONSTITUENT CORPORATIONS.

         (a) ORGANIZATION OF TARGET.

                  (i) INCORPORATION. Target was incorporated under the laws of
the State of California on August 13, 1980.

                  (ii) AUTHORIZED STOCK. Target is authorized to issue one class
of shares designated Common Stock in the aggregate amount of 30,000,000 shares
("Target Common Stock") .

                  (iii) OUTSTANDING STOCK. As of the date of this Agreement,
11,356,610 shares of Target Common Stock were outstanding.

         (b) ORGANIZATION OF SUB.

                  (i) INCORPORATION. Sub was incorporated under the laws of the
State of Delaware on September 14, 2004.

                  (ii) AUTHORIZED STOCK. Sub is authorized to issue an aggregate
of 1,000 shares of Common Stock ("Sub Stock").

                  (iii) OUTSTANDING STOCK. On the date hereof, an aggregate of
1,000 shares of Sub Stock are outstanding.

         (c) TARGET SHAREHOLDER APPROVAL. The holders of a majority of the
outstanding shares of Target's Common Stock duly approved and adopted this
Agreement without a meeting by written consent dated October 12, 2004, in
accordance with the provisions of Section 603 of the CGCL.

                                      -2-
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         3. AMENDED ARTICLES OF INCORPORATION; BY-LAWS AND DIRECTORS AND
            OFFICERS OF TARGET.

         (a) AMENDMENT OF TARGET'S ARTICLES OF INCORPORATION.

                  (i) AUTHORIZED STOCK AT MERGER. At the Effective Time of the
Merger, Article V of the Articles of Incorporation of Target shall be amended in
its entirety to read as set forth on Exhibit A attached hereto.

                  (ii) ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. The
Articles of Incorporation of Target in effect at the Effective Time of the
Merger, as amended as provided in clause (a)(i) above, shall be the Articles of
Incorporation of the Surviving Corporation unless and until amended as provided
by applicable law.

         (b) BYLAWS. The Bylaws of Target, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by California law and such Bylaws.

         (c) OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The directors of
Sub in effect immediately prior to the Effective Time of the Merger shall be the
directors of the Surviving Corporation, and the officers of Target immediately
prior to the Effective Time of the Merger shall be the officers of the Surviving
Corporation, in each case until the earlier of their resignation or removal or
until their respective successors shall have been duly elected and qualified.

         4. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
            CORPORATIONS; EXCHANGE OF CERTIFICATES.

         (a) EFFECT ON CAPITAL STOCK. As of the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the holder of any
shares of Target Common Stock:

                  (i) CAPITAL STOCK OF SUB. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one fully paid and
non-assessable share of Target Common Stock. Each stock certificate of Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.

                  (ii) CANCELLATION OF TREASURY STOCK; ACQUIROR-OWNED STOCK TO
REMAIN OUTSTANDING. All shares of Target Common Stock that are owned by Target
(as treasury stock), Acquiror or Sub shall be canceled and retired and shall
cease to exist and no consideration shall be delivered in exchange therefor.

                  (iii) CONVERSION OF TARGET COMMON STOCK. Each issued and
outstanding share of Target capital stock (other than shares to be cancelled
pursuant to Section 4(a)(ii) hereof and shares, if any, held by persons
exercising dissenter's rights in accordance with Section 1300 of the CGCL) held
by a holder of record of Target capital stock immediately prior to the Effective
Time shall be converted, without any action on the part of the holders thereof,
into the right to receive a number of whole shares of Class A common stock of
Acquiror, $.01 par value ("Acquiror

                                       -3-
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Common Stock"), determined by multiplying the number of shares of Target capital
stock held by such holder of Target capital stock by a fraction (the "Exchange
Ratio"), the numerator of which is $6.50, and the denominator of which is the
initial public offering price per share of Class A common stock of the Acquiror
in connection with its initial public offering, without deduction for
underwriters' fees or commissions (the "Merger Consideration") and rounding the
product up for any fraction equal to or greater than one half, and rounding the
product down for any fraction that is less than one half.

                  (iv) CONVERSION OF TARGET OPTIONS. As of the Effective Time,
each outstanding option to purchase shares of Target Common Stock granted
pursuant to the PDI Inc. 1996 Equity Incentive Plan and the PDI Inc. 1998 Stock
Plan (the "Target Stock Option Plans"), whether vested or unvested (a "Target
Option"), will be converted into an option to purchase shares of Acquiror Common
Stock (each, an "Acquiror Option"). In addition, the Target Stock Option Plans
shall be terminated by resolution of the Target's board of directors. Except as
provided below, each such Target Option converted by Acquiror under this
Agreement shall retain its respective vesting schedule as set forth under the
applicable Target Stock Option Plan; however, the converted Target Options will
be governed by the 2004 Omnibus Incentive Compensation Plan as of the Effective
Time. The 2004 Omnibus Incentive Compensation Plan shall provide for terms and
conditions such that the converted Target Options shall continue to be subject
to the same terms and conditions that are comparable to those set forth in the
applicable Target Stock Option Plan, except that (i) each such option will be
exercisable for that number of whole shares of Acquiror Common Stock obtained by
multiplying the number of shares of Target Common Stock that would be issuable
upon exercise of such option immediately prior to the Effective Time, assuming
that all vesting conditions applicable to such option were then satisfied, by
the Exchange Ratio and rounded down to the nearest whole number of shares of
Acquiror Common Stock, and (ii) the per share exercise price for the shares of
Acquiror Common Stock issuable upon exercise of such converted Target Option
will be equal to the quotient determined by dividing the exercise price per
share of Target Common Stock at which such option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the nearest
cent. Consistent with the terms of the Target Stock Option Plans and the
documents governing the outstanding Target Options under such plans, the Merger
will not terminate any of the outstanding Target Options under the Target Stock
Option Plans or accelerate the exercisability or vesting of such options or the
shares of Target Common Stock which will be subject to those options upon the
conversion of the Target Options in connection with the Merger. It is the
intention of the parties that the Target Options converted to Acquiror Options
qualify, to the maximum extent permissible, following the Effective Time, as
incentive stock options, as defined in Section 422 of the Code, to the extent,
and only to the extent, the Target Options so converted qualified as incentive
stock options prior to the Effective Time.

                  (iv) DISSENTERS' RIGHTS. If any holder of Target Common Stock
(a "Dissenting Holder") duly demands purchase of his, her or its shares of
Target Common Stock in connection with the Merger under Chapter 13 of the CGCL
(such shares being "Dissenting Shares"), the Dissenting Shares shall not be
converted into Merger Consideration but shall be converted into the right to
receive an amount in cash equal to the fair market value of such shares as may
be determined to be due with respect to such Dissenting Shares pursuant to the
law of the State of California. After the Effective Time of the Merger, Acquiror
shall issue and deliver to

                                      -4-
<PAGE>
any holder of shares of Target Common Stock who shall have withdrawn his, her or
its demand for purchase or have failed to perfect or shall have otherwise lost
his, her or its right of purchase, in any case pursuant to the CGCL, upon
surrender by such Dissenting Shareholder of his, her or its, certificate or
certificates representing shares of Target Common Stock, the Merger
Consideration to which such Dissenting Shareholder is then entitled under
Section 4(a)(iii) of this Agreement.

                  (b) EXCHANGE OF CERTIFICATES.

                  (i) EXCHANGE AGENT. Prior to the Closing Date, Acquiror shall
appoint to act as Exchange Agent (the "Exchange Agent") in the Merger.

                  (ii) EXCHANGE PROCEDURES. Prior to the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate (i) a form
of letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the certificates held by such person shall pass,
only upon proper delivery of the certificates to the Exchange Agent and shall be
in a form and have such other provisions as Acquiror may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the applicable Merger Consideration. Upon surrender of a
certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly completed and validly executed, and such other documents as
may reasonably be required by the Exchange Agent, the holder of such certificate
shall be entitled to receive in exchange therefor the Merger Consideration with
respect to such shares, without interest and the certificate so surrendered
shall forthwith be cancelled.

                  (iii) NO FURTHER OWNERSHIP RIGHTS IN TARGET COMMON STOCK. All
Merger Consideration delivered upon the surrender of certificates that
represented shares of Target Common Stock in accordance with the terms hereof
shall be deemed to have been paid in full satisfaction of all rights pertaining
to such shares of Target Common Stock theretofore represented by such
certificates. At the close of business on the day on which the Effective Time
occurs the stock transfer books of Target shall be closed, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Target capital stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates are presented to the Surviving Corporation or the Exchange Agent
for transfer or any other reason, they shall be canceled and exchanged as
provided in this Section 4.

5. TERMINATION

         (a) TERMINATION BY MUTUAL AGREEMENT. Notwithstanding the approval of
this Agreement by the shareholders of Target, this Agreement may be terminated
at any time prior to the Effective Time of the Merger by mutual written consent
of the Constituent Corporations.

         (b) EFFECTS OF TERMINATION. In the event of the termination of this
Agreement, this Agreement shall become void and there shall be no liability on
the part of either Target or Sub or their respective officers or directors.

                                      -5-
<PAGE>
6. GENERAL PROVISIONS.

         (a) AMENDMENT. This Agreement may be amended by the parties hereto any
time prior to the effective time of the Merger; however, after approval hereof
by the shareholders of Target, no amendment shall be made which by law requires
the further approval of such shareholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.

         (b) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

         (c) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
New York, without giving effect to its principles governing conflicts of laws,
except to the extent the laws of California are mandatorily applicable to the
Merger.

         (d) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among such parties pertaining to the subject matter hereof and thereof, and the
agreements contemplated hereby and all negotiations and drafts of the parties
with regard to the transactions contemplated herein, and any and all written or
oral agreements existing between the parties hereto regarding such transactions
are expressly cancelled.

                                      -6-
<PAGE>
                                   APPENDIX A

         The parties have duly executed this Agreement as of the date first
written above.

                           TARGET:

                           PACIFIC DATA IMAGES, INC.,

                                by  /s/ Jeffrey Katzenberg
                                    ___________________________________
                           Name:  Jeffrey Katzenberg
                           Title: President

                                by  /s/ Ann Daly
                                    ___________________________________
                           Name:  Ann Daly
                           Title: Vice President

                           SUB:

                           DWA ACQUISITION CORP.,

                                by  /s/ Ann Daly
                                    ___________________________________
                           Name:  Ann Daly
                           Title: President

                                by  /s/ Katherine Kendrick
                                    ___________________________________
                           Name:  Katherine Kendrick
                           Title: Secretary

                           ACQUIROR:

                           DREAMWORKS ANIMATION, INC.,

                                by  /s/ Katherine Kendrick
                                    ___________________________________
                           Name:  Katherine Kendrick
                           Title: General Counsel

                                by  /s/ Kristina M. Leslie
                                    ___________________________________
                           Name:  Kristina M. Leslie
                           Title: Chief Financial Officer

<PAGE>
                                                                       EXHIBIT A

AMENDMENT TO PACIFIC DATA IMAGES, INC.'S ARTICLES OF INCORPORATION:

                                    ARTICLE V

         The Corporation is authorized to issue one class of shares designated
"Common Stock." The total number of shares of Common Stock that the Corporation
is authorized to issue is one thousand, par value $0.01 per share.

                                      -8-

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