DREAMWORKSANIMATIONSKG,INC. NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS—(Continued) Shares in the Equity Plan had decreased from the previously determined fair market value. Accordingly in the year ended December 31, 2003 the Company reversed previously recorded compensation expense related to the Equity Plan aggregating $2.3 million to reflect the reduction in fair value as of December 31, 2003. For the year ended December 31, 2004, $0.4 million in compensation expense pursuant to the Equity Plan net of reversals of previously recorded compensation expense was allocated to the Company. As of December 31, 2003 and 2004, deferred compensation liabilities associated with the Equity Plan of $6.4 million and $0.9 million, were allocated to the Company. In connection with the Separation, the Company’s Board of Directors approved the 2004 Omnibus Incentive Compensation Plan (“Omnibus Plan”). The Omnibus Plan provides for the grant of incentive stock options to Company employees and non statutory stock options, restricted stock, stock appreciation rights, performance units, performance shares, restricted stock units and other stock equity awards to the Company’s employees, directors and consultants. In connection with the Omnibus Plan, the Company issued various equity awards to its employees and advisors, as well as to the employees of DreamWorks Studios as described below. The Company issued fully vested shares to its and DreamWorks Studios’ employees who had fully vested awards granted by DreamWorks Studios on an equivalent value basis. Outstanding unvested equity awards previously issued by DreamWorks Studios were exchanged for equity awards granted by the Company with the same aggregate intrinsic value and remaining vesting terms. In connection with the acquisition of PDI in 2000, the Company inherited a stock option plan that was previously established by PDI. PDI employees who had fully vested shares of PDI were issued fully vested shares of the Company on an equivalent basis. PDI employees who had outstanding and unexercised stock options had those stock options converted with the same intrinsic value and remaining vesting terms. Asdescribed above, the Company issued restricted stock grants to its and DreamWorks Studios’ employees. The restrictions on restricted stock grants generally lapse upon meeting certain performance-based milestones, or passage of time, or a combination of both. Restricted stock grants are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of the Company’s common stock. For those restricted stock grants issued to DreamWorks Studios employees, such value was accounted for as a dividend to DreamWorks Studios, based on the grant date fair value of the underlying stock. For those restricted stock grants issued to Company employees, such value (determined based on the grant date fair value of the underlying stock) is recognized as an expense over the corresponding vesting period. For the year ended December 31, 2004, approximately 1.8 million shares of restricted stock were issued, excluding 1.0 million shares of restricted stock that had performance criteria that were not set by the Compensation Committee of the Company’s Board of Directors (“the Committee”) until January, 2005. In addition, on January 13, 2005, the Committee approved performance compensation awards with respect to approximately 1.0 million shares of Common Stock for certain named executive officers. Pursuant to the terms and conditions of such awards, delivery of shares of Common Stock is contingent on a determination and certification by the Committee at the end of a four-year performance period that certain objective performance goals based upon the Company’s revenues and operating cash flow in excess of a return on investment had been achieved. 89