DREAMWORKSANIMATIONSKG,INC. NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS—(Continued) licensing and merchandising rights) and contingent compensation and residual reporting oversight services, are provided pursuant to the Distribution Agreement. As a result, DreamWorks Studios no longer allocates any these costs to the Company. However, DreamWorks Studios provides other accounting services to the Company such as payroll, for which the Company reimburses DreamWorks Studios pursuant to the Services Agreement. Legal and Business Affairs: Costs related to legal and business affairs services, other than outside legal fees and film specific trademark-related expenses that were directly charged to the Company were historically allocated to the Company based on actual time spent by DreamWorks Studios’ attorneys on matters related primarily to the Company or the Company’s films. After the Separation, the Company directly incurs the costs of most legal and business affairs services, either through Company employees or through direct retention of outside legal counsel. However, attorneys employed by DreamWorks Studios provide some legal and business affairs services, such as work related to employment and music law, to the Company under the Services Agreement. The Company reimburses DreamWorks Studios for these services pursuant to the Services Agreement. Human Resources: DreamWorks Studios historically has allocated human resources costs, including management, benefits administration and employee relations to the Company based on the Company’s headcount as a percentage of the consolidated headcount of DreamWorks Studios. Other costs related to human resources, such as recruiting and relocation costs have been directly incurred by the Company. After the Separation, the Company directly incurs the costs associated with human resources management and employee relations. DreamWorks Studios provides other services, such as benefits management, for which the Company reimburses DreamWorksStudiospursuant to the Services Agreement. Occupancy and Facilities Management: The costs of facilities, facilities management and mail services were allocated to the Company historically based on the square footage that the Company has occupied at the Company’s Glendale animation campus and the Company’s Redwood City production facility as a percentage of total square footage of all DreamWorks Studios facilities. After the Separation, the Company incurs the costs of facilities management and mail services directly. The Company charges a portion of the Company’s occupancy costs to DreamWorks Studios pursuant to the Services Agreement for DreamWorks Studios’ occupancy of these facilities. Insurance: Property insurance premiums were historically allocated to the Company based on the Company’s insurable asset values as a proportion of DreamWorks Studios’ total insurable asset values, based on the asset’s fair market or replacement value as determined a the time of premium renewal. The insurance premiums for policies such as errors and omissions, directors and officers, travel, and excess liability, were historically allocated to the Company based on (1) the Company’s headcount as a percentage of the consolidated headcount of DreamWorks Studios in a given year and (2) the number of films the Company has released as a percentage of all DreamWorks Studios’ films released in a given year. These allocations continued until the end of 2004. After the Separation, the Company began directly incurring all insurance costs. Information Technology: DreamWorks Studios historically has allocated to the Company the costs of network infrastructure and administrative desktop computer support. This allocation has been based on the Company’s headcount as a percentage of total DreamWorks Studios’ headcount, in each case excluding the headcount of the Company’s Redwood City facility, as the costs related to Redwood City were directly incurred by the Company. After the Separation, DreamWorks Studios provides network infrastructure and administrative desktop support services to the Company and the Company reimburses DreamWorks Studios for these services pursuant to the Services Agreement. For telecommunications, the Company historically allocates a fixed fee for every telephone user, which includes the costs of equipment and related maintenance and support costs. The Companyischargedfor actual local and long distance usage. 81