9. Related Party Transactions and Transactions with Affiliates 10. Commitments Revenues. The Company and IMS Health have entered into Master Services Agreements pursuant to which the Company provides cer- tain IT services to IMS Health. As a result of the Split-Off, IMS Health is no longer a related party to the Company as of the Split-Off Date. Accordingly, revenues from IMS Health subsequent to the Split-Off Date are classified as third party revenues. The Company recognized related party revenues from IMS Health totaling $2,575 and $20,429 in 2003 and 2002, respectively. Total revenues from IMS Health during 2003, including related party revenues prior to the Split-Off Date, were approximately $22,675. Services. IMS Health provides the Company with certain administra- tive services under the provisions of an amended and restated Intercompany Services Agreement entered into in connection with the Split-Off. In 2003 and prior periods, IMS Health permitted the Company to participate in certain of IMS Health’s business insurance plans and provided certain other services such as tax planning and compliance, which have since been transitioned to the Company. Total costs charged in connection with these services during the T period January 1, 2003 through the Split-Off Date and, in 2002 were $28 and $656, respectively. The Company has a strategic relationship with The Trizetto Group Inc. (“Trizetto”) that includes helping its healthcare customers integrate Trizetto’s products with their existing information systems and, within T Trizetto, supporting further development of these software applica- T tions. As of the Split-Off Date, IMS Health owned approximately 26.4% of the outstanding common stock of Trizetto. The Company recorded revenues from Trizetto of approximately $831 from January 1, 2003 through the Split-Off Date and $2,577 in 2002. The Company recorded expenses related to Trizetto commissions of approximately $9 from January 1, 2003 through the Split-Off Date and $697 in 2002. Pension Plans. In 2003 and 2002, certain U.S. employees of the Company participated in IMS Health’s defined benefit pension plans. The plans are cash balance pension plans under which six percent of creditable compensation plus interest is credited to the employee’s retirement account on a monthly basis. The cash balance earns monthly investment credits based on the 30-year Treasury bond yield. At the time of retirement, the vested employee’s account balance is actuarially converted into an annuity. The Company’s cost for these plans is included in the allocation of expense from IMS Health for employee benefits plans. The Company leases office space and equipment under operating leases, which expire at various dates through the year 2010. Certain leases contain renewal provisions and generally require the Company to pay utilities, insurance, taxes and other operating expenses. Future minimum rental payments under operating leases that have initial or remaining lease terms in excess of one year as of December 31, 2004 are as follows: Rental expense totaled $11,560, $7,782 and $5,201 for years ended December 31, 2004, 2003 and 2002, respectively. The Company has expanded its plans to construct additional fully- owned development centers to now include over 900,000 square feet as compared to previous plans, announced in December 2003, to add 600,000 square feet of space. The new facilities will be located in Chennai, Pune, Calcutta and Bangalore, India. The total construction expenditure related to this expanded program is estimated to be approximately $76,000, an increase of approximately $34,000, when compared to the expansion program announced in December 2003. As of December 31, 2004, the Company has entered into fixed capi- tal commitments of $22,011 related to this India development center expansion program, of which $14,708 has been spent to date. The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the outcome of such claims and legal actions, if decided adversely, is not expected to have a material adverse effect on the Company’s busi- ness, financial condition and results of operations. Additionally, many of the Company’s engagements involve projects that are critical to the operations of its customers’ business and provide benefits that are difficult to quantify. Any failure in a customer’s computer system could result in a claim for substantial damages against the Company, regardless of the Company’s responsibility for such failure. Although the Company attempts to contractually limit its liability for damages arising from negligent acts, errors, mistakes, or omissions in rendering its software development and maintenance services, there can be no assurance that the limitations of liability set forth in its contracts will be enforceable in all instances or will otherwise protect the Company from liability for damages. Although the Company has general liability insurance coverage, including coverage for errors or omissions, there 11. Contingencies 41 COGNIZANT ANNUAL REPORT 2004 2005 $ 12,010 2006 10,139 2007 6,276 2008 5,137 2009 4,187 Thereafter 2,557 Total minimum lease payments $ 40,306 T Notes to Consolidated Financial Statements (in thousands, except share and per share data)