Management’s Discussion and Analysis of Financial Condition and Results of Operations Commitments and Contingencies COGNIZANT ANNUAL REPORT 2004 23 We have expanded our plans to construct additional fully-owned development and training centers to now include over 900,000 square feet of new space 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. Total construction costs related to this program are expected to be approximately $76.0 million, which we expect to fund internally. As of December 31, 2004, we have entered into fixed capital commit- ments of approximately $22.0 million related to this India development center expansion program, of which approximately $14.7 million has been spent to date. The remaining fixed capital commitments are payable within the next two years. We lease office space and equipment under operating leases, which expire at various dates through the year 2010. Certain leases contain renewal provisions and generally require that we pay utilities, insurance, taxes, and other operating expenses. Future minimum rental pay- ments under operating leases that have initial or remaining lease terms in excess of one year as of December 31, 2004 are as follows (in thousands): In connection with our acquisition of Infopulse, additional purchase price, not to exceed 3.5 million Euros (approximately $4.7 million) is payable in 2006 contingent on Infopulse achieving certain revenue and operating income targets for the 24 month period ending December 31, 2005. In addition, approximately $1.1 million of the total Infopulse purchase price is payable in 2005. We are 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 our quarterly or annual operat- ing results, cash flows or consolidated financial position. Additionally, many of our engagements involve projects that are critical to the operations of our 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 us, regardless of our responsibility for such failure. Although we attempt to contractually limit our liability for damages arising from negligent acts, errors, mistakes or omissions in rendering our application design, development and maintenance services, there can be no assurance that the limitations of liability set forth in our contracts will be enforceable in all instances or will otherwise protect us from liability for damages. Although we have general liability insurance coverage, including coverage for errors or omissions, there can be no assurance that such coverage will continue to be available on reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our quarterly and annual operating results, financial position and cash flows. In connection with the split-off from IMS Health, we entered into a Distribution Agreement, dated January 7, 2003, with IMS Health, referred to as the Distribution Agreement. The Distribution Agreement provides, among other things, that IMS Health and we will comply with, and not take any action during the relevant time period that is inconsistent with, the representations made to and relied upon by McDermott, Will & Emery in connection with rendering its opinion regarding the U.S. federal income tax consequences of the exchange offer. In addition, pursuant to the Distribution Agreement, we indemnified IMS Health for any tax liability to which they may be subject as a result of the exchange offer but only to the extent that such tax liability resulted solely from a breach in the representations we made to and were relied upon by McDermott, Will & Emery in connection with rendering its opinion regarding the U.S. federal income tax consequences of the exchange offer. If we breach any of our representations in connection with the Distribution Agreement, the related indemnification liability could be material to our quarterly and annual operating results, financial position and cash flows. 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