2002 COGNIZANT FINANCIAL REVIEW Management’s Discussion and Analysis of Financial Condition and Results of Operations Intercompany Services Agreement The Company leases office space and equipment under operating leases, which expire at various dates through the year 2011. Certain leases con- tain 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, 2002 are as follows: Health owned in the exchange offer, which is the subject of Amendment No. 4 to Form S-4 Registration Statement filed by the Company on January 30, 2003. As of the completion of such distribution, IMS Health is no longer a related party of Cognizant. Master Services Agreement Distribution Agreement Related Party Transactions and Transactions with Affiliates Agreements Relating to the Distribution Director Resignations. IMS Health caused David M. Thomas and Nancy E. Cognizant 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 Cognizant’s quarterly or annual operat- ing results, cash flows, or consolidated financial position. Additionally, many of Cognizant’s engagements involve projects that are critical to the operations of its customers’ business and provide benefits that are diffi- cult to quantify. Any failure in a customer’s computer system could result in a claim for substantial damages against Cognizant, regardless of Cognizant’s responsibility for such failure. Although Cognizant attempts to contractually limit its liability for damages arising from negligent acts, errors, mistakes, or omissions in rendering its application design, develop- ment 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 Cognizant from liability for damages. Although Cognizant has general liability insurance coverage, including coverage for errors or omissions, there can be no assurance that such cov- erage 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 insur- er will not disclaim coverage as to any future claim. The successful asser- tion of one or more large claims against Cognizant that exceed available insurance coverage or changes in Cognizant’s insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on Cognizant’s busi- ness, results of operations and financial condition. In addition, as a result of the IMS Health split-off, the Company has entered into certain agree- ments and indemnifications (See Note 13 to the Consolidated Financial Statements.) As indicated in Notes 1 and 9 and 13 to Notes to the Consolidated Financial Statements, the Company has entered into various agreements with IMS Health, who owned a majority and controlling interest in the outstanding common stock of the Company (55.3%) and held approxi- mately 92.5% of the combined voting power of the Company’s common stock at December 31, 2002. On February 13, 2003, IMS Health completed its plan to distribute all of the Cognizant Class B common stock that IMS The Company and IMS Health entered into the Distribution Agreement, the terms of which have been approved by a special committee of the Board of Directors of the Company, which was comprised of the Company’s inde- pendent directors. The Distribution Agreement sets forth certain rights and obligations of IMS Health and the Company in respect of the exchange offer in addition to those provided in the Intercompany Agreement. For a more complete description of the terms of the Distribution Agreement, we urge you to read the entire Distribution Agreement, which has been filed with the SEC as an exhibit to Amendment No. 4 to Form S-4 Registration Statement filed with the SEC on January 30, 2003. The Company and IMS Health have entered into Master Services Agreements pursuant to which the Company provides IT services to IMS Health. The IT services are provided to IMS Health on terms that are com- parable to unrelated third parties. The same is true for IT services provided to former affiliates of The Dun and Bradstreet Corporation and Cognizant Corporation, former parents of the Company, and former and present affil- iates of IMS Health. In 2002, the Company recognized related party revenues totaling $20.4 million for services performed for IMS Health. In 2001, the Company recognized related party revenues totaling $18.8 mil- lion for services performed for IMS Health. In 2000, the Company recog- nized related party revenues totaling $14.3 million including revenues from IMS Health and Strategic Technologies (through August 30, 2000). Prior to the consummation of the exchange offer, pursuant to the terms of an Intercompany Services Agreement, dated as of May 15, 1998, IMS Health provided the Company with certain administrative services, includ- ing payroll and payables processing and permitted the Company to partici- pate in IMS Health’s business insurance plans. In prior periods, IMS Health provided certain other services such as tax planning and compliance, which have now been transitioned to the Company. Costs for all periods prior to the Company’s IPO were allocated to the Company based on utilization of certain specific services. All subsequent services were per- formed and charged to the Company under the CTS/IMS Health intercom- pany services agreement that was negotiated between the parties on an arms length basis. IMS Health and Cognizant entered into an amended and restated Intercompany Services Agreement, effective following the consummation of the exchange offer, which provides for the continued provision of payroll, payables processing and certain other administrative services for a term of up to one year. 2003 $5,799 2004 3,829 2005 2,229 2006 1,755 2007 1,252 Thereafter 2,090 Total minimum lease payments $16,954 20