Notes to Consolidated Financial Statements (in thousands, except share and per share data) 1. Basis of Presentation 32 Description of Business. Cognizant Technology Solutions Corporation (“Cognizant” or the “Company”) is a leading provider of custom information technology (“IT”) services related to IT design, develop- ment, integration and maintenance services primarily for Fortune 1000 companies located in North America and Europe. Cognizant’s core competencies include web-centric applications, data warehous- ing, and component-based development and legacy and client-server systems. Cognizant provides the IT services it offers using an integrat- ed on-site/offshore business model. This seamless on-site/offshore business model combines technical and account management teams located on-site at the customer location and offshore at dedicated development centers located primarily in India. Organization. Cognizant began its IT development and maintenance services business in early 1994, as an in-house technology develop- ment center for The Dun & Bradstreet Corporation and its operating units. In 1996, Cognizant, along with certain other entities, was spun- off from the Dun & Bradstreet Corporation to form a new company, Cognizant Corporation. On June 24, 1998, Cognizant completed its initial public offering of its Class A common stock. On June 30, 1998, a majority interest in Cognizant, and certain other entities were spun- off from Cognizant Corporation to form IMS Health Incorporated (“IMS Health’’). Subsequently, Cognizant Corporation was renamed Nielsen Media Research, Incorporated. At December 31, 2002, IMS Health owned 55.3% of the outstanding stock of Cognizant. Split-Off from IMS Health.  On February 13, 2003 (the “Split-Off Date”), IMS Health distributed all of the Cognizant common stock that IMS Health owned in an exchange offer to IMS stockholders (the “Split-Off”). As a result of the Split-Off, IMS Health and its affiliates are no longer related parties of Cognizant as of the Split-Off Date. Accordingly, only services rendered to or received from IMS Health and its affiliates during the period January 1, 2003 to the Split-Off Date are classified as related party transactions. Services rendered to or received from IMS Health subsequent to the Split-Off Date are classified as third party transactions. (See Note 9). In connection with the Split-Off, Cognizant was obligated to pay the costs associated with the Split-Off (the “Split-Off Costs”) in connec- tion with the exchange offer under the provisions of an Intercompany Agreement, dated as of May 15, 1998. The Intercompany Agreement provided that Cognizant would pay its own costs, without reimburse- ment, and the costs of IMS Health (other than underwriting discounts, commissions and certain other specified costs) necessary to facilitate a sale or spin-off of IMS Health’s ownership interest in the Company. In 2003, Cognizant incurred direct and incremental costs of $2,010 resulting from external costs contractually incurred related to the Split-Off. Such costs included direct legal, accounting, printing and other costs, including a non-cash charge calculated in accordance with Accounting Principles Board Opinion (“APB”) No. 25, “Account- ing for Stock Issued to Employees and Related Interpretations” (“APB No. 25”) of approximately $488 related to the retention, acceleration and extended life of Cognizant common stock options held by two former Directors of Cognizant who resigned on the Split-Off Date as a condition of the Split-Off. Such former Directors were, as of the Split- Off Date, officers of IMS Health.  Of the total $3,690 of Split-Off Costs incurred and recorded, including approximately $1,680 recorded in 2002, all costs were paid as of December 31, 2003. Cognizant did not receive any proceeds from the IMS Health exchange offer. Capital Stock. In connection with the Split-Off, IMS Health, as the Company’s majority stockholder at that time, approved amendments to Cognizant’s certificate of incorporation that became effective fol- lowing consummation of the Split-Off. The material terms of these amendments: In connection with the Split-Off, Cognizant’s Board of Directors also approved amendments to Cognizant’s by-laws, which became effec- tive following completion of the Split-Off. The material terms of these amendments made to Cognizant’s by-laws affected nominations of persons for election to the Board of Directors and proposals of busi- ness at annual or special meetings of stockholders. Cognizant’s Board of Directors also adopted a stockholders’ rights plan providing certain rights to stockholders under certain circumstances. On April 12, 2004, the Board of Directors declared a conditional two- for-one stock split to be effected by a 100% stock dividend payable on June 17, 2004 to stockholders of record as of May 27, 2004. The stock split was subject to stockholder approval at the Company’s May 26, 2004 Annual Meeting of Stockholders of an amendment to the Restated Certificate of Incorporation to increase the number of authorized shares of Class A common stock. On May 26, 2004, the Company’s stockholders approved such amendment to the Restated Certificate of Incorporation and as a result, a 100% stock dividend was paid on June 17, 2004 to stockholders of record as of May 27, 2004. The stock split has been reflected in the accompanying consoli- dated financial statements, and all applicable references as to the number of outstanding common shares and per share information have been restated to reflect the stock split as if it occurred at the beginning of the earliest period presented. Stockholders’ equity accounts have been restated to reflect a $653 reclassification of an amount equal to the par value of the increase in issued shares of Class A common stock from the additional paid-in-capital account to the Class A common stock account. The amendment to the Restated Certificate of Incorporation increased the number of authorized shares of Class A common stock to 325,000,000 and eliminated the authori- zation of Class B common stock. • provided for a classified board of directors; • set the number of Cognizant’s directors; and • provided for supermajority approval requirements for  actions to amend, alter, change, add to or repeal specified  provisions of Cognizant’s certificate of incorporation and any provision of the by-laws. COGNIZANT ANNUAL REPORT 2004