10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 0-24429

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware	13-3728359
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

Glenpointe Centre West, 500 Frank W. Burr Blvd., Teaneck, New Jersey	07666
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (201) 801-0233

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

Preferred Share Purchase Rights

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  x    Yes  ¨    No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  ¨    Yes  x  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x     Yes  ¨    No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x	Accelerated filer  ¨
Non-accelerated filer  ¨ (Do not check if a smaller reporting company)	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes x No

The aggregate market value of the registrant’s voting shares of common stock held by non-affiliates of the registrant on June 29, 2007, based on $37.50 per share, the last reported sale price on the NASDAQ Global Select Market on that date, was $10,802,629,650.

The number of shares of Class A common stock, $0.01 par value, of the registrant outstanding as of February 20, 2008 was 288,346,719 shares.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference into the Annual Report on Form 10-K: Portions of the registrant’s definitive Proxy Statement for its 2008 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report.

TABLE OF CONTENTS

	Item		Page
PART I			1
	1.	Business	1
	1A.	Risk Factors	13
	1B.	Unresolved Staff Comments	26
	2.	Properties	26
	3.	Legal Proceedings	26
	4.	Submission of Matters to a Vote of Security Holders	26
PART II			26
	5.	Market for Our Common Equity, Related Stockholder Matters and Purchases of Equity Securities	26
	6.	Selected Consolidated Financial Data	29
	7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	7A.	Quantitative and Qualitative Disclosures About Market Risk	44
	8.	Financial Statements and Supplementary Data	45
	9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	45
	9A.	Controls and Procedures	45
	9B.	Other Information	46
PART III			46
	10.	Our Directors and Executive Officers and Corporate Governance	46
	11.	Executive Compensation	46
	12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
	13.	Certain Relationships and Related Transactions, and Director Independence	47
	14.	Principal Accountant Fees and Services	47
PART IV			47
	15.	Exhibits, Financial Statements and Financial Statement Schedule	47
SIGNATURES			48
EXHIBIT INDEX			49
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS			F-1

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PART I

Item 1. Business

Overview

We are a leading provider of custom Information Technology (IT) consulting and technology services as well as outsourcing services for Global 2000 companies located in North America, Europe and Asia. Our core competencies include Technology Strategy Consulting, Complex Systems Development, Enterprise Software Package Implementation and Maintenance, Data Warehousing and Business Intelligence, Application Testing, Application Maintenance, Infrastructure Management, and Vertically-Oriented Business Process Outsourcing (V-BPO). We tailor our services to specific industries, and utilize an integrated 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.

Industry Background

Many companies today face intense competitive pressure and rapidly changing market dynamics, driven by such factors as changes in government regulations, globalization and technology innovation. In response to these challenges, many companies are focused on improving productivity, increasing service levels, lowering costs and accelerating delivery times. In order to achieve these goals, companies are focusing on a number of technology-centric areas, such as:

• Business and IT alignment;

• IT application and infrastructure optimization;

• Business process effectiveness and efficiency;

• Advanced custom systems development;

• Data Warehousing and Business Intelligence (BI);

• Enterprise Resource Planning (ERP);

• Customer Relationship Management (CRM);

• Supply Chain Management;

• Enterprise 2.0 business models and technology solutions; and

• Service-Oriented Architectures and Web 2.0.

These approaches and technologies facilitate faster, more responsive, lower-cost business operations. However, their development, integration and on-going maintenance present major challenges and require a large number of highly skilled professionals trained in many diverse technologies. In addition, companies also require additional technical resources to maintain, enhance and re-engineer their core legacy IT systems and to address application maintenance projects. Increasingly, companies are relying on custom IT solutions providers, such as us, to provide these services.

In order to respond effectively to a changing and challenging business environment, IT departments of many companies have focused increasingly on improving returns on IT investments, lowering costs and accelerating the delivery of new systems and solutions. To accomplish these objectives, many IT departments have shifted all or a portion of their IT development, integration and maintenance requirements to outside service providers operating with on-site/offshore business models.

Global demand for high quality, lower cost IT services from outside providers has created a significant opportunity for IT service providers that can successfully leverage the benefits of, and address the challenges in using, an offshore talent pool. The effective use of offshore personnel can offer a variety of benefits, including lower costs, faster delivery of new IT solutions and innovations in vertical solutions, processes and technologies. Certain developing countries, particularly India and China, have large talent pools of highly qualified technical professionals that can provide high quality IT and business processing outsourcing (BPO) services at a lower cost. India is a leader in IT services, and is regarded as having one of the largest and highest quality pools of talent in the world. Historically, IT service providers have used offshore labor pools primarily to supplement the internal staffing needs of customers. However, evolving customer demands have led to the increasing acceptance and use of offshore resources for higher value-added services. These services include application design, development, testing, integration and maintenance, as well as technology consulting and infrastructure management. India’s services and software exports continue to see significant growth. According to NASSCOM (India’s National Association of Software and Services Companies), IT/BPO exports from India were an estimated $31.3 billion for the fiscal year ended March 31, 2007, with IT software and services exports growing 36% and BPO exports growing 34% in fiscal 2007. The IT / BPO sector is projected to grow to greater than $60 billion by 2010.

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Using a globally distributed workforce to provide value-added services presents a number of challenges to IT service providers. The offshore implementation of value-added IT services requires that IT service providers continually and effectively attract, train and retain highly skilled software development professionals with the advanced technical skills necessary to keep pace with continuing changes in information technology, evolving industry standards and changing customer preferences. These skills are necessary to design, develop and deploy high-quality technology solutions in a cost-effective and timely manner. In addition, IT service providers must have the methodologies, processes and communications capabilities to enable offshore workforces to be successfully integrated with on-site personnel. Service providers must also have strong research and development capabilities, technology competency centers and relationship management skills in order to compete effectively.

The Cognizant Approach

Our business is organized and managed primarily around our four vertically-oriented business segments:

• Financial Services;

• Healthcare;

• Manufacturing, Retail & Logistics; and

• Other, which includes Communications, Media and Information Services, and High Technology.

This vertical focus has been central to our revenue growth and high customer satisfaction. As the IT Services industry continues to mature, clients are looking for service providers who understand their businesses, industry initiatives, culture and have solutions tailored to meet their individual business needs. We have continued to hire experts out of industry, establish a broad base of business analysts, invest in industry training for our staff, and build out industry-specific services and solutions. This approach is central to our high-levels of on-time delivery and customer satisfaction, as we understand the full context of our clients’ challenges and have deep experience in addressing them.

Our key service areas—IT Consulting and Technology Services, and Outsourcing Services—are delivered to our clients across our four business segments in a standardized, high-quality manner through a Global Delivery Model. These service areas include:

• IT Consulting and Technology Services

• Business Process Consulting

• IT Strategy Consulting

• Technology Consulting

• Application Design, Development, Integration and Re-engineering

• Complex Custom Systems Development

• Data Warehousing / Business Intelligence (BI)

• Customer Relationship Management (CRM) System implementation

• Enterprise Resource Planning (ERP) System implementation

• Software Testing Services

• Outsourcing Services

• Application Maintenance

• Custom Application Maintenance

• CRM and ERP Maintenance

• IT Infrastructure Outsourcing

• Business Process Outsourcing (BPO)

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Business Segments

We are organized around industry verticals, and we report the operations of our business in the following four business segments:

Cognizant’s Business Segments
Financial Services	Healthcare	Manufacturing/Retail/Logistics	Other
Capital Markets	Healthcare	Manufacturing and Logistics	Communications
Banking	Life Sciences	Retail	Media and Information Services
Insurance			High Technology

Financial Services

In 2007, our Financial Services business segment represented approximately 47% of our total revenues. This business segment provides services to our customers operating in the following industries:

• Capital Markets. We focus on the needs of broker / dealers, asset management firms, depositories, clearing organizations and exchanges. Key areas where we help these clients in both driving efficiencies and establishing new capabilities include: Front Office, Middle Office, Back Office, Sales & Brokerage, Research, Exchange Operations and Prime Brokerage solutions.

• Banking. We focus on traditional retail and commercial banks, and diversified financial enterprises. We assist these clients in such areas as: Consumer Lending, Cards & Payments, Wholesale Banking, Risk Management, Investment Management, Corporate Services and Retail Banking.

• Insurance. We assist with the needs of property and casualty insurers, life insurers, reinsurance firms and insurance brokers. We focus on such areas as: Business Acquisition, Policy Administration, Claims Processing, Management Reporting, Regulatory Compliance and Reinsurance.

Healthcare

In 2007, our Healthcare business segment represented approximately 24% of our total revenues. This business segment provides services to our customers operating in the following industries:

• Healthcare. We worked with many leading healthcare organizations, including three of the top five healthcare organizations in the United States. Our Healthcare service teams focus on the following key industry solutions: Broker Compensation, Sales & Underwriting Systems, Provider Management, Plan Sponsor Administration, Electronic Enrollment, Membership, Billing, Claims Processing, Medical Management and Pharmacy Benefit Management. We are also partnering with our customers to enable their IT systems for initiatives such as self service portals (member / provider / broker), consumer-driven healthcare, behavioral health, Medicare Modernization Act (MMA) and healthcare data warehousing and analytics.

• Life Sciences. We partner with the leading organizations in the Life Sciences industry to assist them with the opportunities and challenges of their rapidly evolving market. In 2007, we worked with most of the world’s leading pharmaceutical companies. We are assisting these companies in dealing with such challenges as: Consolidation, Data Integration, Time to Market, Safety, Globalization and Regulations. Some of our Life Sciences solutions include: Prescriber Behavior Analysis and Insight, Longitudinal Prescription Data Management Systems, Sales Force Compensation Systems, Sales Data and Claims Data Management Systems, Clinical Trial Solutions, 21CFR11 Assessment and Computer Systems Validation, Data Mining and Business Intelligence Solutions, e-Business and Data Portals, and ERP implementation, upgrade, and maintenance services.

Manufacturing / Retail / Logistics

In 2007, our Manufacturing, Logistics & Retail business segment represented approximately 15% of our total revenues. This business segment services customers in the following industry groups:

• Manufacturing and Logistics. We help organizations improve operational efficiencies, enhance responsiveness and collaborate with trading partners to better serve their end customers. We leverage a comprehensive understanding of the business and technology drivers of the industry. Some of our Manufacturing and Logistics solutions include: Supply Chain Management, Warehouse and Yard Management, Waste Management, Transportation Management, Optimization, Portals and ERP solutions.

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• Retail. We serve a wide spectrum of retailers and distributors, including supermarkets, specialty premium retailers and large mass-merchandise discounters. We deliver the best of both worlds: in-depth experience with retailing applications and a strong enterprise architecture foundation. As a result, we have helped retailers:

• Upgrade supply chain systems, ranging from order management to category and space management, warehouse management, logistics management, pricing and promotions, and merchandising management;

• Implement new point of sale solutions that embrace new international standards and provide new flexibility for supporting new merchandising initiatives;

• Implement point solutions developed by our Retail Center of Excellence. The Center of Excellence has built solution accelerators and defined implementation methodologies for multi-channel integration, and for Point of Sale systems migration;

• Accelerate the implementation of enterprise and customer relationship management; and

• Improve business intelligence effectiveness.

Other

The Other reportable business segment is an aggregation of operating segments which, individually, are less than 10% of consolidated revenues and segment operating profit. The Other business segment includes Communications, Media and Information Services, and High Technology operating segments. In 2007, our Other reportable business segment represented approximately 14% of our total revenues. A description of operating segments included in Other is as follows:

• Communications. Our Communications industry practice serves some of the world’s leading communications service providers, equipment vendors and software vendors. We have several industry-specific solutions, including: OSS / BSS Implementation, Network Management Services, Mobile Applications, Conformance Testing, Product Lifecycle Management, Product Implementation, Portals, Business Activity Monitoring, Mobile Systems Integration, Broadband Evolution Services and Billing Quality Assurance.

• Media and Information Services. We have an extensive track record working with some of the world’s largest media and entertainment companies. With the emergence of digital technologies promising to revolutionize the business, we are ready to offer the consulting and outsourcing services to help media and entertainment companies concentrate on their end product. Some of our solutions include:

• Supply chain management solutions, from pre-press to material procurement, circulation, logistics, and vendor management;

• Business solutions covering advertising management, online media, and e-business;

• Workflow automation covering the product development process for broadcasters;

• Spot ad buying systems covering agency of record, traffic management, post-buy analysis, and financial management;

• Digital Asset Management (DAM) and Digital Rights Management (DRM); and

• Operational systems including ad sales, studio management, outsourcing billing and payments, along with content management and delivery.

• High Technology. Our High Technology segment is a dedicated practice serving some of the world’s leading Independent Software Vendors (ISVs) and Online Service Providers. We believe that the needs of technology companies are different – more technically complex, challenging and advanced than what is typically found in other industries. Catering to these needs, our High Technology practice assists with the unique needs of these clients in areas such as: Product Development, Product Sustenance, Compatibility Testing, Internationalization, Product Re-engineering, Multiple Channel Extension, Security Testing and Content Management.

Our Solution and Services

We believe that we have developed an effective integrated on-site/offshore business model and that this business model will be a critical element of our continued growth. To support this business model, at December 31, 2007, we employed over 55,400 IT professionals and support staff globally. We have also established facilities, technology and communications infrastructure in order to support our business model.

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Across each of our business segments, we provide a broad, and expanding, range of consulting, information technology and business processing outsourcing services, including:

IT Consulting and Technology Services

• IT Consulting. Consulting offerings that are based on rigorous and proven methodologies and scientifically driven frameworks. In the areas of business processes, technologies and offshoring, we analyze the existing environment, identify opportunities for optimization and provide a robust roadmap for significant cost savings and productivity improvement. The broad areas of coverage include: offshoring strategy, IT strategy, technology rationalization, business process rationalization, change management and IT solution strategy.

• Application Design, Development, Integration and Re-engineering. Define customer requirements, write specifications and design, develop, test and integrate software across multiple platforms including Internet technologies. Modify and test applications to enable systems to function in new operating environments. In addition, these services include Data Warehousing / Business Intelligence (BI), ERP and CRM implementation services, as well as testing services. We follow either one of two alternative approaches to application development and integration:

• full life-cycle application development, in which we assume start-to-finish responsibility for analysis, design, implementation, testing and integration of systems; or

• cooperative development, in which our employees work with a customer’s in-house IT personnel to jointly analyze, design, implement, test and integrate new systems.

In both of these approaches, our on-site team members work closely and collaboratively with our clients. Detailed design, implementation and testing are generally performed offshore at our 42 IT development centers located in India, China and Argentina, as well as our development centers in Bentonville (AR), Boston, Bridgewater (NJ), Chicago, Doylestown (PA), Phoenix, Scottsdale, Amsterdam, and Toronto. In addition, we maintain an on-site presence at each customer location in order to address evolving customer needs and resulting changes to the project.

A key part of our application development and integration offering is a suite of services to help organizations build and integrate business applications with the rest of their operations. In this suite of services, we leverage our skills in business application development and enterprise application integration to build sophisticated business applications and to integrate these new applications and Web sites with client server and legacy systems. We build and deploy robust, scalable and extensible architectures for use in a wide range of industries. We maintain competency centers specializing in Microsoft, IBM, SAP and JAVA, among others, in order to be able to provide application development and integration services to a broad spectrum of customers.

Our re-engineering service offerings assist customers migrating from systems based on legacy computing environments to newer, open systems-based platforms and client/server architectures, often in response to the more stringent demands of business. Our re-engineering tools automate many of the processes required to implement advanced client/server technologies. We believe that this automation substantially reduces the time and cost to perform re-engineering services, savings that benefit both us and our customers. These tools also enable us to perform source code analysis and to re-design target databases and convert certain programming languages. If necessary, our programmers also help customers re-design and convert user interfaces.

• Software Testing Service. Our Software Testing service offering has experienced significant growth in the past several years. Through this practice, we provide an independent verification and validation service focused exclusively on supporting the software testing needs of our clients. Our testing service has four key offerings: 1) Independent Functional Testing; 2) Test Automation; 3) Test Process Consulting; and 4) Performance Testing. We utilize our own Managed Test Center process model to ensure our client’s receive the highest quality code possible after it has been tested by us. We focus our Managed Test Centers on specific domains (e.g., specific industries and software solutions), ensuring we tailor our testing solutions to the particular needs of our clients.

Outsourcing

• Application Maintenance. Support some or all of a customer’s applications ensuring that systems remain operational and responsive to changing user requirements, and to provide on-going enhancement as required by the customer.

We provide services to help ensure that a customer’s core operational systems are free of defects and responsive to the customer’s changing needs. As part of this process, we are often able to introduce product and process enhancements and improve service levels to customers requesting modifications and on-going support.

Our on-site/offshore business model enables us to provide a range of rapid response and cost-effective support services to our customers. Our on-site team members often provide help-desk services at the customer’s facility. These team members typically carry pagers in the event of an emergency service request and are available to quickly resolve

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customer problems from remote locations. In the case of more complex maintenance services, including modifications, enhancements and documentation, which typically have longer turnaround times, we take full advantage of our offshore resources to develop solutions more cost-effectively than would be possible relying on higher cost local professionals. The services provided by our offshore team members are delivered to customers using satellite and fiber-optic communications.

As part of our application maintenance services, we assist customers in renovating their core systems to meet the requirements imposed by new regulations, new standards or other external events. These services include, or have previously included, Year 2000 compliance, Eurocurrency compliance, decimalization within the securities industry and compliance with the Health Insurance Portability and Accountability Act for the healthcare industry.

We seek to anticipate the operational environment of customer’s IT systems as we design and develop such systems. We also offer diagnostic services to customers to assist them in identifying shortcomings in their IT systems and optimizing the performance of their systems.

• IT Infrastructure Services. We provide IT Infrastructure Management Outsourcing services. This is a newer service at Cognizant, but one where we anticipate growing demand in the coming years. As a result of our acquisition of AimNet Solutions, Inc. in September 2006, we now provide service capability in redundant Network Operating Centers (NOCs) in North America and India through which we are able to provide significant scale, quality and cost savings to our clients in IT Infrastructure Services. We focus on a number of key areas, including such key areas of infrastructure management as: Networks, Servers, Middleware, Security, Vendors, Storage, Messaging, Databases, and Desktops. We can provide these through an IT Service Desk model, focusing on such areas as IT Operations and IT Help Desk.

• Vertical Business Process Outsourcing (V-BPO). We provide Vertically-Oriented BPO to our clients. This is a newer service at Cognizant, but one in which we anticipate future growth. At Cognizant, we made a strategic decision to stay out of more generic, horizontally-based BPO markets (i.e., call centers) and instead have focused on value-added processes that are specific to clients in our key industry segments (particularly in Financial Services, Healthcare and Manufacturing / Logistics / Retail). Our BPO practice focuses on core back office services covering: Transaction Processing, Accounting Operations, Voice Processes, Data Administration, Data Management and Data Analytics.

In addition to our industry-specific expertise and focus, our strengths, which we believe differentiate us from other IT service providers, include the following:

Established and Scalable Proprietary Processes. We have developed proprietary methodologies for integrating on-site and offshore teams to facilitate cost-effective, on-time delivery of high-quality projects. These methodologies comprise our proprietary Q*VIEW software engineering process and delivery management processes, which is available to all on-site and offshore programmers. We use this ISO 9001:2000 certified process to define and implement projects from the design, development and deployment stages through on-going application maintenance. For most projects, Q*VIEW is used as part of an initial setting up of processes that allows us to define the scope and risks of the project and subdivide the project into smaller phases with frequent deliverables and feedback from customers. We also use our Q*VIEW process to proactively detect, mitigate and correct possible quality defects and to establish appropriate contingencies for each project. In order to ensure consistent implementation of the quality processes, we assign a quality facilitator to each project who reports to a centralized quality assurance and software engineering group. This group performs quality audits, deliverables verifications, and metrics collection and analysis, which are used to continuously improve processes and methodologies. These processes and methodologies have proven to be scalable, as we have significantly increased the number of offshore development centers, customers and projects. In addition, all of our principal development centers, including our China Development Center, have been appraised by KPMG at Maturity Level 5 (the highest possible maturity rating) of the Capability Maturity Model Integration v1.2 (CMMI) of the Software Engineering Institute at Carnegie Mellon University, which is a widely recognized means of measuring the process maturity of an organization’s software development, maintenance and delivery management processes. CMMI Maturity Level 5 is the highest level of process maturity that independently verifies an organization’s capabilities to continuously enhance its processes through incremental and innovative process and technological improvements. CMMI Maturity Level 5 affirms Cognizant’s ability to statistically manage the sub-processes in order to achieve process and business objectives. In addition, all of our principal development centers have been certified by the STQC Directorate Ministry of Communications and Information Technology, Government of India (the accreditation authority for companies in India) under the internationally recognized ISO 27001 (Earlier BS 7799-2) Information Security Standards, a comprehensive set of controls comprising best practices in information security and business continuity planning. Our quality management system has also been certified by Det Norske Veritas (DNV) to International Standard ISO 9001:2000 of the International Organization for Standardization, an internationally recognized standard for quality management systems directed to the achievement of business results, including satisfaction of customers and others. In addition, in late 2006 (through our Coimbatore facility) Cognizant became the first company to achieve Maturity Level 5 of CMMI v1.2 Model through SCAMPI v1.2.

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Highly Skilled Workforce. Our managers and senior technical personnel provide in-depth project management expertise to customers. To maintain this level of expertise, we have placed significant emphasis on recruiting and training our workforce of highly skilled professionals. We have over 5,000 project managers and senior technical personnel around the world, many of whom have significant work experience in North America, Europe and Asia. We also maintain programs and personnel to hire and train the best available technical professionals in both legacy systems and emerging technologies. We provide five months of combined classroom and on-the-job training to newly hired programmers, as well as additional annual training programs designed to enhance the business practices, tools, technology and consulting skills of our professional staff. We were recently assessed by KPMG at Level 5 (the highest possible rating) of the People Capability Maturity Model (P-CMM) of the Software Engineering Institute at Carnegie Mellon University, a widely recognized means of implementing best current practices in fields such as human resources, knowledge management, and organizational development which improves our processes for managing and developing our workforce and addressing critical people issues.

Research and Development and Competency Centers. We have project experience and expertise across multiple architectures and technologies, and have made significant investments in our competency centers and in research and development to keep abreast of the latest technology developments. Most of our programmers are trained in multiple technologies and architectures. As a result, we are able to react to customers’ needs quickly and efficiently redeploy programmers to different technologies. In order to develop and maintain this flexibility, we have made a substantial investment in our competency centers where the experience gained from particular projects and research and development efforts is leveraged across our entire organization. In addition, through our investment in research and development activities and the continuing education of our technical personnel, we enlarge our knowledge base and develop the necessary skills to keep pace with emerging technologies. We believe that our ability to work in new technologies allows us to foster long-term relationships by having the capacity to continually address the needs of both existing and new customers.

Well-Developed Infrastructure. Our extensive facilities, technology and communications infrastructure facilitate the seamless integration of our on-site and offshore workforces. This is accomplished by permitting team members in different locations to access common project information and to work directly on customer projects. This infrastructure allows for:

• rapid completion of projects;

• highest level of quality;

• off-peak use of customers’ technological resources; and

• real-time access to project information by the on-site account manager or the customer.

International time differences enable our offshore teams located in India to access a customer’s computing facilities located in North America, Europe and the Asia Pacific region during off-peak hours. This ability to perform services during off-peak hours enables us to complete projects more rapidly and does not require our customers to invest in duplicative hardware and software. In addition, for large projects with short time frames, our offshore facilities allow for parallel processing of various development phases to accelerate delivery time. In addition, we can deliver services more rapidly than some competitors without an offshore labor pool because our lower labor costs enable us to cost-effectively assign more professionals to a project.

Business Strategies

Our objectives are to maximize stockholder value and enhance our position as a leading provider of custom IT services. We implement the following core strategies to achieve these objectives:

Further Develop Long-Term Customer Relationships. We have strong long-term strategic relationships with our customers and business partners. We seek to establish long-term relationships that present recurring revenue opportunities, frequently trying to establish relationships with our customers’ chief information officers, or other IT decision makers, by offering a wide array of cost-effective high quality services. Approximately 96% of our revenues in the year ended December 31, 2007, were derived from customers who had been using our services at the end of 2006. We also seek to leverage our experience with a customer’s IT systems into new business opportunities. Knowledge of a customer’s processes and IT systems gained during the performance of application maintenance services, for example, may provide us with a competitive advantage in securing additional development and maintenance projects from that customer.

Expand Service Offerings and Solutions. We have several teams dedicated to developing new, high value services. These teams collaborate with customers to develop these services. For example, we are currently developing new offerings in Business Consulting and IT Consulting, and vertically-oriented IT solutions atop innovative technologies including: Service Oriented Architectures (SOA) and Web 2.0. In addition, we invest in internal research and development and promote knowledge building and sharing across the organization in order to promote the development of new services and solutions that we can offer to our customers. Furthermore, we continue to enhance our capabilities and service offerings in the areas of:

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• Customer Relationship Management (CRM);

• Enterprise Resource Planning (ERP);

• Data Warehousing / Business Intelligence (BI);

• Software Testing;

• Infrastructure Management; and

• Vertically-Oriented Business Process Outsourcing.

We believe that the continued expansion of our service offerings will reduce our reliance on any one technology initiative and will help foster long-term relationships with our customers by allowing us to serve their needs better.

Enhance Processes, Methodologies and Productivity Toolsets. We are committed to improving and enhancing our proprietary Q*VIEW software engineering process and other methodologies and toolsets. In light of the rapid evolution of technology, we believe that continued investment in research and development is critical to our continued success. We are constantly designing and developing additional productivity software tools to automate testing processes and improve project estimation and risk assessment techniques. In addition, we use groupware technology to share project experience and best practice methodologies across the organization with the objective of improving productivity.

Expand Domestic and International Geographic Presence. As we expand our customer base, we plan to open additional sales and marketing offices in North America, Europe, South America and Asia. It is expected that this expansion will facilitate sales and service to existing and new customers. We have established sales and marketing offices in Atlanta, Boston, Bridgewater (NJ), Chicago, Dallas, Minneapolis, Phoenix, Los Angeles, Norwalk (CT), San Francisco and Teaneck. In addition, we have been pursuing market opportunities internationally through our offices in Amsterdam, Buenos Aires, Cyberjaya, Malaysia, Frankfurt, London, Melbourne, Paris, Shanghai, Singapore, Tokyo, Toronto and Zurich.

Continue to be an Employer of Choice in the Industry. As a rapidly growing professional services firm, a key attribute of our continued success is an ability to continually hire, assimilate, motivate and retain the best talent possible in the industry. We have developed strong relationships with key universities around the world, and in particular in India, to provide a continual funnel of talented staff from Tier One schools. In addition, we continue to expand our presence and brand in our key supply markets to ensure our continued momentum in making senior lateral hires from competing IT services firms and industry as needed to support our client needs and growth. We also invest heavily in training programs (centered around Cognizant Academy), motivational programs and career development to ensure personal professional growth for each of our associates.

Pursue Selective Strategic Acquisitions, Joint Ventures and Strategic Alliances. We believe that opportunities exist in the fragmented IT services market to expand our business through selective strategic acquisitions, joint ventures and strategic alliances. We believe that acquisition and joint venture candidates may enable us to expand our geographic presence and our capabilities more rapidly, especially in geographic markets and key industries. For example, in 2007 we acquired marketRx, a data analytics and process outsourcing firm specializing in the Life Sciences industry to both strengthen our Life Sciences industry expertise as well as our data analytics capabilities, which we expect to leverage across multiple industries. In addition, through our working relationships with independent software vendors we obtain projects using the detailed knowledge we gain in connection with a joint development process. Finally, we will continue to strategically partner with select IT service firms that offer complementary services in order to best meet the requirements of our customers.

Sales and Marketing

We market and sell our services directly through our professional staff, senior management and direct sales personnel operating out of our Teaneck, New Jersey headquarters and our business development offices located across the country and the world in Atlanta, Boston, Bridgewater (NJ), Chicago, Dallas, Los Angeles, Minneapolis, Norwalk (CT), Phoenix, San Francisco, Teaneck, Amsterdam, Buenos Aires, Cyberjaya, Malaysia, Frankfurt, London, Melbourne, Paris, Shanghai, Singapore, Tokyo, Toronto and Zurich. At December 31, 2007, we had 57 direct sales persons and 442 account managers. The sales and marketing group works with our technical team as the sales process moves closer to the customer’s selection of a services provider. The duration of the sales process varies depending on the type of service, ranging from approximately two months to over one year. The account manager or sales executive works with the technical team to:

• define the scope, deliverables, assumptions and execution strategies for a proposed project;

• develop project estimates;

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• prepare pricing and margin analyses; and

• finalize sales proposals.

Management reviews and approves proposals, which are then presented to the prospective customer. Our sales and account management personnel remain actively involved in the project through the execution phase. We focus our marketing efforts on businesses with intensive information processing needs. We maintain a prospect/customer database that is continuously updated and used throughout the sales cycle from prospect qualification to close. As a result of this marketing system, we pre-qualify sales opportunities, and direct sales representatives are able to minimize the time spent on prospect qualification. In addition, substantial emphasis is placed on customer retention and expansion of services provided to existing customers. In this regard, our account managers play an important marketing role by leveraging their ongoing relationship with the customer to identify opportunities to expand and diversify the type of services provided to that customer.

Customers

The number of customers served by us has increased significantly in recent years. As of December 31, 2007, we were providing services to approximately 500 customers, as compared to approximately 400 customers as of December 31, 2006, and 250 customers as of December 31, 2005.

For the year ended December 31, 2007, we derived our revenues from the following business segments: 47% from Financial Services, 24% from Healthcare, 15% from Retail/Manufacturing/Logistics and 14% from Other.

We provide services either on a time-and-material basis or on a fixed price basis. The volume of work performed for specific customers is likely to vary from year to year, and a significant customer in one year may not use our services in a subsequent year.

Our customers include:

ADP Incorporated	JPMorgan Chase
Brinker International Incorporated	Kimberly-Clark Corporation
CCC Information Services Incorporated	Merck & Co., Incorporated
The Dun & Bradstreet Corporation	Metropolitan Life Insurance Company
First Data Corporation	Royal & SunAlliance USA
IMS Health Incorporated	United Healthcare

Presented in the table below is additional information about our customers.

	Year Ended December 31,
	2007		2006		2005
Percent of revenues from top five customers	24	%	29	%	34	%
Percent of revenues from top ten customers	34	%	39	%	46	%
Revenues under fixed-bid contracts as a percent of revenues	25	%	25	%	25	%

Competition

The intensely competitive IT services market includes a large number of participants and is subject to rapid change. This market includes participants from a variety of market segments, including:

• systems integration firms;

• contract programming companies;

• application software companies;

• Internet solutions providers;

• the professional services groups of computer equipment companies; and

• facilities management and outsourcing companies.

Our most direct competitors include, among others, Infosys Technologies, Tata Consultancy Services and WIPRO, which utilize an integrated on-site/offshore business model comparable to that used by us. We also compete with large IT service providers with greater resources than us, such as Accenture, Computer Sciences Corporation, Electronic Data Systems and IBM Global Services. In addition, we compete with numerous smaller local companies in the various geographic markets in which we operate.

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Many of our competitors have significantly greater financial, technical and marketing resources and greater name recognition than we do. The principal competitive factors affecting the markets for our services include:

• performance and reliability;

• quality of technical support, training and services;

• responsiveness to customer needs;

• reputation, experience and financial stability; and

• competitive pricing of services.

We rely on the following to compete effectively:

• a well developed recruiting, training and retention model;

• a successful service delivery model;

• a broad referral base;

• continual investment in process improvement and knowledge capture;

• investment in research and development;

• continued focus on responsiveness to customer needs, quality of services, competitive prices; and

• project management capabilities and technical expertise.

Intellectual Property

Our intellectual property rights are important to our business. We presently hold no patents or registered copyrights. Instead, we rely on a combination of intellectual property laws, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property. We require our employees, independent contractors, vendors and customers to enter into written confidentiality agreements upon the commencement of their relationships with us. These agreements generally provide that any confidential or proprietary information developed by us or on our behalf be kept confidential. In addition, when we disclose any confidential or proprietary information to third parties, we routinely require those third parties to agree in writing to keep that information confidential.

A portion of our business involves the development for customers of highly complex information technology software applications and other technology deliverables. This intellectual property includes written specifications and documentation in connection with specific customer engagements. Our customers usually own the intellectual property in the software we develop for them.

On July 1, 1998, Nielsen Media Research, Inc., the successor in interest to Cognizant Corporation, assigned all of its right, title and interest in and to the marks COGNIZANT and C & Design to Cognizant Technology Solutions Corporation. On February 6, 2003, Cognizant Technology Solutions Corporation assigned certain of its assets, including all of its intangible assets, to Cognizant Technology Solutions U.S. Corporation. As of December 31, 2007, Cognizant Technology Solutions U.S. Corporation or its predecessors is the record owner of two registrations for COGNIZANT, one registration for C & Design, one registration for MANAGED TEST CENTER and one pending trademark application for TWO-IN-A-BOX in the United States, two registrations for COGNIZANT and two pending applications for C & Design in India, a registration for COGNIZANT in Spain, a registration for each COGNIZANT and C & Design in the European Union and a total of 11 pending applications for COGNIZANT and C & Design in Malaysia. In addition, as of December 31, 2007, Cognizant Technology Solutions U.S. Corporation, or its predecessors, is the record owner of a total of 235 other trademark registrations in 60 countries.

Employees

As of December 31, 2007, we employed approximately 55,400 persons, including approximately 9,800 persons on a full-time basis in various locations throughout North America and South America. We also employed over 1,800 persons on a full-time basis in various locations throughout Europe, principally in the United Kingdom, and approximately 43,800 persons in the Asia Pacific region, including over 43,100 on a full-time basis in our offshore IT development centers in India. None of our employees are subject to a collective bargaining arrangement. We consider our relations with our employees to be good.

Our future success depends to a significant extent on our ability to attract, train and retain highly skilled IT development professionals. In particular, we need to attract, train and retain project managers, programmers and other senior technical personnel. We believe there is a shortage of, and significant competition for, IT development professionals in the

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United States and in India with the advanced technological skills necessary to perform the services we offer. We have an active recruitment program in India, and have developed a recruiting system and database that facilitates the rapid identification of skilled candidates. During the course of the year, we conduct extensive recruiting efforts at premier colleges and technical schools in India. We evaluate candidates based on academic performance, the results of a written aptitude test measuring problem-solving skills and a technical interview. In addition, we have an active lateral recruiting program in North America, Europe and India. A substantial majority of the personnel on most on-site teams and virtually all the personnel staffed on offshore teams is comprised of Indian nationals.

Our senior project managers are hired from leading consulting firms in the United States and India. Our senior management and most of our project managers have experience working in the United States and Europe. This enhances our ability to attract and retain other professionals with experience in the United States. We have also adopted a career and education management program to define our employees’ objectives and career plans. We have implemented an intensive orientation and training program to introduce new employees to the Q*VIEW software engineering process, our other technologies and our services.

Our Executive Officers

The following table identifies our current executive officers:

Name	Age	Capacities in Which Served	In Current Position Since
Lakshmi Narayanan(1)	54	Vice Chairman of the Board of Directors	2007
Francisco D’Souza(2)	39	President and Chief Executive Officer	2007
Gordon Coburn(3)	44	Chief Financial and Operating Officer, and Treasurer	2007
Ramakrishnan Chandrasekaran(4)	50	President and Managing Director, Global Delivery	2006
Rajeev Mehta(5)	41	Chief Operating Officer, Global Client Services	2006
Steven Schwartz(6)	40	Senior Vice President, General Counsel and Secretary	2007

⁽¹⁾ Lakshmi Narayanan was appointed Vice Chairman of the Board of Directors, effective January 1, 2007. Mr. Narayanan served as our Chief Executive Officer from December 2003 through December 2006 and as our President from March 1998 through December 2006. Mr. Narayanan joined our Indian subsidiary as Chief Technology Officer in 1994 and was elected President of such subsidiary on January 1, 1996. Prior to joining us, from 1975 to 1994, Mr. Narayanan was the regional head of Tata Consultancy Services, a large consulting and software services company located in India. Mr. Narayanan holds a Bachelor of Science degree, a Master of Science degree and a Management degree from the Indian Institute of Science.

⁽²⁾ Francisco D’Souza was appointed President and Chief Executive Officer, effective January 1, 2007. Mr. D’Souza served as our Chief Operating Officer from December 2003 through December 2006. Prior to that, from November 1999 to December 2003, he served as our Senior Vice President, North American Operations and Business Development. From March 1998 to November 1999, he served as our Vice President, North American Operations and Business Development and as our Director-North American Operations and Business Development from June 1997 to March 1998. From January 1996 to June 1997, Mr. D’Souza was engaged as our consultant. From February 1995 to December 1995, Mr. D’Souza was employed as Product Manager at Pilot Software. Between 1992 and 1995, Mr. D’Souza held various marketing, business development and technology management positions as a Management Associate at The Dun & Bradstreet Corporation. While working at The Dun & Bradstreet Corporation, Mr. D’Souza was part of the team that established the software development and maintenance business conducted by us. Mr. D’Souza holds a Bachelor of Business Administration degree from the University of East Asia and a Master of Business Administration degree from Carnegie-Mellon University.

⁽³⁾ Gordon Coburn was appointed Chief Operating Officer, effective January 1, 2007. Mr. Coburn continues to serve as our Chief Financial Officer and Treasurer, positions he has held since his election in March 1998. Mr. Coburn served as our Executive Vice President from December 2003 through December 2006. From November 1999 to December 2003, he served as our Senior Vice President. He previously was our Vice President from 1996 to November 1999. Mr. Coburn served as Senior Director – Group Finance & Operations for Cognizant Corporation from November 1996 to December 1997. From 1990 to October 1996, Mr. Coburn held key financial positions with The Dun & Bradstreet Corporation. Mr. Coburn serves on the board of directors of ICT Group, Inc. and Corporate Executive Board Company. Mr. Coburn holds a Bachelor of Arts degree from Wesleyan University and a Master of Business Administration degree from the Amos Tuck School at Dartmouth College.

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⁽⁴⁾ Ramakrishnan Chandrasekaran was appointed President and Managing Director, Global Delivery in August 2006. Mr. Chandrasekaran served as our Executive Vice President and Managing Director from January 2004 through July 2006. Prior to that, from November 1999 to January 2004, he served as our Senior Vice President responsible for the ISV relationships, key alliances, capacity growth, process initiatives, business development and offshore delivery. Mr. Chandrasekaran joined us as Assistant Vice President in December 1994, before getting promoted to Vice President in January 1997. Mr. Chandrasekaran has more than 20 years of experience working in the IT services industry. Prior to joining us, Mr. Chandrasekaran worked with Tata Consultancy Services. Mr. Chandrasekaran holds a Mechanical Engineering degree and Master of Business Administration degree from the Indian Institute of Management.

⁽⁵⁾ Rajeev Mehta was appointed Chief Operating Officer, Global Client Services in August 2006 and is responsible for our sales, business development and client relationship management organizations. Mr. Mehta, who joined Cognizant in 1997, most recently served as Senior Vice President and General Manager of our Financial Services Business Unit, a position he held from June 2005 to August 2006. From November 2001 to June 2006, he served as our Vice President and General Manager of our Financial Services Business Unit. From January 1998 to November 2001, Mr. Mehta served as our Director of the U.S. Central Region. Mr. Mehta served as our Senior Manager of Business Development from January 1997 to January 1998. Prior to joining Cognizant in 1997, Mr. Mehta was involved in implementing GE Information Services offshore outsourcing program and also held consulting positions at Deloitte & Touche and Andersen Consulting. Mr. Mehta holds a Bachelor of Science degree from the University of Maryland and a Master of Business Administration degree from Carnegie-Mellon University.

⁽⁶⁾ Steven Schwartz was named Senior Vice President, General Counsel and Secretary in July 2007, having global responsibility for managing Cognizant’s legal function. Mr. Schwartz, who joined Cognizant in 2001, most recently served as Vice President and General Counsel, a position he held from March 2003 to July 2007. From April 2002 to March 2003, he served as our Vice President and Chief Corporate Counsel. From October 2001 to December 2002, he served as our Chief Corporate Counsel. Mr. Schwartz also serves as our Chief Legal Officer. Mr. Schwartz holds a Bachelor of Business Administration degree from the University of Miami, a Juris Doctor degree from Fordham University School of Law and an L.L.M. (in Taxation) degree from the New York University School of Law.

None of our executive officers is related to any other executive officer or to any of our Directors. Our executive officers are elected annually by the Board of Directors and serve until their successors are duly elected and qualified.

Corporate History

We began our IT development and maintenance services business in early 1994, as an in-house technology development center for The Dun & Bradstreet Corporation and its operating units. In 1996, we, along with certain other entities, were spun-off from The Dun & Bradstreet Corporation to form a new company, Cognizant Corporation. On June 24, 1998, we completed an initial public offering of our Class A common stock. On June 30, 1998, a majority interest in us, and certain other entities were spun-off from Cognizant Corporation to form IMS Health. Subsequently, Cognizant Corporation was renamed Nielsen Media Research, Incorporated.

On January 30, 2003, we filed a tender offer in which IMS Health stockholders could exchange IMS Health shares held by them for our Class B common stock held by IMS Health.

On February 13, 2003, IMS Health distributed all of our Class B common stock that IMS Health owned in an exchange offer to its stockholders. There was no impact on the number of our total shares outstanding upon the completion of the exchange offer.

As of February 21, 2003, pursuant to our Restated Certificate of Incorporation, all of the shares of Class B common stock automatically converted into shares of Class A common stock. According to our Restated Certificate of Incorporation, if at any time the outstanding shares of our Class B common stock ceased to represent at least 35% of the economic ownership represented by the aggregate number of shares of our common stock then outstanding, each share of our Class B common stock shall automatically convert into one share of Class A common stock. This automatic conversion occurred on February 21, 2003 based on share numbers received by us from our transfer agent (American Stock Transfer and Trust Company) as of the close of business February 20, 2003, which indicated that the Class B common stock represented less than 35% ownership represented by the aggregate number of shares of our common stock then outstanding. Accordingly, as of February 21, 2003, there are no shares of Class B common stock outstanding.

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, which was obtained on May 26, 2004 and, as a result, the stock dividend was paid on June 17, 2004 to stockholders of record as of May 27, 2004.

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On September 17, 2007, the Board of Directors declared a two-for-one stock split to be effected by a 100% stock dividend paid on October 16, 2007 to stockholders of record as of October 1, 2007.

These stock splits, as well as our other stock splits, have been reflected in the accompanying consolidated financial statements, and all applicable references as to the number of common shares and per share information were retroactively adjusted. Appropriate adjustments have been made in the exercise price and number of shares subject to stock options. Stockholder equity accounts were retroactively adjusted to reflect the reclassification of an amount equal to the par value of the increase in issued common shares from the additional paid-in-capital account to the common stock accounts.

Available Information

We make available the following public filings with the Securities and Exchange Commission, or the SEC, free of charge through our Web site at www.cognizant.com as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC:

• our Annual Reports on Form 10-K and any amendments thereto;

• our Quarterly Reports on Form 10-Q and any amendments thereto; and

• our Current Reports on Form 8-K and any amendments thereto.

In addition, we make available our Code of Business Conduct and Ethics free of charge through our Web site. We intend to disclose any amendments to, or waivers from, our Code of Business Conduct and Ethics that are required to be publicly disclosed pursuant to rules of the SEC and the NASDAQ Global Select Market by filing such amendment or waiver with the SEC and posting it on our Web site.

No information on our Internet Web site is incorporated by reference into this Form 10-K or any other public filing made by us with the SEC.

Item 1A. Risk Factors

In addition to the risks and uncertainties detailed elsewhere in this Annual Report on Form 10-K, if any of the following risks occur, our business, financial condition, results of operations or prospects could be materially adversely affected. In such case, the trading price of our Common Stock could decline.

A substantial portion of our assets and operations are located in India and we are subject to regulatory, economic and political uncertainties in India.

We intend to continue to develop and expand our offshore facilities in India where, as of December 31, 2007, a majority of our technical professionals were located. While wage costs are lower in India than in the United States and other developed countries for comparably skilled professionals, wages in India are increasing at a faster rate than in the United States, which could result in our incurring increased costs for technical professionals and reduced operating margins. In addition, there is intense competition in India for skilled technical professionals and we expect that competition to increase.

India has also experienced civil unrest and terrorism and has been involved in conflicts with neighboring countries. In recent years, there have been military confrontations between India and Pakistan that have occurred in the region of Kashmir and along the India-Pakistan border. The potential for hostilities between the two countries has been high in light of tensions related to recent terrorist incidents in India and the unsettled nature of the regional geopolitical environment, including events in and related to Afghanistan and Iraq. If India were to become engaged in armed hostilities, particularly if these hostilities were protracted or involved the threat of or use of weapons of mass destruction, our operations would be materially adversely affected. In addition, U.S. companies may decline to contract with us for services in light of international terrorist incidents or armed hostilities even where India is not involved because of more generalized concerns about relying on a service provider utilizing international resources.

In the past, the Indian economy has experienced many of the problems confronting the economies of developing countries, including high inflation, erratic gross domestic product growth and shortages of foreign exchange. The Indian government has exercised and continues to exercise significant influence over many aspects of the Indian economy, and Indian government actions concerning the economy could have a material adverse effect on private sector entities, including us. In the past, the Indian government has provided significant tax incentives and relaxed certain regulatory restrictions in order to encourage foreign investment in specified sectors of the economy, including the software development services industry. Programs that have benefited us include, among others, tax holidays, liberalized import and export duties and preferential rules on foreign investment and repatriation. Notwithstanding these benefits, India’s central and state governments remain significantly involved in the Indian economy as regulators. In recent years, the Indian government has

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introduced non-income related taxes, including the fringe benefit tax and new service taxes. The elimination of any of the benefits realized by us from our Indian operations or the imposition of new taxes could have a material adverse effect on our business, results of operations and financial condition.

We are investing substantial cash assets in new facilities and physical infrastructure, and our profitability could be reduced if our business does not grow proportionately.

As of December 31, 2007, we had contractual commitments of approximately $126.7 million related to capital expenditures on construction or expansion of our IT development centers. We may encounter cost overruns or project delays in connection with new facilities. These expansions will likely increase our fixed costs and if we are unable to grow our business and revenues proportionately, our profitability will be reduced.

Our international sales and operations are subject to many uncertainties.

Revenues from customers outside North America represented approximately 17% of our revenues for the year ended December 31, 2007, 14% of our revenues for the year ended December 31, 2006 and 13% of our revenues for the year ended December 31, 2005. We anticipate that revenues from customers outside North America will continue to account for a material portion of our revenues in the foreseeable future and may increase as we expand our international presence, particularly in Europe. In addition, a majority of our employees and almost all of our IT development centers are located in India. As a result, we may be subject to risks associated with international operations, including risks associated with foreign currency exchange rate fluctuations and risks associated with the application and imposition of protective legislation and regulations relating to import or export or otherwise resulting from foreign policy or the variability of foreign economic conditions. From time to time, we may engage in hedging transactions to mitigate our risks relating to exchange rate fluctuations. Additional risks associated with international operations include difficulties in enforcing intellectual property rights, the burdens of complying with a wide variety of foreign laws, potentially adverse tax consequences, tariffs, quotas and other barriers and potential difficulties in collecting accounts receivable. In addition, we may face competition in other countries from companies that may have more experience with operations in such countries or with international operations. We may also face difficulties integrating new facilities in different countries into our existing operations, as well as integrating employees that we hire in different countries into our existing corporate culture. Our international expansion plans may not be successful and we may not be able to compete effectively in other countries. There can be no assurance that these and other factors will not have a material adverse effect on our business, results of operations and financial condition.

Our operating results may be adversely affected by fluctuations in the Indian rupee and other foreign currency exchange rates.

Although we report our operating results in U.S. dollars, a portion of our revenues and expenses are denominated in currencies other than the U.S. dollar. Fluctuations in foreign currency exchange rates can have a number of adverse effects on us. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, expenses and income, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, changes in the value of the U.S. dollar against other currencies will affect our revenues, income from operations and the value of balance-sheet items originally denominated in other currencies. During the year ended December 31, 2007, the appreciation of the Indian rupee versus the U.S. dollar negatively impacted our operating margins by 210 basis points or 2.1 percentage points as compared to 2006. There is no guarantee that our financial results will not be adversely affected by currency exchange rate fluctuations, including further appreciation of the Indian rupee versus the U.S. dollar, or that any efforts by us to engage in currency hedging activities would be effective. In addition, in some countries we could be subject to strict restrictions on the movement of cash and the exchange of foreign currencies, which could limit our ability to use this cash across our global operations. Finally, as we continue to leverage our global delivery model, more of our expenses are incurred in currencies other than those in which we bill for the related services. An increase in the value of certain currencies, such as the Indian rupee, against the U.S. dollar could increase costs for delivery of services at off-shore sites by increasing labor and other costs that are denominated in local currency.

We face intense competition from other IT service providers.

The intensely competitive IT professional services market includes a large number of participants and is subject to rapid change. This market includes participants from a variety of market segments, including:

• systems integration firms;

• contract programming companies;

• application software companies;

• Internet solutions providers;

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• the professional services groups of computer equipment companies; and

• infrastructure management and outsourcing companies.

The market also includes numerous smaller local competitors in the various geographic markets in which we operate. Our direct competitors who use the on-site/offshore business model include, among others, Infosys Technologies, Tata Consultancy Services and WIPRO. In addition, many of our competitors have significantly greater financial, technical and marketing resources and greater name recognition than we do. Some of these larger competitors, such as Accenture, Electronic Data Systems and IBM Global Services, have offshore operations. We cannot assure you that we will be able to sustain our current levels of profitability or growth as competitive pressures, including competition for skilled IT development professionals and pricing pressure from competitors employing an on-site/offshore business model, increase.

We may not be able to sustain our current level of profitability.

For the year ended December 31, 2007 and the year ended December 31, 2006, we had an operating margin of 17.9% and 18.2%, respectively, compared to an operating margin of 20.1% for the year ended December 31, 2005. Our operating margin has declined as a result of the adoption of Statement of Financial Accounting Standard (SFAS) No. 123R, “Share-Based Payment,” which required us to record stock compensation expense for equity-based compensation awards, primarily stock option grants by us, in our consolidated statement of operations effective January 1, 2006. In addition, effective April 1, 2007, the government in India has imposed a fringe benefit tax on the company for the income generated upon the exercise of stock options or vesting of performance stock units for employees who worked in India during the vesting period for such award. Although we recover the fringe benefit tax from the employee’s proceeds upon sale or vesting of the stock-based compensation award, we are required under U.S. GAAP to record the fringe benefit tax as an operating expense, reducing our profitability, while the recovery of the fringe benefit tax by us from the employee is reported as an addition to additional paid-in capital. Our operating margin may decline further if we experience declines in demand and pricing for our services, imposition of new non-income related taxes or due to adverse fluctuations in foreign currency exchange rates. In addition, wages in India are increasing at a faster rate than in the United States, which could result in us incurring increased costs for technical professionals. Additionally, the number and type of equity-based compensation awards and the assumptions used in valuing equity-based compensation awards may change resulting in increased stock compensation expense and lower margins. Although we have been able to partially offset wage increases and foreign currency fluctuations through further leveraging of our low-cost operating structure, obtaining price increases, and issuing a lower number of stock options and other equity-based compensation awards in proportion to our overall headcount, we cannot assure you that we will be able to continue to do so in the future.

Our business will suffer if we fail to develop new services and enhance our existing services in order to keep pace with the rapidly evolving technological environment.

The IT services market is characterized by rapid technological change, evolving industry standards, changing customer preferences and new product and service introductions. Our future success will depend on our ability to develop solutions that keep pace with changes in the IT services market. We cannot assure you that we will be successful in developing new services addressing evolving technologies on a timely or cost-effective basis or, if these services are developed, that we will be successful in the marketplace. In addition, we cannot assure you that products, services or technologies developed by others will not render our services non-competitive or obsolete. Our failure to address these developments could have a material adverse effect on our business, results of operations and financial condition.

Our ability to remain competitive will also depend on our ability to design and implement, in a timely and cost-effective manner, solutions for customers that both leverage their legacy systems and appropriately utilize newer technologies such as Web 2.0 models, software-as-a-service, and service oriented architectures. Our failure to design and implement solutions in a timely and cost-effective manner could have a material adverse effect on our business, results of operations and financial condition.

We may face difficulties in providing end-to-end business solutions for our clients that could cause clients to discontinue their work with us, which in turn could harm our business.

We have been expanding the nature and scope of our engagements and have added new service offerings, such as IT consulting, business process outsourcing, systems integration and outsourcing of entire portions of IT infrastructure. The success of these service offerings is dependent, in part, upon continued demand for such services by our existing and new clients and our ability to meet this demand in a cost-competitive and effective manner. In addition, our ability to effectively offer a wider breadth of end-to-end business solutions depends on our ability to attract existing or new clients to these service offerings. To obtain engagements for such end-to-end solutions, we also are more likely to compete with large, well-established international consulting firms, resulting in increased competition and marketing costs. Accordingly, we cannot be certain that our new service offerings will effectively meet client needs or that we will be able to attract existing and new clients to these service offerings.

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The increased breadth of our service offerings may result in larger and more complex projects with our clients. This will require us to establish closer relationships with our clients and a thorough understanding of their operations. Our ability to establish such relationships will depend on a number of factors, including the proficiency of our IT professionals and our management personnel. Our failure to understand our client requirements or our failure to deliver services which meet the requirements specified by our clients could result in termination of client contracts, and we could be liable to our clients for significant penalties or damages.

Larger projects may involve multiple engagements or stages, and there is a risk that a client may choose not to retain us for additional stages or may cancel or delay additional planned engagements. These terminations, cancellations or delays may result from the business or financial condition of our clients or the economy generally, as opposed to factors related to the quality of our services. Such cancellations or delays make it difficult to plan for project resource requirements, and inaccuracies in such resource planning may have a negative impact on our profitability.

Our results of operations may be affected by the rate of growth in the use of technology in business and the type and level of technology spending by our clients.

Our business depends in part upon continued growth in the use of technology in business by our clients and prospective clients and their customers and suppliers. In challenging economic environments, our clients may reduce or defer their spending on new technologies in order to focus on other priorities. At the same time, many companies have already invested substantial resources in their current means of conducting commerce and exchanging information, and they may be reluctant or slow to adopt new approaches that could disrupt existing personnel, processes and infrastructures. If the growth of use of technology in business or our clients’ spending on technology in business declines, or if we cannot convince our clients or potential clients to embrace new technology solutions, our results of operations could be adversely affected.

Competition for highly skilled technical personnel is intense and the success of our business depends on our ability to attract and retain highly skilled professionals.

Our future success will depend to a significant extent on our ability to attract, train and retain highly skilled IT development professionals. In particular, we need to attract, train and retain project managers, IT engineers and other senior technical personnel. We believe there is a shortage of, and significant competition for, IT development professionals in the United States and India with the advanced technological skills necessary to perform the services we offer. We have subcontracted, to a limited extent in the past, and may do so in the future, with other service providers in order to meet our obligations to our customers. Our ability to maintain and renew existing engagements and obtain new business will depend, in large part, on our ability to attract, train and retain technical personnel with the skills that keep pace with continuing changes in information technology, evolving industry standards and changing customer preferences. Further, we must train and manage our growing work force, requiring an increase in the level of responsibility for both existing and new management personnel. We cannot assure you that the management skills and systems currently in place will be adequate or that we will be able to train and assimilate new employees successfully. Our failure to attract, train and retain current or future employees could have a material adverse effect on our business, results of operations and financial condition.

Our growth may be hindered by immigration restrictions.

Our future success will depend on our ability to attract and retain employees with technical and project management skills from developing countries, especially India. The vast majority of our IT professionals in the United States and in Europe are Indian nationals. The ability of Indian nationals to work in the United States depends on their ability and our ability to obtain the necessary visas and work permits.

The H-1B visa classification enables U.S. employers to hire qualified foreign workers in positions that require an education at least equal to a Baccalaureate Degree in the United States in specialty occupations such as IT systems engineering and systems analysis. The H-1B visa usually permits an individual to work and live in the United States for a period of up to six years. Under certain circumstances, H-1B visa extensions after the six-year period may be available. There is a limit on the number of new H-1B petitions that United States Citizenship and Immigration Services, or CIS, one of the successor agencies to the Immigration and Naturalization Service, may approve in any federal fiscal year, and in years in which this limit is reached, we may be unable to obtain H-1B visas necessary to bring foreign employees to the United States. In the current federal fiscal year, the limit is 65,000. The fiscal year 2008 cap was reached on April 2, 2007. The fiscal year 2008 cap of 20,000 for graduates of U.S. advanced degree programs was reached on April 30, 2007. The fiscal year 2007 cap was reached on May 26, 2006. The fiscal year 2007 cap of 20,000 for graduates of U.S. advanced degree programs was reached on July 26, 2006. We will be able to file H-1B applications against the fiscal year 2009 cap beginning on April 1,

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2008 for work in H-1B status beginning on October 1, 2008. Each year the H-1B cap is reached at an earlier point prior to the beginning of the fiscal year for which the H-1B’s will be available. However, as a part of our advanced planning process, we believe that we have sufficient employees visa-ready to meet our anticipated business growth in the current year. In addition, there are strict labor regulations associated with the H-1B visa classification. Larger users of the H-1B visa program are often subject to investigations by the Wage and Hour Division of the United States Department of Labor. A finding by the United States Department of Labor of willful or substantial failure by us to comply with existing regulations on the H-1B classification may result in back-pay liability, substantial fines, and/or a ban on future use of the H-1B program and other immigration benefits. We are currently subject to such an investigation as described in the immediately following risk factor.

We also regularly transfer employees from India to the United States to work on projects and at client sites, using the L-1 visa classification. The L-1 visa allows companies abroad to transfer certain managers, executives and employees with specialized company knowledge to related U.S. companies such as a parent, subsidiary, affiliate, joint venture, or branch office. We have an approved “Blanket L Program,” under which the corporate relationships of our transferring and receiving entities have been pre-approved by the CIS, thus enabling individual L-1 visa applications to be presented directly to a visa-issuing U.S. consular post abroad rather than undergoing the pre-approval process in the United States. In recent years, both the U.S. consular posts that review initial L-1 applications and the CIS offices, which adjudicate extensions of L-1 status, have become more restrictive with respect to this category. As a result, the rate of refusals of initial L-1 applications and of extensions has increased. In addition, even where L-1 visas are ultimately granted and issued, security measures undertaken by U.S. consular posts around the world have delayed visa issuances. Our inability to bring qualified technical personnel into the United States to staff on-site customer locations would have a material adverse effect on our business, results of operations and financial condition.

On December 8, 2004, President Bush signed the L-1 Visa Reform Act, which was part of the fiscal year 2005 Omnibus Appropriations Act (Public Law 108-447 at Division J, Title IV). This legislation contained several important changes to the laws governing L-1 visa holders. All of the changes took effect on June 8, 2005. Under one provision of the new law, all L-1 applicants, including those brought to the United States under a Blanket L Program, must have worked abroad with the related company for one full year in the prior three years. The provision allowing Blanket L applicants who had worked abroad for the related company for six months during the qualifying three-year period was revoked. In addition, L-1B holders (intracompany transferees with specialized company knowledge) may not be primarily stationed at the work site of another employer if the L-1B holder will be controlled and supervised by an employer other than the petitioning employer. Finally, L-1B status may not be granted where placement of the L-1B visa holder at a third party site is part of an arrangement to provide labor for the third party, rather than placement at the site in connection with the provision of a product or service involving specialized knowledge specific to the petitioning employer.

We do not place L-1B workers at third party sites where they are under the primary supervision of a different employer, nor do we place L-1B holders at third party sites in an arrangement to provide labor for the third party, without providing a service involving our specialized knowledge. Since implementation of the new law, we consistently establish this fact to CIS’s satisfaction. However, if CIS and/or the United States Department of State, through its visa-issuing U.S. consular posts abroad, decide to interpret these provisions in a very restrictive fashion, this could impair our ability to staff our projects in the United States with resources from our entities abroad. In addition, CIS has not yet issued regulations governing these new provisions. If such regulations are restrictive in nature, this could impair our ability to staff our projects in the United States with resources from our entities abroad.

We also process immigrant visas for lawful permanent residence for employees to fill positions for which there are no able, willing and qualified U.S. workers available to fill the positions. Compliance with existing U.S. immigration and labor laws, or changes in those laws making it more difficult to hire foreign nationals or limiting our ability to successfully obtain permanent residence for our foreign employees in the United States, could require us to incur additional unexpected labor costs and expenses or could restrain our ability to retain the skilled professionals we need for our operations in the United States. Any of these restrictions or limitations on our hiring practices could have a material adverse effect on our business, results of operations and financial condition.

In addition to immigration restrictions in the United States, there are certain restrictions on transferring our employees to work in the United Kingdom, where we have experienced significant growth. The United Kingdom requires that employees who are not nationals of the European Economic Area (EEA), which includes nationals of all European Union countries (except Bulgaria and Romania) plus Iceland, Norway, Liechtenstein and Switzerland, obtain an intra-company transfer work permit before beginning to perform work. Under the work permit regulations, in order for us to transfer our non-EEA employees to the United Kingdom, we must demonstrate that the employee had been employed by us for at least six months prior to the transfer and that the position in the United Kingdom requires someone with either: (1) a United Kingdom degree level qualification; or (2) a Higher National Diploma (HND) level occupational qualification which is relevant to the UK position; or (3) a general HND level qualification plus one year’s work experience doing the type of job

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for which the work permit is sought; or (4) at least three years’ high-level specialist skills acquired through doing the type of job for which the work permit is sought. These restrictions restrain our ability to add the skilled professionals we need for our operations in Europe, and could have an adverse affect on our international strategy to expand our presence in Europe. As a result, the work permit legislation in the United Kingdom could have a material adverse effect on our business, results of operations and financial condition.

Immigration and work permit laws and regulations in the United States, the United Kingdom and other countries are subject to legislative and administrative changes as well as changes in the application of standards and enforcement. Immigration and work permit laws and regulation can be significantly affected by political forces and levels of economic activity. Our international expansion strategy and our business, results of operations and financial condition may be materially adversely affected if changes in immigration and work permit laws and regulations or the administration or enforcement of such laws or regulations impair our ability to staff projects with IT professionals who are not citizens of the country where the work is to be performed.

Our results of operations and business may be affected by an investigation currently being conducted by the Wage and Hour Division of the United States Department of Labor.

There are strict labor regulations associated with the H-1B visa classification. Larger users of the H-1B visa program are often subject to investigations by the Wage and Hour Division of the United States Department of Labor. The Department of Labor has commenced an investigation to determine if we have complied with the elements of the Labor Condition Application(s) (ETA Form 9035) used by us to hire certain H-1B non-immigrant workers. We believe the Department of Labor is primarily focused on whether our employees with H-1B renewals were paid at the appropriate pay level. The investigation has recently been commenced and is in its early stages. We do not currently have a timetable in which this investigation will be concluded. While we believe we have complied with the applicable regulations, an adverse finding by the United States Department of Labor may result in back-pay liability, substantial fines, and/or a ban on future use of the H-1B program and other immigration benefits, which could potentially have a harmful effect on our business and results of operations.

Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, and violation of these regulations could harm our business.

Because we provide services to clients throughout the world, we are subject to numerous, and sometimes conflicting, legal rules on matters as diverse as import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, government affairs, internal and disclosure control obligations, data privacy and labor relations. Violations of these regulations in the conduct of our business could result in fines, criminal sanctions against us or our officers, prohibitions on doing business and damage to our reputation. Violations of these regulations in connection with the performance of our obligations to our clients also could result in liability for monetary damages, fines and/or criminal prosecution, unfavorable publicity, restrictions on our ability to process information and allegations by our clients that we have not performed our contractual obligations. Due to the varying degrees of development of the legal systems of the countries in which we operate, local laws might be insufficient to protect our rights. Our failure to comply with applicable regulatory requirements, could have a material adverse effect on our business, results of operations and financial condition.

Anti-outsourcing legislation, if adopted, could adversely affect our business, financial condition and results of operations and impair our ability to service our customers.

The issue of companies outsourcing services to organizations operating in other countries is a topic of political discussion in many countries, including the United States which is our largest market. For example, measures aimed at limiting or restricting outsourcing by U.S. companies are under discussion in Congress and in numerous state legislatures to address concerns over the perceived association between offshore outsourcing and the loss of jobs in the United States. While no substantive anti-outsourcing legislation has been introduced to date, given the ongoing debate over this issue, the introduction of such legislation is possible. If introduced, such measures are likely to fall within two categories: (1) a broadening of restrictions on outsourcing by federal and state government agencies and on government contracts with firms that outsource services directly or indirectly, and/or (2) measures that impact private industry, such as tax disincentives or intellectual property transfer restrictions. In the event that any of these measures become law, our business, financial condition and results of operations could be adversely affected and our ability to service our customers could be impaired.

In addition, from time to time there has been publicity about negative experiences associated with offshore outsourcing, such as theft and misappropriation of sensitive client data, particularly involving service providers in India. Current or prospective clients may elect to perform certain services themselves or may be discouraged from transferring services from onshore to offshore providers to avoid negative perceptions that may be associated with using an offshore provider. Any slowdown or reversal of existing industry trends toward offshore outsourcing would seriously harm our ability to compete effectively with competitors that provide services from within the country in which our clients operate.

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Legislation enacted in certain European jurisdictions and any future legislation in Europe, Japan or any other country in which we have clients restricting the performance of business process services from an offshore location could also have a material adverse effect on our business, results of operations and financial condition. For example, new legislation recently enacted in the United Kingdom, based on the 1977 EC Acquired Rights Directive that has been adopted in some form by many European Union, or EU, countries, provides that if a company outsources all or part of its business to a service provider or changes its current service provider, the affected employees of the company or of the previous service provider are entitled to become employees of the new service provider, generally on the same terms and conditions as their original employment. In addition, dismissals of employees who were employed by the company or the previous service provider immediately prior to that transfer are automatically considered unfair dismissals that entitle such employees to compensation. As a result, in order to avoid unfair dismissal claims we may have to offer, and become liable for, voluntary redundancy payments to the employees of our clients in the United Kingdom and other EU countries who have adopted similar laws who outsource business to us. This legislation may materially affect our ability to obtain new business from companies in the EU and to provide outsourced services to companies in the EU in a cost-effective manner.

Hostilities involving the United States, the United Kingdom, and other countries in which we provide on-site services to our clients, and other acts of terrorism, violence or war could delay or reduce the number of new purchase orders we receive and impair our ability to service our customers, thereby adversely affecting our business, financial condition and results of operations.

Hostilities involving the United States and other acts of terrorism, violence or war, such as the attacks of September 11, 2001 in the United States, the attacks of July 7, 2005 in the United Kingdom, and the continuing conflict in Iraq, could materially adversely affect our operations and our ability to service our customers. Hostilities involving the United States, the United Kingdom, and other countries in which we provide on-site services to our clients could cause customers in these countries to delay their decisions on IT spending, which could affect our financial results. In addition, acts of terrorism, violence or war could give rise to military or travel disruptions and restrictions affecting our employees. As of December 31, 2007, a majority of our technical professionals were located in India, and the vast majority of our technical professionals in the United States and Europe were Indian nationals who were able to work in the United States and Europe only because they held current visas and work permits. Travel restrictions could cause us to incur additional unexpected labor costs and expenses or could restrain our ability to retain the skilled professionals we need for our operations in the United States and Europe.

Although we continue to believe that we have a strong competitive position in the United States, we continue to increase our efforts to geographically diversify our clients and revenue. Despite our efforts to diversify, hostilities involving the United States the United Kingdom, and other countries in which we provide on-site services to our clients, and other acts of terrorism, violence or war may reduce the demand for our services and negatively affect our revenues and profitability.

Our revenues are highly dependent on clients primarily located in the United States and Europe, as well as on clients concentrated in certain industries, and economic slowdowns or factors that affect the economic health of the United States, Europe or these industries may affect our business.

Approximately 83% of our revenues during the year ended December 31, 2007 were derived from customers located in the United States. In the same period, approximately 16% of our revenues were derived from customers located in Europe. If the United States or European economy weakens or otherwise slows, pricing for our services may be depressed and our customers may reduce or postpone their technology spending significantly, which may in turn lower the demand for our services and negatively affect our revenues and profitability. Additionally, any recession in the United States economy could have an adverse impact on our revenues because a large portion of our revenues is derived from the United States. In addition, during the year ended December 31, 2007, we earned approximately 47% of our revenues from the financial services and insurance industries. Any significant decrease in the growth of the financial services industry, or significant consolidation in that industry or decrease in growth or consolidation in other industry segments on which we focus, could reduce the demand for our services and negatively affect our revenues and profitability.

Our ability to operate and compete effectively could be impaired if we lose key personnel or if we cannot attract additional qualified personnel.

Our future performance depends to a significant degree upon the continued service of the key members of our management team, as well as marketing, sales and technical personnel, and our ability to attract and retain new management and other personnel. We do not maintain key man life insurance on any of our executive officers or significant employees.

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Competition for personnel is intense, and there can be no assurance that we will be able to retain our key employees or that we will be successful in attracting and retaining new personnel in the future. The loss of any one or more of our key personnel or the failure to attract and retain key personnel could have a material adverse effect on our business, results of operations and financial condition.

Restrictions in non-competition agreements with our executive officers may not be enforceable.

We have entered into non-competition agreements with our executive officers. We cannot assure you, however, that the restrictions in these agreements prohibiting such executive officers from engaging in competitive activities are enforceable. Further, substantially all of our professional non-executive staff are not covered by agreements that would prohibit them from working for our competitors. If any of our key professional personnel leaves our employment and joins one of our competitors, our business could be adversely affected.

Our earnings may be adversely affected if we change our intent not to repatriate earnings in India.

Effective January 1, 2002, pursuant to Accounting Principles Board Opinion No. 23, “Accounting for Income Taxes-Special Areas,” we no longer accrue incremental U.S. taxes on all Indian earnings recognized in 2002 and subsequent periods as these earnings are considered to be indefinitely reinvested outside of the United States. While we have no plans to do so, events may occur in the future that could effectively force us to change our intent on repatriating Indian earnings. If we change our intent and repatriate such earnings, we will have to accrue the applicable amount of taxes associated with such earnings and pay taxes at a substantially higher rate than our effective income tax rate in 2007. These increased taxes could have a material adverse effect on our business, results of operations and financial condition.

Over the next few years we will lose certain tax benefits provided by India to companies in our industry.

Our Indian subsidiaries are export-oriented companies, which, under the Indian Income Tax Act of 1961, are entitled to claim tax holidays for a period of ten consecutive years for each Software Technology Park (STP) with respect to export profits for each STP. Substantially all of the earnings of our Indian subsidiaries are attributable to export profits. The majority of our STPs in India are currently entitled to a 100% exemption from Indian income tax. Under current law, these tax holidays will be completely phased out by March 2009. In anticipation of the complete phase out of the tax holidays in March 2009, we expect to locate a portion of our new development centers in areas designated as Special Economic Zones (SEZ). Development centers operating in SEZ will be entitled to certain income tax incentives for periods of up to 15 years. Under current Indian tax law, export profits after March 31, 2009 from our existing STPs will be fully taxable at the Indian statutory rate (33.99% as of December 31, 2007) in effect at such time. If the tax holidays relating to our Indian STPs are not extended or new tax incentives are not introduced that would effectively extend the income tax holiday benefits beyond March 2009, we expect that our effective income tax rate would increase significantly beginning in calendar year 2009.

If our pricing structures do not accurately anticipate the cost and complexity of performing our work, then our contracts could be unprofitable.

We negotiate pricing terms with our clients utilizing a range of pricing structures and conditions. We contract to provide services either on a time-and-materials basis or on a fixed-price basis. Our pricing is highly dependent on our internal forecasts and predictions about our projects and the marketplace, which might be based on limited data and could turn out to be inaccurate. If we do not accurately estimate the costs and timing for completing projects, our contracts could prove unprofitable for us or yield lower profit margins than anticipated. We face a number of risks when pricing our contracts, as many of our projects entail the coordination of operations and workforces in multiple locations and utilizing workforces with different skill sets and competencies across geographically distributed service locations. Our pricing, cost and profit margin estimates for the work that we perform frequently include anticipated long-term cost savings from transformational and other initiatives that we expect to achieve and sustain over the life of the contract. There is a risk that we will underprice our projects, fail to accurately estimate the costs of performing the work or fail to accurately assess the risks associated with potential contracts. In particular, any increased or unexpected costs, delays or failures to achieve anticipated cost savings, or unexpected risks we encounter in connection with the performance of this work, including those caused by factors outside our control, could make these contracts less profitable or unprofitable, which could have an adverse effect on our profit margin.

In addition, a significant portion of our projects are on a fixed-price basis, subjecting us to the foregoing risks to an even greater extent. Fixed-price contracts accounted for approximately 25% of our revenues for the years ended December 31, 2007 and 2006. We expect that an increasing number of our future projects will be contracted on a fixed-price basis. In addition to the other risks described in the paragraph above, we bear the risk of cost over-runs and operating cost inflation in connection with projects covered by fixed-price contracts. Our failure to estimate accurately the resources and time required for a fixed-price project, or our failure to complete our contractual obligations within the time frame committed, could have a material adverse effect on our business, results of operations and financial condition.

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If we do not continue to improve our operational, financial and other internal controls and systems to manage our rapid growth, our business may suffer and the value of our shareholders’ investment may be harmed.

Our anticipated growth will continue to place significant demands on our management and other resources. Our growth will require us to continue to develop and improve our operational, financial and other internal controls, both in the United States, India and elsewhere. In particular, our continued growth will increase the challenges involved in:

• recruiting and retaining sufficiently skilled technical, marketing and management personnel;

• adhering to our high quality standards;

• maintaining high levels of client satisfaction;

• developing and improving our internal administrative infrastructure, particularly our financial, operational, communications and other internal systems; and

• preserving our culture, values and entrepreneurial environment.

As part of our growth strategy, we are expanding our operations in Europe, Asia and Latin America. We may not be able to compete effectively in these markets and the cost of entering these markets may be substantially greater than we expect. If we fail to compete effectively in the new markets we enter, or if the cost of entering those markets is substantially greater than we expect, our business, results of operations and financial condition could be adversely affected. In addition, if we cannot compete effectively, we may be required to reconsider our strategy to invest in our international expansion plans and change our intent on the repatriation of our earnings.

We rely on a few customers for a large portion of our revenues.

Our top five customers generated approximately 24% of our revenues for year ended December 31, 2007 and 29% of our revenues in the fiscal year ended December 31, 2006. The volume of work performed for specific customers is likely to vary from year to year, and a major customer in one year may not use our services in a subsequent year. The loss of one of our large customers could have a material adverse effect on our business, results of operations and financial condition.

We generally do not have long-term contracts with our customers and our results of operations could be adversely affected if our clients terminate their contracts with us on short notice.

Consistent with industry practice, we generally do not enter into long-term contracts with our customers. A majority of our contracts can be terminated by our clients with short notice. As a result, we are substantially exposed to volatility in the market for our services, and may not be able to maintain our level of profitability.

When contracts are terminated, we lose the anticipated revenues and might not be able to eliminate associated costs in a timely manner. Consequently, our profit margins in subsequent periods could be lower than expected. If we are unable to market our services on terms we find acceptable, our financial condition and results of operations could suffer materially.

Our profitability could suffer if we are not able to maintain favorable pricing rates.

Our profit margin, and therefore our profitability, is dependent on the rates we are able to recover for our services. If we are not able to maintain favorable pricing for our services, our profit margin and our profitability could suffer. The rates we are able to recover for our services are affected by a number of factors, including:

• our clients’ perceptions of our ability to add value through our services;

• competition;

• introduction of new services or products by us or our competitors;

• our competitors’ pricing policies;

• our ability to accurately estimate, attain and sustain contract revenues, margins and cash flows over increasingly longer contract periods;

• bid practices of clients and their use of third-party advisors;

• the use by our competitors and our clients of off-shore resources to provide lower-cost service delivery capabilities; and

• general economic and political conditions.

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Our operating results may experience significant quarterly fluctuations.

We historically have experienced significant quarterly fluctuations in our revenues and results of operations and expect these fluctuations to continue. Among the factors causing these variations have been:

• the number, timing, scope and contractual terms of IT development and maintenance projects in which we are engaged;

• delays incurred in the performance of those projects;

• the accuracy of estimates of resources and time required to complete ongoing projects; and

• general economic conditions.

In addition, our future revenues, operating results and margins may fluctuate as a result of:

• changes in pricing in response to customer demand and competitive pressures;

• the mix of on-site and offshore staffing;

• the ratio of fixed-price contracts versus time-and-materials contracts;

• employee wage levels and utilization rates;

• changes in foreign exchange rates, including the Indian rupee versus the U. S. dollar;

• the timing of collection of accounts receivable;

• enactment of new taxes, including fringe benefit taxes in India;

• the timing of the exercise of stock options or vesting of performance stock units subject to the Indian fringe benefit tax;

• changes in domestic and international income tax rates and regulations; and

• changes to levels and types of stock-based compensation awards and assumptions used to determine the fair value of such awards.

A high percentage of our operating expenses, particularly personnel and rent, are relatively fixed in advance of any particular quarter. As a result, unanticipated variations in the number and timing of our projects or in employee wage levels and utilization rates may cause significant variations in our operating results in any particular quarter, and could result in losses. Any significant shortfall of revenues in relation to our expectations, any material reduction in utilization rates for our professional staff or variance in the on-site, offshore staffing mix, an unanticipated termination of a major project, a customer’s decision not to pursue a new project or proceed to succeeding stages of a current project or the completion during a quarter of several major customer projects could require us to pay underutilized employees and could therefore have a material adverse effect on our business, results of operations and financial condition.

As a result of these factors, it is possible that in some future periods, our revenues and operating results may be significantly below the expectations of public market analysts and investors. In such an event, the price of our common stock would likely be materially and adversely affected.

Our profitability could suffer if we are not able to maintain favorable utilization rates.

The cost of providing our services, including the utilization rate of our professionals, affects our profitability. If we are not able to maintain an appropriate utilization rate for our professionals, our profit margin and our profitability may suffer. Our utilization rates are affected by a number of factors, including:

• our ability to transition employees from completed projects to new assignments and to hire and assimilate new employees;

• our ability to forecast demand for our services and thereby maintain an appropriate headcount in each of our geographies and workforces;

• our ability to manage attrition; and

• our need to devote time and resources to training, professional development and other non-chargeable activities.

Liability claims for damages caused by disclosure of confidential information or system failures could have a material adverse effect on our business.

Many of our engagements involve projects that are critical to the operations of our customers’ businesses and provide benefits that are difficult to quantify. Any failure in a customer’s computer system could result in a claim for substantial

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damages against us, regardless of our responsibility for the failure. Although we attempt to limit by contract our liability for damages arising from negligent acts, errors, mistakes or omissions in rendering our IT development and maintenance services, we cannot assure you that any contractual limitations on liability will be enforceable in all instances or will otherwise protect us from liability for damages.

In addition, we often have access to or are required to collect and store confidential client and customer data. If any person, including any of our employees, penetrates our network security or misappropriates sensitive data, we could be subject to significant liability from our clients or from our clients’ customers for breaching contractual confidentiality provisions or privacy laws. Unauthorized disclosure of sensitive or confidential client and customer data, whether through breach of our computer systems, systems failure or otherwise, could damage our reputation and cause us to lose clients.

Although we have general liability insurance coverage, including coverage for errors or omissions, there can be no assurance that coverage will continue to be available on reasonable terms or will be sufficient in amount 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 business, results of operations and financial condition.

We may be subject to legacy Dun & Bradstreet liabilities that could have an adverse effect on our results of operations and financial condition.

In 1996, The Dun & Bradstreet Corporation split itself into three separate companies: The Dun & Bradstreet Corporation, Cognizant Corporation and ACNielsen Corporation. In connection with the split-up transaction, The Dun & Bradstreet Corporation, Cognizant Corporation (renamed Nielsen Media Research), of which we were once a part, and ACNielsen Corporation (now a subsidiary of the Dutch company VNU N.A.) entered into a distribution agreement. In the 1996 distribution agreement, each party assumed the liabilities relating to the businesses allocated to it and agreed to indemnify the other parties and their subsidiaries against those liabilities and certain other matters. The 1996 distribution agreement also prohibited each party thereto from distributing to our stockholders any business allocated to it unless the distributed business delivered undertakings agreeing to be jointly and severally liable to the other parties under the 1996 distribution agreement for the liabilities of the distributing parent company under the 1996 distribution agreement. IMS Health made such undertaking when it was spun off by Nielsen Media Research in 1998 and, accordingly, IMS Health and Nielsen Media Research are jointly and severally liable to R.H. Donnelly and ACNielsen for Cognizant Corporation obligations under the terms of the 1996 distribution agreement. IMS Health has requested similar undertakings from us as a condition to the distribution of our shares in the exchange offer. IMS Health is obligated to procure similar undertakings from us to Nielsen Media Research and Synavant Inc. with respect to liabilities allocated to IMS Health in connection with Nielsen Media Research’s spin-off of IMS Health and IMS Health’s spin-off of Synavant Inc. In connection with the exchange offer, we gave these undertakings and, as a result, we may be subject to claims in the future in relation to legacy liabilities.

Claims have arisen in the past and may arise in the future under the 1996 distribution agreement or the distribution agreements relating to Nielsen Media Research’s spin-off of IMS Health and IMS Health’s spin-off of Synavant Inc., in which case we may be jointly and severally liable for any losses suffered by the parties entitled to indemnification. IMS Health has agreed to indemnify us for any and all liabilities that arise out of our undertakings to be jointly and severally liable for these liabilities, but if for any reason IMS Health does not perform on our indemnification obligation, these liabilities could have a material adverse effect on our financial condition and results of operations.

If we are unable to protect our intellectual property rights, our business may be adversely affected.

Our future success will depend in part on our ability to protect our proprietary methodologies and other intellectual property. We presently hold no patents or registered copyrights, and rely upon a combination of copyright and trade secret laws, non-disclosure and other contractual arrangements and various security measures to protect our intellectual property rights. Existing laws of some countries in which we provide services or solutions might offer only limited protection of our intellectual property rights. India is a member of the Berne Convention, and has agreed to recognize protections on copyrights conferred under the laws of foreign countries, including the laws of the United States. We believe that laws, rules, regulations and treaties in effect in the United States and India are adequate to protect us from misappropriation or unauthorized use of our copyrights. However, there can be no assurance that these laws will not change and, in particular, that the laws of India or the United States will not change in ways that may prevent or restrict the transfer of software components, libraries and toolsets from India to the United States or from the United States to India. There can be no assurance that the steps we have taken to protect our intellectual property rights will be adequate to deter misappropriation of any of our intellectual property, or that we will be able to detect unauthorized use and take appropriate steps to enforce our rights. Unauthorized use of our intellectual property may result in development of technology, products or services which compete with our products and unauthorized parties may infringe upon or misappropriate our products, services or proprietary information. If we are unable to protect our intellectual property, our business may be adversely affected.

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Our services or solutions could infringe upon the intellectual property rights of others or we might lose our ability to utilize the intellectual property of others.

We cannot be sure that our services and solutions, or the solutions of others that we offer to our clients, do not infringe on the intellectual property rights of third parties, and we could have infringement claims asserted against us or against our clients. These claims could harm our reputation, cost us money and prevent us from offering some services or solutions. In a number of our contracts, we have agreed to indemnify our clients for any expenses or liabilities resulting from claimed infringements of the intellectual property rights of third parties. In some instances, the amount of these indemnities could be greater than the revenues we receive from the client. Any claims or litigation in this area, whether we ultimately win or lose, could be time-consuming and costly, injure our reputation or require us to enter into royalty or licensing arrangements. We might not be able to enter into these royalty or licensing arrangements on acceptable terms. If a claim of infringement were successful against us or our clients, an injunction might be ordered against our client or our own services or operations, causing further damages. We expect that the risk of infringement claims against us will increase if our competitors are able to obtain patents for software products and processes. Any infringement claim or litigation against us could have a material adverse effect on our business, results of operations and financial condition.

We could lose our ability or be unable to secure the right to utilize the intellectual property of others. Third-party suppliers of software, hardware or other intellectual assets could be unwilling to permit us to use their intellectual property or be acquired or used, and this could impede or disrupt use of their products or services by us and our clients. If our ability to provide services and solutions to our clients is impaired, our operating results could be adversely affected.

We may be unable to integrate acquired companies or technologies successfully and we may be subject to certain liabilities assumed in connection with our acquisitions that could harm our operating results.

We believe that opportunities exist in the fragmented IT services market to expand our business through selective strategic acquisitions and joint ventures. We believe that acquisition and joint venture candidates may enable us to expand our geographic presence, especially in the European market, enter new technology areas or expand our capacity. We cannot assure you that we will identify suitable acquisition candidates available for sale at reasonable prices, consummate any acquisition or joint venture or successfully integrate any acquired business or joint venture into our operations. Further, acquisitions and joint ventures involve a number of special risks, including diversion of management’s attention, failure to retain key personnel, unanticipated events or circumstances and legal liabilities, some or all of which could have a material adverse effect on our business, results of operations and financial condition. We may finance any future acquisitions with cash, debt financing, the issuance of equity securities or a combination of the foregoing. We cannot assure you that we will be able to arrange adequate financing on acceptable terms. In addition, acquisitions financed with the issuance of our equity securities could be dilutive.

Although we conduct due diligence in connection with each of our acquisitions, there may be liabilities that we fail to discover or that we inadequately assess in our due diligence efforts. In particular, to the extent that prior owners of any acquired businesses or properties failed to comply with or otherwise violated applicable laws or regulations, or failed to fulfill their contractual obligations to customers, we, as the successor owner, may be financially responsible for these violations and failures and may suffer reputational harm or otherwise be adversely affected. While we generally require the selling party to indemnify us for any and all liabilities associated with such liabilities, if for any reason the seller does not perform their indemnification obligation, we may be held responsible for such liabilities. In addition, as part of an acquisition, we may assume responsibilities and obligations of the acquired business pursuant to the terms and conditions of services agreements entered by the acquired entity that are not consistent with the terms and conditions that we typically accept and require. Although we attempt to structure acquisitions in such a manner as to minimize the liability that could arise from such contractual commitments, we cannot assure you that any of our efforts to minimize the liability will be effective in all instances or will otherwise protect us from liability for damages under such agreements. The discovery of any material liabilities associated with our acquisitions for which we are unable to receive indemnification for could harm our operating results.

System failure or disruptions in telecommunications could disrupt our business and result in lost customers and curtailed operations which would reduce our revenue and profitability.

To deliver our services to our customers, we must maintain a high speed network of satellite, fiber optic and land lines and active voice and data communications 24 hours a day between our main offices in Chennai, our other IT development centers in India and globally and the offices of our customers worldwide. Although we maintain redundancy facilities and satellite communications links, any systems failure or a significant lapse in our ability to transmit voice and data through satellite and telephone communications could result in lost customers and curtailed operations which would reduce our revenue and profitability.

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Provisions in our charter, by-laws and stockholders’ rights plan and provisions under Delaware law may discourage unsolicited takeover proposals.

Provisions in our charter and by-laws, each as amended, our stockholders’ rights plan and Delaware General Corporate Law, or DGCL, may have the effect of deterring unsolicited takeover proposals or delaying or preventing changes in our control or management, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices. In addition, these documents and provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. Our board of directors has the authority, without further action by the stockholders, to fix the rights and preferences, and issue shares of preferred stock. Our charter provides for a classified board of directors, which will prevent a change of control of our board of directors at a single meeting of stockholders. The prohibition of our stockholders’ ability to act by written consent and to call a special meeting will delay stockholder actions until annual meetings or until a special meeting is called by our chairman or chief executive officer or our board of directors. The supermajority-voting requirement for specified amendments to our charter and by-laws allows a minority of our stockholders to block those amendments. The DGCL also contains provisions preventing stockholders from engaging in business combinations with us, subject to certain exceptions. These provisions could also discourage bids for our common stock at a premium as well as create a depressive effect on the market price of the shares of our common stock.

Compliance with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance.

Changing laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, other SEC regulations, and the NASDAQ Global Select Market rules, are creating uncertainty for companies like ours. These laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time, as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such corporate governance standards.

In particular, our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment requires the commitment of significant financial and managerial resources. We consistently assess the adequacy of our internal controls over financial reporting, remediate any control deficiencies that may be identified, and validate through testing that our controls are functioning as documented. While we do not anticipate any material weaknesses, the inability of management and our independent auditor to provide us with an unqualified report as to the adequacy and effectiveness, respectively, of our internal controls over financial reporting for future year ends could result in adverse consequences to us, including, but not limited to, a loss of investor confidence in the reliability of our financial statements, which could cause the market price of our stock to decline.

We are committed to maintaining high standards of corporate governance and public disclosure, and our efforts to comply with evolving laws, regulations and standards in this regard have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. In addition, the laws, regulations and standards regarding corporate governance may make it more difficult for us to obtain director and officer liability insurance. Further, our board members, chief executive officer and chief financial officer could face an increased risk of personal liability in connection with their performance of duties. As a result, we may face difficulties attracting and retaining qualified board members and executive officers, which could harm our business. If we fail to comply with new or changed laws, regulations or standards of corporate governance, our business and reputation may be harmed.

Funds associated with auction-rate securities that we hold as investments may not be liquid or accessible for in excess of 12 months and our auction-rate securities may decline in value.

As of December 31, 2007, our short-term investments included $282.8 million of AAA-rated auction-rate municipal debt securities that are collateralized by debt obligations supported by student loans. As of February 26, 2008, we held $176.3 million of AAA-rated auction-rate municipal debt securities of which approximately 95% of the underlying student loans are backed by the Federal Family Education Loan Progam (FFELP). In addition, the auction-rate municipal debt securities held by us are generally collateralized by assets that are in excess of the total par value of the security issue. During the period February 14, 2008 to February 26, 2008, auctions failed for $71.1 million of the auction-rate securities held by us as investments. There is no assurance that successful auctions on the remaining auction-rate securities in our investment portfolio will continue to succeed.

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The current instability in the credit markets may affect our ability to liquidate these securities in the short term. The funds associated with failed auctions will not be accessible until a successful auction occurs, the issuer calls or restructures the underlying security, the underlying security matures or a buyer outside the auction process emerges. We believe that the failed auctions experienced to date are not necessarily a result of the deterioration of the underlying credit quality of the securities. In addition, we believe that any potential future unrealized gain or loss associated with these securities will be temporary and will be recorded in accumulated other comprehensive income in our consolidated statement of financial position. However, if such losses become permanent, an impairment charge would be recorded to our consolidated statement of operations and comprehensive income which could have a material adverse affect on our results of operations and financial condition.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties

To support our planned growth, we are continually expanding our IT development center capacity through the construction new facilities scheduled to become operational in 2008 and 2009, supplemented by additional leasing of non-owned facilities. Below is a summary of IT development facilities in India and China and our executive office in Teaneck, New Jersey.

Location	Number of Locations	Square Footage Leased	Square Footage Owned	Total Square Footage
IT Development Facilities:
India
Chennai	10	1,300,480	891,220	2,191,700
Bangalore	5	1,046,592	225,000	1,271,592
Pune	5	716,924	343,703	1,060,627
Kolkata	7	454,887	190,182	645,069
Hyderabad	3	567,610	—	567,610
Coimbatore	3	173,641	—	173,641
Cochin	1	73,800	—	73,800
Mumbai	2	73,235	—	73,235
Gurgaon	2	35,343	—	35,343
Shanghai, China	3	99,055	—	99,055
Total	41	4,541,567	1,650,105	6,191,672
Executive Office:
Teaneck	1	42,521	—	42,521

We operate out of our Teaneck, New Jersey headquarters and our regional and international offices. We have business development offices in the following cities: Atlanta, Boston, Bridgewater (NJ), Chicago, Dallas, Los Angeles, Minneapolis, Norwalk (CT), Phoenix, San Francisco, Teaneck, Amsterdam, Buenos Aires, Cyberjaya, Malaysia, Frankfurt, London, Melbourne, Paris, Shanghai, Singapore, Tokyo, Toronto and Zurich. In addition, we operate IT development facilities in Bentonville (AR), Boston, Bridgewater (NJ), Chicago, Doylestown (PA), Phoenix, Scottsdale, Amsterdam, Buenos Aires and Toronto. We believe that our current facilities are adequate to support our existing operations. We also believe that we will be able to obtain suitable additional facilities on commercially reasonable terms on an “as needed” basis.

Item 3. Legal Proceedings

We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of our 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 operating results, cash flows or consolidated financial position.

Item 4. Submission of Matter to a Vote of Security Holders

None.

PART II

Item 5. Market for Our Common Equity, Related Stockholder Matters and Purchases of Equity Securities.

Our Class A common stock trades on the NASDAQ Global Select Market (NGS) under the symbol “CTSH”.

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The following table describes the per share range of high and low sale prices for shares of our Class A common stock, as listed for quotation on the NGS, and the quarterly cash dividends per share for the periods indicated. This table has been retroactively adjusted to reflect our 2 – for – 1 stock split effected by a 100% stock dividend that became effective on October 16, 2007.

Quarter Ended	High		Low		Cash Dividend Per Share
March 31, 2006	$	30.08	$	24.60	$	0.00
June 30, 2006	$	34.51	$	28.44	$	0.00
September 30, 2006	$	37.53	$	30.52	$	0.00
December 31, 2006	$	41.10	$	36.32	$	0.00
March 31, 2007	$	47.44	$	38.56	$	0.00
June 30, 2007	$	45.31	$	37.42	$	0.00
September 30, 2007	$	43.76	$	33.88	$	0.00
December 31, 2007	$	42.90	$	29.76	$	0.00

As of December 31, 2007, the approximate number of holders of record of our Class A common stock was 234 and the approximate number of beneficial holders of our Class A common stock was 42,100.

Dividends

We have never declared or paid cash dividends on our Class A common stock. We currently intend to retain any future earnings to finance the growth of the business and, therefore, do not currently anticipate paying any cash dividends in the foreseeable future.

Equity Compensation Plan Information

The following table provides information as of December 31, 2007 with respect to the shares of our Class A common stock that may be issued under our existing equity compensation plans. We have four equity compensation plans, each of which has been approved by our stockholders: (1) Amended and Restated 1999 Incentive Compensation Plan, which we refer to as the Incentive Plan; (2) Non-Employee Directors’ Stock Option Plan, which we refer to as the Director Plan; (3) the Key Employees Stock Option Plan; and (4) the 2004 Employee Stock Purchase Plan. For additional information on our equity compensation plans, please see Note 10 to the consolidated financial statements.

Plan Category	Number of Securities to be Issued Upon Vesting of Awards or Exercise of Outstanding Options		Weighted Average Exercise Price of Awards or Outstanding Options		Number of Securities Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans that have been approved by security holders — stock options(1)	26,766,224	(2)	$	14.91	8,901,898	(3)
Equity compensation plans that have been approved by security holders — performance stock units(4)	1,058,257			N/A	—
Equity compensation plans not approved by security holders	—				—
Total	27,824,481				8,901,898

(1) Consists of the Incentive Plan, the Director Plan, the Key Employees’ Stock Option Plan and the 2004 Employee Stock Purchase Plan.

(2) Excludes purchase rights outstanding under the 2004 Employee Stock Purchase Plan. Under such plan, employees may purchase up to $25,000 worth of stock annually at price per share equal to 90% of the lower of the fair market value per share on the first day of the purchase period or the fair market value per share on the last day of the purchase period.

(3) Includes 5,704,112 shares of Class A common stock available for future issuance under the Incentive Plan. Also includes 8,000 shares of Class A common stock available for future issuances pursuant to the Director Plan and 3,189,786 shares of Class A common stock issuable under the 2004 Employee Stock Purchase Plan.

(4) Consists of 1,058,257 shares that are issuable to holders of performance stock units, granted pursuant to the Incentive Plan, upon the achievement of certain performance and vesting criteria.

Recent Sales of Unregistered Securities

We did not sell any unregistered equity securities during the fourth quarter of 2007.

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Issuer Purchases of Equity Securities

Below is a summary of stock repurchases for the fourth quarter ended December 31, 2007.

Month	Total Number of Shares Purchased	Average Price Paid per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs(2) (in thousands)
November 2007	2,887,659	$	30.85	2,887,659	$	110,902
December 2007	500,000	$	32.32	500,000	$	94,742
Total	3,387,659	$	31.07	3,387,659

(1) Exclusive of fees and costs.

(2) In September 2007, our Board of Directors authorized up to $100 million in funds for repurchases of Cognizant’s outstanding shares of Class A common stock under a stock repurchase program and in December 2007, our Board of Directors authorized an additional $100 million increasing the stock repurchase program to an aggregate of $200 million of our Class A common stock. The $200 million authorization excludes fees and expenses and expires in September 2008. The program authorizes management to repurchase shares opportunistically in the open market or in private transactions from time to time, depending on market conditions. All shares repurchased in the fourth quarter of 2007 were purchased in open market transactions. There were no repurchases during October 2007.

Performance Graph

The following graph compares the cumulative total stockholder return on our Class A Common Stock with the cumulative total return on the Nasdaq 100 Index, S&P 500 Index and a Peer Group Index (capitalization weighted) for the period beginning January 1, 2003 and ending on the last day of our last completed fiscal year. The stock performance shown on the graph below is not indicative of future price performance.

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COMPARISON OF CUMULATIVE TOTAL RETURN⁽¹⁾⁽²⁾

Among Cognizant, the Nasdaq 100 Index, the S&P 500 Index

And a Peer Group Index⁽³⁾ (Capitalization Weighted)

Company / Index	Base Period 12/31/02	12/31/03	12/31/04	12/31/05	12/31/06	12/31/07
COGNIZANT TECHNOLOGY SOLUTIONS CORP	100	189.56	351.63	417.58	640.95	563.87
S&P 500 INDEX	100	126.68	142.69	149.70	173.34	182.86
NASDAQ 100	100	149.12	164.69	167.13	178.48	211.81
PEER GROUP	100	144.71	174.99	186.51	238.98	219.07

(1) Graph assumes $100 invested on January 1, 2003 in our Class A common stock, the Nasdaq 100 Index, the S&P 500 Index and the Peer Group Index (capitalization weighted).

(2) Cumulative total return assumes reinvestment of dividends.

(3) We have constructed a Peer Group Index of other information technology consulting firms consisting of Accenture Ltd., Computer Sciences Corporation, Computer Task Group, Inc., Diamond Management & Technology Consultants, Inc., Electronic Data Systems Corporation, iGate Corp., Infosys Technologies Ltd., Sapient Corp., Satyam Computer Services Ltd., Syntel, Inc. and Wipro Ltd. We believe that these companies most closely resemble our business mix and that their performance is representative of our industry. In 2007, we added Computer Sciences Corporation and Electronic Data Systems Corporation and removed Computer Horizons Corp., which is no longer publicly traded, Covansys Corporation, which was acquired by Electronic Data Systems Corporation, and Keane, Inc., which was acquired by Caritor, Inc.

Item 6. Selected Consolidated Financial Data

The following table sets forth our selected consolidated historical financial data as of the dates and for the periods indicated. Our selected consolidated financial data set forth below as of December 31, 2007 and 2006 and for each of the three years in the period ended December 31, 2007 has been derived from the audited financial statements included elsewhere herein. Our selected consolidated financial data set forth below as of December 31, 2005, 2004 and 2003 and for each of the years ended December 31, 2004 and 2003 are derived from the audited financial statements not included elsewhere herein. Our selected consolidated financial information for 2007, 2006 and 2005 should be read in conjunction with the Consolidated Financial Statements and the Notes and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” which are included elsewhere in this Annual Report on Form 10-K.

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	Year Ended December 31,
	2007(1)		2006(1)		2005(2)			2004		2003
	(in thousands, except per share data)
Consolidated Statement of Operations Data:
Revenues	$	2,135,577	$	1,424,267	$	885,830		$	586,673	$	365,656
Revenues – related party		—		—		—			—		2,575
Total revenues		2,135,577		1,424,267		885,830			586,673		368,231
Cost of revenues (exclusive of depreciation and amortization expense shown separately below)		1,206,035		787,923		479,915			319,810		199,724
Selling, general and administrative expenses		494,102		343,238		206,899			132,796		84,259
Depreciation and amortization expense		53,918		34,163		21,400			16,447		11,936
Income from operations		381,522		258,943		177,616			117,620		72,312
Other income (expense), net:
Interest income		29,560		17,615		8,982			4,389		2,128
Split-off costs		—		—		—			—		(2,010	)
Other income (expense) – net		3,274		1,253		(1,326	)		86		(199	)
Total other income (expense), net		32,834		18,868		7,656			4,475		(81	)
Income before provision for income taxes		414,356		277,811		185,272			122,095		72,231
Provision for income taxes		64,223		45,016		19,006			21,852		14,866
Net income	$	350,133	$	232,795	$	166,266		$	100,243	$	57,365
Basic earnings per share	$	1.22	$	0.83	$	0.61		$	0.38	$	0.23
Diluted earnings per share	$	1.15	$	0.77	$	0.57		$	0.35	$	0.21
Weighted average number of common shares outstanding – Basic		288,155		281,715		272,988			261,980		250,022
Weighted average number of common shares outstanding – Diluted		303,593		301,124		293,790			285,113		271,628
Consolidated Statement of Financial Position Data:
Cash and cash equivalents	$	339,845	$	265,937	$	196,938		$	199,296	$	144,371
Working capital		901,495		790,888		509,628			340,189		220,873
Total assets		1,838,306		1,325,981		869,893			572,745		365,300
Stockholders’ equity		1,468,210		1,073,499		714,145			453,529		274,070

⁽¹⁾ Includes the impact of our adoption of SFAS No. 123R effective January 1, 2006 and the impact of the stock-based Indian fringe benefit tax effective April 1, 2007. For additional information, refer to Note 10 (Employee Stock-Based Compensation Plans) to our consolidated financial statements which are included elsewhere herein.

⁽²⁾ For the year ended December 31, 2005, our consolidated statement of operations data includes the reduction of income tax expense (one-time income tax benefit) of $12,411, $0.05 per basic earnings per share and $0.04 per diluted earnings per share related to the repatriation of $60,000 of Indian earnings pursuant to the American Jobs Creation Act of 2004.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

In 2007, our revenues increased to $2,135.6 million compared to $1,424.3 million in 2006. Net income increased to $350.1 million or $1.15 per diluted share, including stock-based compensation expense and stock-based Indian fringe benefit tax expense, net of tax, equal to $0.12 per diluted share, during 2007. This is compared to $232.8 million or $0.77 per diluted share, including stock-based compensation expense, net of tax, equal to $0.09 per diluted share, during 2006. The key drivers of our revenue growth in 2007 were as follows:

• greater penetration of the European market, where we experienced revenue growth of 86.5% in 2007 as compared to 2006;

• strong performance of our Manufacturing/Retail/Logistics segment, which had year-over-year revenue growth of approximately 52.7% and our Healthcare segment, which had year-over-year revenue growth of approximately 52.5%;

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• continued strength of our Financial Services segment and Other segment, particularly with our media and information services customers;

• expansion of our service offerings, which enabled us to cross-sell new services to our customers and meet the rapidly growing demand for complex large-scale outsourcing solutions;

• increased penetration at existing customers, including strategic customers. Specifically, 96.2% of our 2007 revenues were derived from customers who had been using our services at the end of 2006; and

• continued expansion of the market for global delivery of IT services and business process outsourcing.

We saw a continued increase in demand from our customers for a broad range of IT solutions, particularly high performance web development initiatives and complex systems development engagements, testing, enterprise resource planning, or ERP, infrastructure management, business process outsourcing and business intelligence. We finished the year with approximately 500 active clients compared to 400 as of December 31, 2006 and increased the number of strategic clients by 20 during the year bringing the total number of our strategic clients to 107. We define a strategic client as one offering the potential to generate $5 million to $50 million or more in annual revenues at maturity. Our top five and top ten customers accounted for approximately 24% and 34%, respectively, of our total revenues in 2007 as compared to approximately 29% and 39%, respectively, for the year ended December 31, 2006. As we continue to add new customers and increase our penetration at existing customers, we expect the percentage of revenues from our top five and top ten customers to continue to decline over time.

In Europe, we continue to experience strong growth. During 2007, our revenue from European customers increased by approximately 86.5% to approximately $342.9 million compared to approximately $183.9 million in 2006. In 2007, revenue from Europe, excluding the UK, increased by approximately $72.9 million from approximately $48.9 million in 2006 to approximately $121.8 million. Europe will continue to be an area of significant investment for us in 2008 as we see this region as a growth opportunity for the long term.

Our revenue growth is also attributed to increasing market acceptance of, and strong demand for, offshore IT software and services and business process outsourcing. Recent NASSCOM (India’s National Association of Software and Service Companies) reports state that India’s IT software and services and business process outsourcing sectors were an estimated $31.3 billion industry in 2007 with IT software and services exports and business process outsourcing exports growing 36% and 34%, respectively, in 2007. The Indian IT software and services and business process outsourcing sectors are expected to grow to greater than $60 billion by the year 2010.

In 2007, our operating margin decreased to approximately 17.9% compared to 18.2% in 2006. Excluding stock-based compensation costs of approximately $35.9 million and stock-based Indian fringe benefit tax expense of $5.9 million, operating margin in 2007 was approximately 19.8%. This was in line with our historic targeted operating margin range, excluding stock-based compensation costs and stock-based Indian fringe benefit tax expense, of 19% to 20% of total revenues. Historically, we have invested our profitability above the 19% to 20% operating margin level, which excludes stock-based compensation and stock-based Indian fringe benefit tax expense, back into our business, which we believe is a significant contributing factor to our strong revenue growth. This investment is primarily focused in the areas of: (i) hiring client partners and relationship personnel with specific industry experience or domain expertise; (ii) training our technical staff in a broader range of IT service offerings; (iii) strengthening our business analytic capabilities; (iv) strengthening and expanding our portfolio of services; (v) continuing to expand our geographic presence for both sales and delivery; and (vi) recognizing and rewarding exceptional performance by our employees. In addition, this investment includes maintaining a deep bench of resources, trained in a broad range of service offerings, to be well positioned to respond to our customer requests to take on additional projects. For 2008, we expect to continue to invest amounts in excess of our historical targeted operating margin levels back into the business.

In 2007, we experienced pressure on our cost structure due to the appreciation of the Indian rupee versus the U.S. dollar. This is in addition to the continuing wage inflation, primarily in India, that we have experienced over the last several years. Approximately 31% of our global costs for the year ended December 31, 2007 were denominated in the Indian rupee. The appreciation of the Indian rupee versus the U.S. dollar during 2007 had the effect of decreasing our operating margin by approximately 210 basis points or 2.1 percentage points in 2007 as compared to 2006. Each additional 1% change in the exchange rate between the Indian rupee and the U.S. dollar will have the effect of moving our operating margin by approximately 25 basis points or 0.25 percentage points. During 2007, we implemented actions that mitigated these negative cost trends, including increasing our global utilization rates of our technical staff and reducing discretionary spending. Accordingly we believe this balanced response, at current exchange rates, will permit us to continue to maintain operating margins in our historic targeted operating margin range, which excludes stock-based compensation costs and stock-based Indian fringe benefit tax expense, of 19% to 20% of total revenues and permit us to continue to make the necessary investments to continue to grow the company.

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We finished the year with total headcount of approximately 55,400, an increase of approximately 16,600 over the prior year. The increases in the number of our technical personnel and the related infrastructure costs, to meet the demand for our services, are the primary drivers of the increase in our operating expenses in 2007. Annualized turnover, including both voluntary and involuntary, was approximately 15% for 2007. The majority of our turnover occurs in India. As a result, annualized attrition rates on-site at clients are below our global attrition rate. In addition, attrition is weighted towards the more junior members of our staff. We have experienced wage inflation in India, which may continue in the future; however, this has not had a material impact on our results of operations as Indian wages represent approximately 20% of our total operating expenses.

Our current India real estate development program now includes planned construction of approximately 4.3 million square feet of new space. The expanded program, which commenced during the quarter ended March 31, 2007, includes the expenditure of approximately $330 million through the end of 2009 on land acquisition, facilities construction and furnishings to build new state-of-the-art IT development centers in regions primarily designated as Special Economic Zones located in India. During 2008, we expect to spend approximately $250 million globally for capital expenditures, the majority of which relates to our India real estate development program. In addition, we plan to selectively lease space in Special Economic Zones located in India to take advantage of tax incentives and meet our capacity requirements.

At December 31, 2007, we had cash and cash equivalents and short-term investments of $670.4 million and working capital of approximately $901.5 million. Accordingly, we do not anticipate any near-term liquidity issues. During 2007, we repurchased $105.4 million of our Class A common stock under a $200 million stock repurchase program authorized by our Board of Directors that expires in September 2008. Stock repurchases under this program must be funded from working capital. Also, in November 2007, we acquired marketRx, Inc., or marketRx, a U.S.-based leading provider of data analytics and process outsourcing for initial net cash consideration of approximately $135.9 million (including direct transaction costs). The marketRx acquisition will strengthen our life sciences industry expertise as well as our data analytics capabilities, which we expect to leverage across multiple industries. The operating results of marketRx included in our 2007 consolidated financial statements were immaterial. In 2008, we will continue to look for acquisitions that will strengthen our presence in a particular geographic area and increase our capabilities in a specific technology or industry.

On September 17, 2007, our Board of Directors declared a two-for-one stock split which was effected by a 100% stock dividend paid on October 16, 2007 to stockholders of record as of October 1, 2007. The stock split has been reflected in the accompanying consolidated financial statements, and all applicable references as to the number of outstanding common shares and per share information have been retroactively adjusted to reflect the stock split as if it occurred at the beginning of the earliest period presented. In addition, our stockholders’ equity accounts have been retroactively adjusted to reflect a 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.

Critical Accounting Estimates and Risks

Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities, including the recoverability of tangible and intangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. On an on-going basis, we evaluate our estimates. The most significant estimates relate to the recognition of revenue and profits based on the percentage of completion method of accounting for certain fixed-bid contracts, the allowance for doubtful accounts, income taxes, valuation of short-term investments, goodwill and other long-lived assets, assumptions used in valuing stock-based compensation arrangements, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual amounts may differ from the estimates used in the preparation of the accompanying consolidated financial statements. Our significant accounting policies are described in Note 1 to the consolidated financial statements.

We believe the following critical accounting policies require a higher level of management judgments and estimates than others in preparing the consolidated financial statements:

Revenue Recognition. Revenues related to our highly complex information technology application development contracts, which are predominantly fixed-priced contracts, are recognized as the service is performed using the percentage of completion method of accounting. Under this method, total contract revenue during the term of an agreement is recognized on the basis of the percentage that each contract’s total labor cost to date bears to the total expected labor cost (cost to cost

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method). This method is followed where reasonably dependable estimates of revenues and costs can be made. Management reviews total expected labor costs on an ongoing basis. Revisions to our estimates may result in increases or decreases to revenues and income and are reflected in the consolidated financial statements in the periods in which they are first identified. If our estimates indicate that a contract loss will be incurred, a loss provision is recorded in the period in which the loss first becomes probable and reasonably estimable. Contract losses are determined to be the amount by which the estimated costs of the contract exceed the estimated total revenues that will be generated by the contract and are included in cost of revenues in our consolidated statement of operations. Contract losses for all periods presented were immaterial.

Stock-Based Compensation. Under the fair value recognition provisions of SFAS No. 123R, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Determining the fair value of stock-based awards at the grant date requires judgment, including estimating the expected term over which stock options will be outstanding before they are exercised, the expected volatility of our stock, the number of stock-based awards that are expected to be forfeited and, beginning in 2007, due to a recent tax law change in India, the expected exercise proceeds for stock-based awards subject to the Indian fringe benefit tax. If actual results differ significantly from our estimates, stock-based compensation expense and our results of operations could be materially impacted.

Income Taxes. Determining the consolidated provision for income tax expense, deferred tax assets and liabilities and related valuation allowance, if any, involves judgment. As a global company, we are required to calculate and provide for income taxes in each of the jurisdictions where we operate. Changes in the geographic mix or estimated level of annual pre-tax income can also affect the overall effective income tax rate. Effective January 1, 2007, we adopted Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of SFAS No. 109” (FIN 48). FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes.” The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.

Tax exposures can involve complex issues and may require an extended period to resolve. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest.

On an on-going basis, we evaluate whether a valuation allowance is needed to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and on-going prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we determine that we will be able to realize deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we determine that we will not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.

Our Indian subsidiaries, Cognizant India, are export-oriented companies, which, under the Indian Income Tax Act of 1961, are entitled to claim tax holidays for a period of ten consecutive years for each Software Technology Park (STP) with respect to export profits for each STP. Substantially all of the earnings of Cognizant India are attributable to export profits. The majority of our STPs in India are currently entitled to a 100% exemption from Indian income tax. Under current law, these tax holidays will be completely phased out by March 2009. The incremental Indian taxes related to the taxable STPs have been incorporated into our effective income tax rate for 2007. In anticipation of the complete phase out of the tax holidays in March 2009, we expect to locate a portion of our new development centers in areas designated as Special Economic Zones (SEZ). Development centers operating in SEZ will be entitled to certain income tax incentives for periods up to 15 years. Under current Indian tax law, export profits after March 31, 2009 from our existing STPs will be fully taxable at the Indian statutory rate (33.99% as of December 31, 2007) in effect at such time. If the tax holidays relating to our Indian STPs are not extended or new tax incentives are not introduced that would effectively extend the income tax holiday benefits beyond March 2009, we expect that our effective income tax rate would increase significantly beginning in calendar year 2009.

Short-term Investments. As of December 31, 2007, we had $330.6 million in short-term investments. We have historically invested these amounts in municipal debt securities with interest rates that reset through a Dutch auction process and in corporate notes and bonds, U.S. government agencies, bank time deposits and commercial paper meeting certain criteria. We classify our marketable securities as available-for-sale at the time of purchase and evaluate such designation as of each balance sheet date. We evaluate our investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and our ability and intent to hold the investment for a period of time, which may be sufficient for anticipated recovery of market value. An impairment charge would be recorded to the extent that the carrying value of our available-for-sale securities exceeds the fair market value of the securities and the decline in value is determined to be other-than-temporary.

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Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is determined by evaluating the relative credit-worthiness of each customer, historical collections experience and other information, including the aging of the receivables. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Goodwill. We evaluate goodwill for impairment at least annually, or as circumstances warrant. When determining the fair value of our reporting units, we utilize various assumptions, including projections of future cash flows. Any adverse changes in key assumptions about our businesses and their prospects or an adverse change in market conditions may cause a change in the estimation of fair value and could result in an impairment charge. As of December 31, 2007, our goodwill balance was approximately $148.8 million.

Long-Lived Assets. In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, we review long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In general, we will recognize an impairment loss when the sum of undiscounted expected future cash flows is less than the carrying amount of such asset. The measurement for such an impairment loss is then based on the fair value of the asset. If such assets were determined to be impaired, it could have a material adverse effect on our business, results of operations and financial condition.

Risks. Most of our IT development centers, including a majority of our employees, are located in India. As a result, we may be subject to certain risks associated with international operations, including risks associated with foreign currency exchange rate fluctuations and risks associated with the application and imposition of protective legislation and regulations relating to import and export or otherwise resulting from foreign policy or the variability of foreign economic or political conditions. Additional risks associated with international operations include difficulties in enforcing intellectual property rights, limitations on immigration programs, the burdens of complying with a wide variety of foreign laws, potential geo-political and other risks associated with terrorist activities and local and cross border conflicts, potentially adverse tax consequences, tariffs, quotas and other barriers. We are also subject to risks associated with our overall compliance with Section 404 of the Sarbanes-Oxley Act of 2002. The inability of our management and our independent auditor to provide us with an unqualified report as to the adequacy and effectiveness of our internal controls over financial reporting for future year ends could result in adverse consequences to us, including, but not limited to, a loss of investor confidence in the reliability of our financial statements, which could cause the market price of our stock to decline. See Part I, Item 1A. “Risk Factors”.

Results of Operations

The following table sets forth, for the periods indicated, certain financial data expressed for the three years ended December 31, 2007:

(Dollars in thousands)

	2007		% of Revenues		2006		% of Revenues		2005		% of Revenues		Increase
													2007		2006
Revenues	$	2,135,577	100.0	%	$	1,424,267	100.0	%	$	885,830	100.0	%	$	711,310	$	538,437
Cost of revenues (1)		1,206,035	56.5			787,923	55.3			479,915	54.2			418,112		308,008
Selling, general and administrative(2)		494,102	23.1			343,238	24.1			206,899	23.3			150,864		136,339
Depreciation and amortization		53,918	2.5			34,163	2.4			21,400	2.4			19,755		12,763
Income from operations		381,522	17.9			258,943	18.2			177,616	20.1			122,579		81,327
Other income (expense), net		32,834				18,868				7,656				13,966		11,212
Provision for income taxes(3)		64,223				45,016				19,006				19,207		26,010
Net income	$	350,133	16.4		$	232,795	16.3		$	166,266	18.8			117,338		66,529

(1) Includes stock-based compensation expense of $17,206 and $13,400 for the years ended December 31, 2007 and 2006, respectively, and stock-based Indian fringe benefit tax expense of $1,979 for the year ended December 31, 2007 and is exclusive of depreciation and amortization expense.

(2) Includes stock-based compensation expense of $18,710 and $16,534 for the years ended December 31, 2007 and 2006, respectively, and stock-based Indian fringe benefit tax expense of $3,943 for the year ended December 31, 2007 and is exclusive of depreciation and amortization expense.

(3) Provision for income taxes for the year ended December 31, 2005 includes a one-time tax benefit of $12,411 related to the repatriation of $60,000 of Indian earnings under the American Jobs Creation Act of 2004.

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The following tables include certain non-GAAP financial measures, namely income from operations on a non-GAAP basis, excluding the impact of stock-based compensation resulting from the adoption of SFAS No. 123R and stock-based Indian fringe benefit tax expense, and net income on a non-GAAP basis, excluding the impact of a one-time tax benefit related to the repatriation of Indian earnings under the American Jobs Creation Act of 2004, or the Act. These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures, the financial statements prepared in accordance with GAAP and reconciliations of our GAAP financial statements to such non-GAAP measures should be carefully evaluated.

We seek to manage the company to a targeted operating margin, excluding stock-based compensation costs and stock-based Indian fringe benefit tax expense, of 19% to 20% of revenues. Accordingly, we believe that non-GAAP income from operations, excluding stock-based compensation costs and stock-based Indian fringe benefit tax expense, is a meaningful measure for investors to evaluate our financial performance. For our internal management reporting and budgeting purposes, we use financial statements that do not include stock-based compensation expense, stock-based Indian fringe benefit tax expense and the income tax benefit related to the repatriation of Indian earnings for financial and operational decision making, to evaluate period-to-period comparisons and for making comparisons of our operating results to that of our competitors. Further, management believes that the presentation of these non-GAAP financial measures provides useful information to investors because our consolidated statement of operations for the year ended December 31, 2005 did not reflect the impact of the adoption of SFAS No. 123R and included a one-time tax benefit of approximately $12.4 million related to the repatriation of $60 million of Indian earnings under the Act. Moreover, because of varying available valuation methodologies and the variety of award types that companies can use under SFAS No. 123R, we believe that providing a non-GAAP financial measure that excludes stock-based compensation allows investors to make additional comparisons between our operating results to those of other companies. Accordingly, we believe that the presentation of non-GAAP income from operations and non-GAAP net income when read in conjunction with our reported GAAP income from operations and GAAP net income can provide useful supplemental information to our management and to investors regarding financial and business trends relating to our financial condition and results of operations.

A limitation of using non-GAAP income from operations and non-GAAP net income versus income from operations and net income reported in accordance with GAAP is that non-GAAP income from operations, excludes costs, namely, stock-based compensation and stock-based Indian fringe benefit tax expense that are recurring and a one-time tax benefit of related to the repatriation of Indian earnings under the Act. Stock-based compensation and the related stock-based Indian fringe benefit tax expense will continue to be for the foreseeable future a significant recurring expense in our business. In addition, other companies may calculate non-GAAP financial measures differently than us, thereby limiting the usefulness of this non-GAAP financial measure as a comparative tool. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP income from operations and non-GAAP net income, and evaluating such non-GAAP financial measures with financial measures calculated in accordance with GAAP.

A reconciliation of income from operations as reported and non-GAAP income from operations excluding stock-based compensation expense and stock-based Indian fringe benefit tax expense is as follows for the year ended December 31:

(Dollars in thousands)

	2007		% of Revenues		2006		% of Revenues
Income from operations, as reported	$	381,522	17.9	%	$	258,943	18.2	%
Add: stock-based compensation expense		35,916	1.7			29,934	2.1
Add: stock-based Indian fringe benefit tax expense		5,922	0.2			—	—
Non-GAAP income from operations, excluding stock-based compensation expense and stock-based Indian fringe benefit tax expense	$	423,360	19.8	%	$	288,877	20.3	%

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A reconciliation of net income as reported and net income on a non-GAAP basis, excluding the impact of a one-time tax benefit related to the repatriation of Indian earnings under the Act is as follows for the year ended December 31:

(Dollars in thousands)

	2005		% of Revenues
Net income, as reported	$	166,266	18.8	%
Less: Income tax benefit related to the repatriation of Indian earnings		12,411	1.4
Non-GAAP net income, excluding income tax benefit related to the repatriation of Indian earnings	$	153,855	17.4	%

Effective April 1, 2007, a new fringe benefit tax was introduced in India that obligates us to pay, upon exercise or distribution of shares under a stock-based compensation award, a non-income related tax on the appreciation of the award from date of grant to date of vest. There is no cash cost to us as we recover the cost of the Indian fringe benefit tax from the employee’s proceeds from the award. Under U.S. GAAP, the stock-based Indian fringe benefit tax expense is required to be recorded as an operating expense and the related recovery of such tax from our employee is required to be recorded to stockholders’ equity as proceeds from a stock-based compensation award. Our future operating results may experience volatility as a result of the timing of exercise or distribution of shares related to stock-based compensation awards to our employees who worked or are working in India. The amount of stock-based Indian fringe benefit tax expense recorded during 2007 was $5.9 million.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Revenue. Revenue increased by 49.9%, or approximately $711.3 million, from approximately $1,424.3 million during 2006 to approximately $2,135.6 million in 2007. This increase is primarily attributed to greater acceptance of the on-site/offshore delivery model among an increasing number of industries, continued strength in our customers’ discretionary spending and greater penetration in the European market. Revenue from customers existing as of December 31, 2006 increased by approximately $630.4 million and revenue from new customers added since December 31, 2006 was approximately $80.9 million or approximately 3.8% of total revenues for the year ended December 31, 2007. In addition, revenue from European customers in 2007 increased by $159.0 million as compared to 2006. We had approximately 500 active clients as of December 31, 2007 as compared to approximately 400 active clients as of December 31, 2006. In addition, we experienced strong demand across all of our business segments for an increasingly broad range of services with all of our business segments experiencing year-over-year revenue growth between 47.3% and 52.7%. Our Financial Services and Healthcare business segments accounted for approximately $321.5 million and $173.6 million, respectively, of the $711.3 million increase in revenue. Our IT consulting and technology services and IT outsourcing revenues increased by approximately 48.4% and 51.4%, respectively, compared to 2006 and represented approximately 48.4% and 51.6%, respectively, of total revenues in 2007.

Cost of Revenues (Exclusive of Depreciation and Amortization Expense). Our cost of revenues consists primarily of the cost of salaries, stock-based compensation expense and related stock-based Indian fringe benefit tax expense, payroll taxes, benefits, immigration and project-related travel for technical personnel, the cost of subcontracting, and the cost of sales commissions related to revenues. Our cost of revenues increased by 53.1% or approximately $418.1 million, from approximately $787.9 million during 2006 to approximately $1,206.0 million in 2007. The increase was due primarily to higher compensation and benefits costs of approximately $381.9 million.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of salaries, stock-based compensation expense and related stock-based Indian fringe benefit tax expense, employee benefits, travel, promotion, communications, management, finance, administrative and occupancy costs as well as depreciation and amortization expense. Selling, general and administrative expenses, including depreciation and amortization, increased by 45.2%, or approximately $170.6 million, from approximately $377.4 million during 2006 to approximately $548.0 million during 2007, and decreased as a percentage of revenue from approximately 26.5% in 2006 to approximately 25.7% in 2007. The percentage decrease was due primarily to economies of scale driven by increased revenues that resulted from our expanded sales and marketing activities in the current and prior years that allowed us to leverage our cost structure over a larger organization, reductions in discretionary spending partially offset by of the appreciation of the Indian rupee versus the U.S. dollar and wage inflation, primarily in India.

Income from Operations. Income from operations increased 47.3%, or approximately $122.6 million, from approximately $258.9 million during 2006 to approximately $381.5 million during 2007, representing operating margins of approximately 17.9% of revenues in 2007 and 18.2% of revenues in 2006. The decrease in operating margin was due primarily to appreciation of the Indian rupee versus the U.S. dollar and wage inflation, primarily in India, partially offset by

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cost containment actions such as control of discretionary spending and scale efficiencies, including increased utilization rates of our technical staff, and lower stock-compensation costs as a percentage of revenues. Excluding stock-based compensation expense of $35.9 million and stock-based Indian fringe benefit tax expense of $5.9 million in 2007 and stock-based compensation expense of $29.9 million in 2006, operating margins for the years ended December 31, 2007 and 2006 were 19.8% and 20.3%, respectively.

Other Income/Expense, Net. Other income/expense, net consists primarily of interest income and foreign currency gains or losses. The increase in other income/expense, net of $14.0 million is attributed to an increase in interest income of $12.0 million from approximately $17.6 million in 2006 to approximately $29.6 million in 2007 and a year-over-year increase of approximately $2.0 million in income due to the remeasurement of certain balance sheet accounts for movements in foreign currency exchange rates. The increase in interest income is due to higher invested global cash balances and an increase in short-term interest rates.

Provision for Income Taxes. The provision for income taxes increased from approximately $45.0 million in 2006 to approximately $64.2 million in 2007. The effective income tax rate decreased from 16.2% in 2006 to 15.5% in 2007 primarily due to tax benefits of approximately $3.6 million recognized in 2007, including $2.9 million upon the expiration of the U.S. Federal income tax statute of limitations for previously recorded uncertain income tax positions and a net benefit of $0.7 million attributed to the effective settlement of certain foreign income tax positions. Additionally, the effective income tax rate decreased due to net reductions in statutory income tax rates. Excluding discrete items, the Company’s effective income tax rate for the year ended December 31, 2007 was 16.4%.

Net Income. Net income increased from approximately $232.8 million in 2006 to approximately $350.1 million in 2007, representing 16.3% and 16.4% of revenues in 2006 and 2007, respectively.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Revenue. Revenue increased by 60.8%, or approximately $538.4 million, from approximately $885.8 million during 2005 to approximately $1,424.3 million in 2006. This increase is primarily attributed to greater acceptance of the on-site/offshore delivery model among an increasing number of industries, continued strength in our customers’ discretionary spending and greater penetration in the European market. Revenue from customers existing as of December 31, 2005 increased by approximately $477.3 million and revenue from new customers added since December 31, 2005 was approximately $61.1 million or approximately 4.3% of total revenues for the year ended December 31, 2006. In addition, revenue from European customers increased by $80.2 million during 2006. We had approximately 400 active clients as of December 31, 2006 as compared to approximately 250 active clients as of December 31, 2005. In addition, we experienced strong demand across all of our business segments for an increasingly broad range of services. Our Financial Services and Healthcare business segments accounted for approximately $238.9 million and $154.8 million, respectively, of the $538.4 million increase in revenue. Our IT consulting and technology services and IT outsourcing revenues increased by approximately 61.4% and 60.2%, respectively, compared to 2005 and represented approximately 48.8% and 51.2%, respectively, of total revenues in 2006.

Cost of Revenues (Exclusive of Depreciation and Amortization Expense). Our cost of revenues consists primarily of the cost of salaries, stock-based compensation expense, payroll taxes, benefits, immigration and project-related travel for technical personnel, the cost of subcontracting, and the cost of sales commissions related to revenues. Our cost of revenues increased by 64.2% or approximately $308.0 million, from approximately $479.9 million during 2005 to approximately $787.9 million in 2006. The increase was due to higher compensation and benefits costs of approximately $242.4 million and the inclusion in 2006 of stock-based compensation expense of approximately $13.4 million.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of salaries, stock-based compensation expense, employee benefits, travel, promotion, communications, management, finance, administrative and occupancy costs as well as depreciation and amortization expense. Selling, general and administrative expenses, including depreciation and amortization, increased by 65.3%, or approximately $149.1 million, from approximately $228.3 million during 2005 to approximately $377.4 million during 2006, and increased as a percentage of revenue from approximately 25.8% in 2005 to approximately 26.5% in 2006. The percentage increase in such expenses was due to stock-based compensation expense of approximately $16.5 million or 1.2% of revenues partially offset by the increased leverage achieved from increased revenues that resulted from our expanded sales and marketing activities in the current and prior years and the depreciation of the Indian rupee versus the U.S. dollar.

Income from Operations. Income from operations increased 45.8%, or approximately $81.3 million, from approximately $177.6 million during 2005 to approximately $258.9 million during 2006, representing operating margins of approximately 18.2% of revenues in 2006 and 20.1% of revenues in 2005. The decrease in operating margin was due to stock-based compensation expense of approximately $29.9 million, or 2.1% of revenues, recorded in the year ended December 31, 2006. Excluding stock-based compensation expense, operating margin for the year ended December 31, 2006 was 20.3% of revenues.

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Other Income/Expense, Net. Other income/expense, net consists primarily of interest income and foreign currency gains or losses. The increase in other income/expense, net of $11.2 million is attributed to an increase in interest income of $8.6 million from approximately $9.0 million in 2005 to approximately $17.6 million in 2006 plus a period-over-period increase of approximately $2.6 million in income due to the remeasurement of certain balance sheet accounts for movements in foreign currency exchange rates. The increase in interest income is due to higher invested global cash balances and an increase in short-term interest rates.

Provision for Income Taxes. The provision for income taxes increased from approximately $19.0 million in 2005 to approximately $45.0 million in 2006. The effective income tax rate increased from 10.3% in 2005 to 16.2% in 2006. The increase in the effective income tax rate in 2006 is primarily attributed to the one-time benefit of approximately $12.4 million recorded in the fourth quarter of 2005 in connection with the repatriation of $60.0 million of Indian earnings under the Act. The effective income tax rate in 2005, excluding the one-time benefit was 17.0% which decreased in 2006 primarily due to the overall growth in our business which resulted in a greater percentage of our Indian earnings falling under the income tax holiday.

Net Income. Net income increased from approximately $166.3 million in 2005 to approximately $232.8 million in 2006, representing 18.8% and 16.3% of revenues in 2005 and 2006, respectively. The decrease in net income as a percentage of revenues as compared to the prior year was primarily due to stock-based compensation expense recorded in 2006, representing 2.1% of revenues and the repatriation of Indian earnings in the fourth quarter of 2005, representing 1.4% of revenues, offset by the decrease in the overall effective income tax rate, excluding the effect of the repatriation, in 2006 equal to 0.2% of revenues and an increase in other income/expense, net, equal to 0.8% of revenues.

Results by Business Segment

Our reportable segments are: Financial Services, which includes customers providing banking / transaction processing, capital markets and insurance services; Healthcare, which includes healthcare providers and payers as well as life sciences customers; Manufacturing/Retail/Logistics, which includes manufacturers, retailers, travel and other hospitality customers, as well as customers providing logistics services; and Other, which is an aggregation of industry operating segments which, individually, are less than 10% of consolidated revenues and segment operating profit. The Other reportable segment includes media and information services, communications, and high technology operating segments. Our sales managers, account executives, account managers and project teams are aligned in accordance with the specific industries they serve.

The Company’s chief operating decision maker evaluates Cognizant’s performance and allocates resources based on segment revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each operating segment have similar characteristics and are subject to the same factors, pressures and challenges. However, the economic environment and its effects on industries served by our operating groups may affect revenue and operating expenses to differing degrees. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as a per seat charge for use of the development centers. Certain expenses, such as general and administrative, and a portion of depreciation and amortization, are not specifically allocated to specific segments as management does not believe it is practical to allocate such costs to individual segments because they are not directly attributable to any specific segment. Further, stock-based compensation expense and the related stock-based India fringe benefit tax are not allocated to individual segments in internal management reports used by the chief operating decision maker. Accordingly, these expenses are separately disclosed as “unallocated” and adjusted only against the total income from operations.

Revenues from external customers and segment operating profit, before unallocated expenses, for the Financial Services, Healthcare, Manufacturing/Retail/Logistics, and Other reportable segments for the years ended December 31, 2007, 2006 and 2005 are as follows:

							2007				2006
	2007		2006		2005		Increase		%		Increase		%
	(Dollars in thousands)
Revenues:
Financial Services	$	1,001,420	$	679,901	$	440,958	$	321,519	47.3	%	$	238,943	54.2	%
Healthcare		504,504		330,860		176,102		173,644	52.5			154,758	87.9
Manufacturing/Retail/Logistics		320,116		209,703		152,536		110,413	52.7			57,167	37.5
Other		309,537		203,803		116,234		105,734	51.9			87,569	75.3
Total revenues	$	2,135,577	$	1,424,267	$	885,830	$	711,310	49.9		$	538,437	60.8
Segment Operating Profit:
Financial Services	$	355,696	$	254,115	$	153,542	$	101,581	40.0	%	$	100,573	65.5	%
Healthcare		199,791		135,374		71,226		64,417	47.6			64,148	90.1
Manufacturing/Retail/Logistics		108,480		73,443		46,210		35,037	47.7			27,233	58.9
Other		111,319		63,657		39,100		47,662	74.9			24,557	62.8
Total segment operating profit	$	775,286	$	526,589	$	310,078	$	248,697	47.2		$	216,511	69.8

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Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Financial Services Segment

Revenue. Revenue increased by 47.3%, or approximately $321.5 million, from approximately $679.9 million during 2006 to approximately $1,001.4 million in 2007. The increase in revenue was primarily driven by continued expansion of existing customer relationships as well as revenue contributed by new customers. The increase in revenue from customers existing as of December 31, 2006 and customers added since such date was approximately $301.5 million and approximately $20.0 million, respectively. Within the segment, growth was particularly strong among our banking customers, where revenue increased approximately $253.9 million over the prior year including significant growth from our European banking clients, which accounted for 28.9% of the segment growth over the prior year. The business challenges experienced by the financial services industry during the last six months of 2007 did not have material impact on our business. The increase can also be attributed to leveraging sales and marketing investments in this business segment as well as greater acceptance of the onsite/offshore IT services delivery model.

Segment Operating Profit. Segment operating profit increased by 40.0%, or approximately $101.6 million, from approximately $254.1 million during 2006 to approximately $355.7 million during 2007. The increase in segment operating profit was attributable primarily to increased revenues partially offset by additional headcount to support our revenue growth, continued investment in sales and marketing, the impact of the appreciation of the Indian rupee and wage inflation, primarily in India.

Healthcare Segment

Revenue. Revenue increased by 52.5%, or approximately $173.6 million, from approximately $330.9 million during 2006 to approximately $504.5 million in 2007. The increase in revenue was primarily driven by continued expansion of existing customer relationships as well as revenue contributed by new customers. The increase in revenue from customers existing as of December 31, 2006 and customers added since such date was approximately $157.6 million and approximately $16.0 million, respectively. Within the segment, growth was particularly strong among our healthcare customers, where revenue increased by approximately $88.9 million over the prior year. The increase can also be attributed to leveraging sales and marketing investments in this business segment as well as greater acceptance of the onsite/offshore IT services delivery model.

Segment Operating Profit. Segment operating profit increased 47.6%, or approximately $64.4 million, from approximately $135.4 million during 2006 to approximately $199.8 million during 2007. The increase in segment operating profit was attributable primarily to increased revenues partially offset by additional headcount to support our revenue growth, continued investment in sales and marketing, the impact of the appreciation of the Indian rupee and wage inflation, primarily in India.

Manufacturing/Retail/Logistics Segment

Revenue. Revenue increased by 52.7%, or approximately $110.4 million, from approximately $209.7 million during 2006 to approximately $320.1 million in 2007. The increase in revenue was primarily driven by continued expansion of existing customer relationships as well as revenue contributed by new customers. The increase in revenue from customers existing as of December 31, 2006 and customers added since such date was approximately $83.5 million and approximately $26.9 million, respectively. The increase can also be attributed to leveraging sales and marketing investments in this business segment as well as greater acceptance of the onsite/offshore IT services delivery model.

Segment Operating Profit. Segment operating profit increased 47.7%, or approximately $35.0 million, from approximately $73.4 million during 2006 to approximately $108.5 million during 2007. The increase in segment operating profit was attributable primarily to increased revenues partially offset by additional headcount to support our revenue growth, continued investment in sales and marketing, the impact of the appreciation of the Indian rupee and wage inflation, primarily in India.

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Other Segment

Revenue. Revenue increased by 51.9%, or approximately $105.7 million, from approximately $203.8 million in 2006 to approximately $309.5 million in 2007. The increase in revenue was primarily driven by continued expansion of existing customer relationships as well as revenue contributed by new customers. The increase in revenue from customers existing as of December 31, 2006 and customers added since such date was approximately $87.7 million and approximately $18.0 million, respectively. Within the segment, growth was particularly strong among our media and information services customers, where revenue increased approximately $55.4 million over the prior year. The increase can also be attributed to leveraging sales and marketing investments in this business segment as well as greater acceptance of the onsite/offshore IT services delivery model.

Segment Operating Profit. Segment operating profit increased 74.9%, or approximately $47.7 million from approximately $63.7 million in 2006 to approximately $111.3 million in 2007. The increase in segment operating profit was attributable primarily to increased revenues and achieving operating efficiencies, including continued leverage on prior sales and marketing investments partially offset by additional headcount to support our revenue growth, the impact of the appreciation of the Indian rupee and wage inflation, primarily in India.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Financial Services Segment

Revenue. Revenue increased by 54.2%, or approximately $238.9 million, from approximately $441.0 million during 2005 to approximately $679.9 million in 2006. The increase in revenue was primarily driven by continued expansion of existing customer relationships as well as revenue contributed by new customers. The increase in revenue from customers existing as of December 31, 2005 and customers added since such date was approximately $220.7 million and approximately $18.2 million, respectively. Within the segment, growth was particularly strong among our insurance customers, where revenue increased approximately $109.3 million over the prior year. The increase can also be attributed to leveraging sales and marketing investments in this business segment as well as greater acceptance of the onsite/offshore IT services delivery model.

Segment Operating Profit. Segment operating profit increased by 65.5%, or approximately $100.6 million, from approximately $153.5 million during 2005 to approximately $254.1 million during 2006. The increase in segment operating profit was attributable primarily to increased revenues and achieving operating efficiencies, including continued leverage on prior sales and marketing investments.

Healthcare Segment

Revenue. Revenue increased by 87.9%, or approximately $154.8 million, from approximately $176.1 million during 2005 to approximately $330.9 million in 2006. The increase in revenue was primarily driven by continued expansion of existing customer relationships as well as revenue contributed by new customers. The increase in revenue from customers existing as of December 31, 2005 and customers added since such date was approximately $140.6 million and approximately $14.2 million, respectively. Within the segment, growth was particularly strong among our life sciences customers, where revenue increased by approximately $74.1 million over the prior year. The increase can also be attributed to leveraging sales and marketing investments in this business segment as well as greater acceptance of the onsite/offshore IT services delivery model.

Segment Operating Profit. Segment operating profit increased 90.1%, or approximately $64.1 million, from approximately $71.2 million during 2005 to approximately $135.4 million during 2006. The increase in segment operating profit was attributable primarily to increased revenues.

Manufacturing/Retail/Logistics Segment

Revenue. Revenue increased by 37.5%, or approximately $57.2 million, from approximately $152.5 million during 2005 to approximately $209.7 million in 2006. The increase in revenue was primarily driven by continued expansion of existing customer relationships as well as revenue contributed by new customers. The increase in revenue from customers existing as of December 31, 2005 and customers added since such date was approximately $48.9 million and approximately $8.3 million, respectively. The increase can also be attributed to leveraging sales and marketing investments in this business segment as well as greater acceptance of the onsite/offshore IT services delivery model.

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Segment Operating Profit. Segment operating profit increased 58.9%, or approximately $27.2 million, from approximately $46.2 million during 2005 to approximately $73.4 million during 2006. The increase in segment operating profit was attributable primarily to increased revenues and achieving operating efficiencies, including continued leverage on prior sales and marketing investments.

Other Segment

Revenue. Revenue increased by 75.3%, or approximately $87.6 million, from approximately $116.2 million in 2005 to approximately $203.8 million in 2006. The increase in revenue was primarily driven by continued expansion of existing customer relationships as well as revenue contributed by new customers. The increase in revenue from customers existing as of December 31, 2005 and customers added since such date was approximately $67.2 million and approximately $20.4 million, respectively. Within the segment, growth was particularly strong among our media and information services customers, where revenue increased approximately $37.3 million over the prior year. The increase can also be attributed to leveraging sales and marketing investments in this business segment as well as greater acceptance of the onsite/offshore IT services delivery model.

Segment Operating Profit. Segment operating profit increased 62.8%, or approximately $24.6 million from approximately $39.1 million in 2005 to approximately $63.7 million in 2006. The increase in segment operating profit was attributable primarily to increased revenues partially offset by continued investment in sales and marketing.

Liquidity and Capital Resources

At December 31, 2007, we had cash and cash equivalents and short-term investments of $670.4 million. We have used, and plan to use, such cash for (i) expansion of existing operations, including our offshore IT development centers; (ii) continued development of new service lines; (iii) possible acquisitions of related businesses; (iv) formation of joint ventures; (v) stock repurchases; and (vi) general corporate purposes, including working capital. As of December 31, 2007, we had no third party debt and had working capital of approximately $901.5 million as compared to working capital of approximately $790.9 million as of December 31, 2006. Accordingly, we do not anticipate any near-term liquidity issues.

Net cash provided by operating activities was approximately $344.3 million for the year ended December 31, 2007, $252.9 million for the year ended December 31, 2006 and $159.8 million for the year ended December 31, 2005. The increase in 2007 as compared to the prior year is primarily attributed to the increase in our net income in 2007 offset, in part, by slower collections of receivables, the timing of payment of accrued expenses and the timing of billings of fixed-price contracts. Trade accounts receivable increased from approximately $154.0 million at December 31, 2005 to approximately $259.2 million at December 31, 2006 and to approximately $383.0 million at December 31, 2007. Unbilled accounts receivable increased from approximately $22.7 million at December 31, 2005 to approximately $39.3 at December 31, 2006 and to approximately $53.5 million at December 31, 2007. The increase in trade accounts receivable during 2007 was due primarily to increased revenues and a higher number of days of sales outstanding. Unbilled receivables increased primarily due to increased revenue and the timing of billings for certain fixed-price contracts. We monitor turnover, aging and the collection of accounts receivable through the use of management reports that are prepared on a customer basis and evaluated by our finance staff. At December 31, 2007, our days’ sales outstanding, including unbilled receivables, was approximately 67 days as compared to 65 days as of December 31, 2006 and 63 days as of December 31, 2005.

Our investing activities used net cash of approximately $277.3 million for the year ended December 31, 2007, $272.3 million for the year ended December 31, 2006 and $204.5 million for the year ended December 31, 2005. The increase in each year was primarily related to greater investment to expand our offshore IT development centers and, in 2007, attributed to payments for the acquisition of marketRx and a contingent purchase price payment relating to our acquisition of Fathom.

Our financing activities provided net cash of approximately $4.0 million for the year ended December 31, 2007, $82.9 million for the year ended December 31, 2006 and $47.5 million for the year ended December 31, 2005. The decrease in 2007 relates primarily to Class A common stock repurchases under our stock repurchase program, offset, in part, by higher proceeds and excess tax benefits from stock option exercises. The increase in 2006 relates to the classification in 2006 of excess tax benefits on employee stock option exercises of approximately $33.2 million in financing activities as required by SFAS No. 123R.

As of December 31, 2007, our short-term investments included $282.8 million of AAA-rated auction-rate municipal debt securities that are collateralized by debt obligations supported by student loans. As of February 26, 2008, we held $176.3 million in AAA-rated auction-rate municipal debt securities of which approximately 95% of the underlying student loans are backed by the Federal Family Education Loan Program (FFELP). In addition, the auction-rate municipal debt securities held by us are generally collateralized by assets that are in excess of the total par value of the security issue. During the period February 14, 2008 to February 26, 2008, auctions failed for $71.1 million of the auction-rate securities held by us. There is no assurance that successful auctions on the remaining auction-rate securities in our investment portfolio will continue to succeed.

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The current instability in the credit markets may affect our ability to liquidate these securities in the short term. The funds associated with failed auctions will not be accessible until a successful auction occurs, the issuer calls or restructures the underlying security, the underlying security matures or a buyer outside the auction process emerges. We believe that the failed auctions experienced to date are not necessarily a result of the deterioration of the underlying credit quality of the securities. In addition, we believe that any potential future unrealized gain or loss associated with these securities will be temporary and will be recorded in accumulated other comprehensive income in our consolidated statement of financial position. However, if such losses become other-than-temporary, an impairment charge would be recorded to our consolidated statement of operations and comprehensive income.

We believe we will be able to recover our investment in auction-rate municipal debt securities due to: (i) the strength of the underlying collateral, substantially backed by FFELP, (ii) the AAA credit rating of the securities held by us and (iii) recent news that certain municipal issuers of auction-rate securities with failed auctions have announced plans to call such securities. All of the auction-rate municipal debt securities held by us are callable by the issuer at par. If future auctions continue to fail, we believe the issuers of the auction-rate securities held by us will begin to call these securities to avoid paying the higher penalty interest rates associated with failed auctions. However, it could take until the final maturity of the underlying security (up to 33 years) to realize our investments’ recorded value. Based on our expected operating cash flows, and our other sources of cash, we do not anticipate the potential lack of liquidity on these investments will affect our ability to execute current and planned operations and needs for at least the next 12 months.

Our ability to expand and grow our business in accordance with current plans, to make acquisitions and form joint ventures and to meet our long-term capital requirements beyond a 12-month period will depend on many factors, including the rate, if any, at which our cash flow increases, our ability and willingness to accomplish acquisitions and joint ventures with capital stock, our continued intent not to repatriate earnings from India, and the availability of public and private debt and equity financing. We cannot be certain that additional financing, if required, will be available on terms favorable to us, if at all.

Commitments and Contingencies

Our current India real estate development program now includes planned construction of approximately 4.3 million square feet of new space. The expanded program, which commenced during the quarter ended March 31, 2007, includes the expenditure of approximately $330 million through the end of 2009 on land acquisition, facilities construction and furnishings to build new state-of-the-art IT development centers in regions primarily designated as Special Economic Zones located in India. As of December 31, 2007, we had outstanding fixed capital commitments of approximately $126.7 million related to our India development center expansion program.

During 2007, we repurchased $105.4 million of our Class A common stock under a $200 million stock repurchase program authorized by our Board of Directors that expires in September 2008. Any future repurchases under this program will be funded from cash generated from operations.

As of December 31, 2007, we had the following obligations and commitments to make future payments under contractual obligations and commercial commitments:

	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Operating leases	$	275,306	$	51,040	$	104,957	$	86,837	$	32,472
Fixed capital commitments(1)		126,658		126,658		—		—		—
Other purchase commitments(2)		89,115		31,640		57,475		—		—
Total	$	491,079	$	209,338	$	162,432	$	86,837	$	32,472

⁽¹⁾ Relates to India IT development center expansion program.

⁽²⁾ Other purchase commitments include, among other things, information technology, software support and maintenance obligations, as well as other obligations in the ordinary course of business that we cannot cancel or where we would be required to pay a termination fee in the event of cancellation.

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As of December 31, 2007, we had $7.9 million of unrecognized tax benefits. This represents the tax benefits associated with various tax positions taken, or expected to be taken, on domestic and international tax returns that have not been recognized in our financial statements due to uncertainty regarding their resolution. The resolution or settlement of these tax positions with the taxing authorities is at various stages and therefore we are unable to make a reliable estimate of the eventual cash flows by period that may be required to settle these matters.

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 operating 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.

Foreign Currency Translation

Overall, we believe that we are not exposed to significant revenue risk resulting from movement in foreign exchange rates as approximately 83% of our revenues are generated from customers located in North America. However, a portion of our costs in India, representing approximately 31% of our global operating costs are denominated in local currency and subject to foreign exchange rate fluctuations, which has an impact on our results of operations. In addition, a portion of our balance sheet is exposed to foreign exchange rate fluctuations, which results in non-operating foreign exchange gains and losses. On an ongoing basis, we manage a portion of this risk by limiting our net monetary asset exposure to the Indian rupee in our Indian subsidiary.

Effects of Inflation

Our most significant costs are the salaries and related benefits for our programming staff and other professionals. Competition in India, the United States and Europe for professionals with advanced technical skills necessary to perform our services offered have caused wages to increase at a rate greater than the general rate of inflation. As with other IT service providers, we must adequately anticipate wage increases, particularly on our fixed-price contracts. There can be no assurance that we will be able to recover cost increases through increases in the prices that we charge for our services in the United States and elsewhere. We have experienced wage inflation in India; however, this has not had a material impact on our results of operations as Indian wages represent approximately 20% of our total operating expenses.

Recent Accounting Pronouncements

On January 1, 2007, we adopted FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a minimum recognition threshold for a tax position taken or expected to be taken in a tax return that is required to be met before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The cumulative effect of adopting FIN 48 of $0.85 million was recorded as a reduction of beginning retained earnings.

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141(R), "Business Combinations." This Statement replaces FASB Statement No. 141, "Business Combinations." SFAS No. 141(R) establishes principles and requirements for how an acquiring company: recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) further changes the accounting treatment for certain specific items, including: acquisition costs will be generally expensed as incurred; acquired contingent liabilities will be recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies; in-process research and development (IPRD) will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; restructuring costs associated with a business combination will be generally expensed

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subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. SFAS No. 141(R) applies prospectively to our business combinations for which the acquisition date is on or after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51” (“SFAS No. 160”). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for us beginning January 1, 2009. We are currently evaluating the potential impact that SFAS No. 160 will have on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115” (SFAS No. 159), which is effective for our financial statements beginning January 1, 2008. SFAS No. 159 permits entities to measure eligible financial assets, financial liabilities and firm commitments at fair value, on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other generally accepted accounting principles. The fair value measurement election is irrevocable and subsequent changes in fair value must be recorded in earnings. We are currently evaluating the potential impact that SFAS No. 159 will have on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. However, on February 12, 2008, the FASB issued FSP SFAS No. 157-2 which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). This FSP partially defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP. Effective for 2008, we will adopt SFAS No. 157 except as it applies to those nonfinancial assets and nonfinancial liabilities as noted in FSP SFAS No. 157-2. We are currently evaluating the potential impact that SFAS No. 157 will have on our consolidated financial statements.

Forward Looking Statements

The statements contained in this Annual Report on Form 10-K that are not historical facts are forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended) that involve risks and uncertainties. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as “believes”, “expects”, “may”, “will”, “should” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. From time to time, we or our representatives have made or may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in various filings made by us with the SEC, or press releases or oral statements made by or with the approval of one of our authorized executive officers. These forward-looking statements, such as statements regarding anticipated future revenues or operating margins, contract percentage completions, capital expenditures, and other statements regarding matters that are not historical facts, involve predictions. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements. These factors include those set forth in the section entitled “Item 1A. Risk Factors”.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to foreign currency exchange rate risk in the ordinary course of doing business as we transact or hold a portion of our funds in foreign currencies, particularly the Indian rupee. Accordingly, we periodically evaluate the need for hedging strategies, including the use of derivative financial instruments, to mitigate the effect of foreign currency fluctuations and may use such instruments in the future to reduce foreign currency exposure to appreciation or depreciation in the value of certain foreign currencies. In 2007, 2006 and 2005, we have not entered into any hedging contracts or off-balance sheet transactions, arrangements or other relationships with unconsolidated entities or other persons that are likely to affect liquidity or the availability of or requirements for capital resources.

We do not believe we are exposed to material direct risks associated with changes in interest rates other than with our cash and cash equivalents and short-term investments. As of December 31, 2007, we had approximately $670.4 million of cash and cash equivalents and short-term investments most of which are impacted almost immediately by changes in short-term interest rates. We limit our credit risk by investing primarily in AAA/Aaa rated securities as rated by Moody’s, Standard & Poor’s and Fitch rating services and restricting amounts that can be invested with any single issuer.

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As of December 31, 2007, our short-term investments included $282.8 million of AAA-rated auction-rate municipal debt securities that are collateralized by debt obligations supported by student loans. As of February 26, 2008, we held $176.3 million in AAA-rated auction-rate municipal debt securities of which approximately 95% of the underlying student loans are backed by the FFELP. In addition, the auction-rate municipal debt securities held by us are generally collateralized by assets that are in excess of the total par value of the security issue. During the period February 14, 2008 to February 26, 2008, auctions failed for $71.1 million of the auction-rate securities held by us as investments. There is no assurance that successful auctions on the remaining auction-rate securities in our investment portfolio will continue to succeed.

The current instability in the credit markets may affect our ability to liquidate these securities in the short term. The funds associated with failed auctions will not be accessible until a successful auction occurs, the issuer calls or restructures the underlying security, the underlying security matures (up to 33 years) or a buyer outside the auction process emerges. We believe that the failed auctions experienced to date are not necessarily a result of the deterioration of the underlying credit quality of the securities. In addition, we believe that any potential future unrealized gain or loss associated with these securities will be temporary and will be recorded in accumulated other comprehensive income in our consolidated statement of financial position. However, if such losses become other-than-temporary, an impairment charge would be recorded to our consolidated statement of operations and comprehensive income.

Item 8. Financial Statements and Supplementary Data

The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. A list of the financial statements filed herewith is found at “Item 15. Exhibits, Financial Statements and Financial Statement Schedule”.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of December 31, 2007. In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2007, our disclosure controls and procedures were (1) effective in that they were designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our chief executive officer and chief financial officer by others within those entities, as appropriate to allow timely decisions regarding required disclosures, and (2) effective in that they provide that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Responsibility for Financial Statements

Our management is responsible for the integrity and objectivity of all information presented in this annual report. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s best estimates and judgments. Management believes the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company’s financial position and results of operations.

The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets regularly with the Company’s independent registered public accounting firm and representatives of management to review accounting, financial reporting, internal control and audit matters, as well as the nature and extent of the audit effort. The Audit Committee is responsible for the engagement of the independent registered public accounting firm. The independent registered public accounting firm has free access to the Audit Committee.

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Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act and is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2007. In making this assessment, the company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on its evaluation, our management has concluded that, as of December 31, 2007, our internal control over financial reporting was effective. The effectiveness of our internal control over financial reporting as of December 31, 2007 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included on page F-2.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information relating to our directors and nominees for election as directors under the heading “Election of Directors” in our definitive proxy statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement. The information relating to our executive officers in response to this item is contained in part under the caption “Our Executive Officers” in Part I of this Annual Report on Form 10-K and the remainder is incorporated herein by reference to our definitive proxy statement for the 2008 Annual Meeting of Stockholders.

We have adopted a written code of business conduct and ethics that applies to all of our employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. We make available our code of business conduct and ethics free of charge through our Web site which is located at www.cognizant.com. We intend to disclose any amendments to, or waivers from, our code of business conduct and ethics that are required to be publicly disclosed pursuant to rules of the SEC and the NASDAQ Global Select Market by filing such amendment or waiver with the SEC and by posting it on our Web site.

Item 11. Executive Compensation

The discussion under the heading “Executive Compensation” in our definitive proxy statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The discussion under the heading “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The discussion under the heading “Certain Relationships and Related Transactions and Director Independence” in our definitive proxy statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.

Item 14. Principal Accountant Fees and Services

The discussion under the heading “Independent Auditors Fees and Other Matters” in our definitive proxy statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.

PART IV

Item 15. Exhibits, Financial Statements and Financial Statement Schedule

(a) (1) Consolidated Financial Statements.

Reference is made to the Index to Consolidated Financial Statements on Page F-1.

      (2) Consolidated Financial Statement Schedule.

Reference is made to the Index to Financial Statement Schedule on Page F-1.

      (3) Exhibits.

Reference is made to the Index to Exhibits on Page 49.

Schedules other than as listed above are omitted as not required or inapplicable or because the required information is provided in the consolidated financial statements, including the notes thereto.

47

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 28th day of February, 2008.

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
By:	/s/ Francisco D’Souza
	Francisco D’Souza, President, Chief Executive Officer and Director (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Francisco D’Souza	President, Chief Executive Officer and Director	February 28, 2008
Francisco D’Souza	(Principal Executive Officer)
/s/ Gordon Coburn	Chief Financial and Operating Officer, and Treasurer	February 28, 2008
Gordon Coburn	(Principal Financial and Accounting Officer)
/s/ John E. Klein	Chairman of the Board and Director	February 28, 2008
John E. Klein
/s/ Lakshmi Narayanan	Vice Chairman of the Board and Director	February 28, 2008
Lakshmi Narayanan
/s/ Thomas M. Wendel	Director	February 28, 2008
Thomas M. Wendel
/s/ Robert W. Howe	Director	February 28, 2008
Robert W. Howe
/s/ Robert E. Weissman	Director	February 28, 2008
Robert W. Weissman
/s/ John N. Fox, Jr.	Director	February 28, 2008
John N. Fox, Jr.

48

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
3.1	Restated Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated February 13, 2003.)
3.2	Amended and Restated By-laws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated February 13, 2003.)
3.3	Amendment to Restated Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.)
3.4	Certificate of Amendment to Restated Certificate of Incorporation of Cognizant Technology Solutions Corporation dated June 13, 2006. (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated June 13, 2006.)
4.1	Rights Agreement, dated March 5, 2003, between the Company and American Stock Transfer & Trust Company, as Rights Agent, which includes the Certificate of Designations for the Series A Junior Participating Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated March 5, 2003.)
4.2	Specimen Certificate for shares of Class A common stock. (Incorporated by reference to Exhibit 4.2 to the Company’s Amendment Number 4 to the Company’s Form S-4 dated January 30, 2003.)
10.1*	Form of Indemnification Agreement for Directors and Officers. (Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1. (File Number 333-49783) which became effective on June 18, 1998.)
10.2*	Amended and Restated Cognizant Technology Solutions Key Employees’ Stock Option Plan. (Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 (File Number 333-49783) which became effective on June 18, 1998.)
10.3*	Amended and Restated Cognizant Technology Solutions Non-Employee Directors’ Stock Option Plan. (Incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 (File Number 333-49783) which became effective on June 18, 1998.)
10.4*	Form of Severance and Non-Competition Agreement between the Company and each of its Executive Officers. (Incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 (File Number 333-49783) which became effective on June 18, 1998.)
10.5*	Amended and Restated 1999 Incentive Compensation Plan (As Amended and Restated Through April 26, 2007). (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 7, 2007.)
10.6	Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.)
10.7	Form of Stock Option Certificate. (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10- Q for the quarter ended September 30, 2004.)
10.8	The Cognizant Technology Solutions Executive Pension Plan. (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.)
10.9	Distribution Agreement between IMS Health Incorporated and the Company dated January 7, 2003. (Incorporated by reference to Exhibit 10.13 to the Company’s Amendment Number 4 to the Company Form S-4 dated January 30, 2003.)
10.10*	Form of Stock Option Agreement between the Company and Lakshmi Narayanan pursuant to which stock options were granted on March 29, 2001. (Incorporated by reference to Exhibit 10.10 to the Company’s Form 10-K dated March 12, 2004.)

49

Exhibit No.	Description of Exhibit
10.11*	Form of Stock Option Agreement between the Company and Lakshmi Narayanan pursuant to which stock options were granted on February 5, 2003. (Incorporated by reference to Exhibit 10.11 to the Company’s Form 10-K dated March 12, 2004.)
10.12*	Form of Stock Option Agreement between the Company and each of Francisco D’Souza and Gordon Coburn pursuant to which stock options were granted on March 29, 2001. (Incorporated by reference to Exhibit 10.12 to the Company’s Form 10-K dated March 12, 2004.)
10.13*	Form of Stock Option Agreement between the Company and each of Francisco D’Souza and Gordon Coburn pursuant to which stock options were granted on February 5, 2003. (Incorporated by reference to Exhibit 10.13 to the Company’s Form 10-K dated March 12, 2004.)
10.14*	Severance and Noncompetition Agreement between the Company and Ramakrishnan Chandrasekaran dated December 13, 2004. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 17, 2004.)
10.15	Consulting Agreement dated December 1, 2006 by and between Venetia Kontogouris and the Company. (Incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated December 1, 2006.)
10.16	Amended and Restated 1999 Incentive Compensation Plan Amendment No. 1, which became effective on March 2, 2007. (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.)
10.17	Amended and Restated Key Employees’ Stock Option Plan Amendment No. 1, which became effective on March 2, 2007. (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.)
10.18	Amended and Restated Non-Employee Directors’ Stock Option Plan Amendment No. 1, which became effective on March 2, 2007. (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.)
10.19	Severance and Noncompetition Agreement with Rajeev Mehta dated July 23, 2007. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated July 18, 2007.)
10.20	Form of Performance Unit Award for grants to certain executive officers. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 6, 2007.)
10.21†	Agreement and Plan of Merger, dated as of October 18, 2007, by and among the Company, Cognizant Technology Corporation, marketRx, Inc., and Jaswinder S. Chadha, solely in his capacity as Stockholder Representative.
21.1 †	List of subsidiaries of the Company.
23.1 †	Consent of PricewaterhouseCoopers LLP.
24	Power of Attorney (included as part of signature page).
31.1 †	Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
31.2 †	Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
32.1 ††	Certification Pursuant to 18 U.S.C. Section 1350 (Chief Executive Officer).
32.2 ††	Certification Pursuant to 18 U.S.C. Section 1350 (Chief Financial Officer).

* A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(a)(3) of Form 10-K.

† Filed herewith. All other exhibits previously filed.

†† Furnished herewith.

50

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULE

	Page
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Financial Position as of December 31, 2007 and 2006	F-3
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2007, 2006 and 2005	F-4
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2007, 2006 and 2005	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005	F-6
Notes to Consolidated Financial Statements	F-7
Financial Statement Schedule:
Schedule of Valuation and Qualifying Accounts	F-22

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Cognizant Technology Solutions Corporation:

In our opinion, the consolidated financial statements listed in the accompanying index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Cognizant Technology Solutions Corporation (the "Company") and its subsidiaries at December 31, 2007 and December 31, 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 1 and Note 8, respectively, to the consolidated financial statements, the Company changed the manner in which it accounts for share-based compensation in 2006 and the manner in which it accounts for uncertainties in income taxes in 2007.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP

Florham Park, NJ

February 28, 2008

F-2

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands, except par values)

	At December 31,
	2007		2006
Assets
Current assets:
Cash and cash equivalents	$	339,845	$	265,937
Short-term investments		330,580		382,222
Trade accounts receivable, net of allowances of $6,339 and $3,719, respectively		382,960		259,210
Unbilled accounts receivable		53,496		39,265
Deferred income tax assets		75,470		61,257
Other current assets		59,828		32,500
Total current assets		1,242,179		1,040,391
Property and equipment, net of accumulated depreciation of $142,981 and $95,539, respectively		356,047		220,154
Goodwill		148,789		27,190
Intangible assets, net		45,565		20,463
Deferred income tax assets, net		11,949		1,024
Other assets		33,777		16,759
Total assets	$	1,838,306	$	1,325,981
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	36,176	$	27,839
Deferred revenue		29,020		19,401
Accrued expenses and other current liabilities		275,488		202,263
Total current liabilities		340,684		249,503
Deferred income tax liabilities, net		15,145		—
Other noncurrent liabilities		14,267		2,979
Total liabilities		370,096		252,482
Commitments and contingencies (See Notes 11 and 12)
Stockholders’ equity:
Preferred stock, $.10 par value, 15,000 shares authorized, none issued		—		—
Class A common stock, $.01 par value, 500,000 shares authorized, 288,012 and 285,026 shares issued and outstanding at December 31, 2007 and 2006, respectively		2,880		2,850
Additional paid-in capital		450,567		408,594
Retained earnings		999,560		650,277
Accumulated other comprehensive income		15,203		11,778
Total stockholders’ equity		1,468,210		1,073,499
Total liabilities and stockholders’ equity	$	1,838,306	$	1,325,981

The accompanying notes are an integral part of the consolidated financial statements.

F-3

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except per share data)

	Year Ended December 31,
	2007		2006		2005
Revenues	$	2,135,577	$	1,424,267	$	885,830
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization expense shown separately below)		1,206,035		787,923		479,915
Selling, general and administrative expenses		494,102		343,238		206,899
Depreciation and amortization expense		53,918		34,163		21,400
Income from operations		381,522		258,943		177,616
Other income (expense), net:
Interest income		29,560		17,615		8,982
Other income (expense), net		3,274		1,253		(1,326	)
Total other income (expense), net		32,834		18,868		7,656
Income before provision for income taxes		414,356		277,811		185,272
Provision for income taxes		64,223		45,016		19,006
Net income	$	350,133	$	232,795	$	166,266
Basic earnings per share	$	1.22	$	0.83	$	0.61
Diluted earnings per share	$	1.15	$	0.77	$	0.57
Weighted average number of common shares outstanding – Basic		288,155		281,715		272,988
Dilutive effect of shares issuable under stock-based compensation plans		15,438		19,409		20,802
Weighted average number of common shares outstanding – Diluted		303,593		301,124		293,790
Comprehensive Income:
Net income	$	350,133	$	232,795	$	166,266
Foreign currency translation adjustments		3,425		9,657		(7,528	)
Total comprehensive income	$	353,558	$	242,452	$	158,738

The accompanying notes are an integral part of the consolidated financial statements.

F-4

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

												Accumulated Other Comprehensive Income
	Class A Common Stock					Additional Paid-in Capital			Retained Earnings						Total
	Shares		Amount
Balance, December 31, 2004	268,354		$	2,684		$	189,980		$	251,216		$	9,649		$	453,529
Foreign currency translation adjustments	—			—			—			—			(7,528	)		(7,528	)
Exercise of stock options	9,384			92			32,651			—			—			32,743
Tax benefit related to stock plans	—			—			49,705			—			—			49,705
Issuances under employee stock purchase plan	728			8			14,700			—			—			14,708
Acquisition	226			2			4,720			—			—			4,722
Net income	—			—			—			166,266			—			166,266
Balance, December 31, 2005	278,692			2,786			291,756			417,482			2,121			714,145
Foreign currency translation adjustments	—			—			—			—			9,657			9,657
Exercise of stock options	5,602			57			30,915			—			—			30,972
Tax benefit related to stock plans	—			—			35,568			—			—			35,568
Issuances under employee stock purchase plan	732			7			20,421			—			—			20,428
Stock-based compensation expense	—			—			29,934			—			—			29,934
Net income	—			—			—			232,795			—			232,795
Balance, December 31, 2006	285,026			2,850			408,594			650,277			11,778			1,073,499
Adoption of FIN 48 (See Note 8)	—			—			—			(850	)		—			(850	)
Foreign currency translation adjustments	—			—			—			—			3,425			3,425
Exercise of stock options	5,504			55			38,066			—			—			38,121
Tax benefit related to stock plans	—			—			44,344			—			—			44,344
Issuances under employee stock purchase plan	870			9			28,973			—			—			28,982
Repurchases of common stock	(3,388	)		(34	)		(105,326	)		—			—			(105,360	)
Stock-based compensation expense	—			—			35,916			—			—			35,916
Net income	—			—			—			350,133			—			350,133
Balance, December 31, 2007	288,012		$	2,880		$	450,567		$	999,560		$	15,203		$	1,468,210

The accompanying notes are an integral part of the consolidated financial statements.

F-5

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2007			2006			2005
Cash flows from operating activities:
Net income	$	350,133		$	232,795		$	166,266
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		53,918			34,163			21,400
Provision for doubtful accounts		3,560			1,507			1,626
Deferred income taxes		25,061			33,286			2,365
Stock-based compensation expense		35,916			29,934			—
Excess tax benefit on stock option exercises		(42,265	)		(33,249	)		—
Changes in assets and liabilities:
Trade accounts receivable		(119,882	)		(102,334	)		(55,827	)
Other current assets		(34,232	)		(26,849	)		(15,339	)
Other assets		(15,780	)		(8,419	)		(1,294	)
Accounts payable		10,554			10,817			2,208
Other current and noncurrent liabilities		77,337			81,225			38,355
Net cash provided by operating activities		344,320			252,876			159,760
Cash flows used in investing activities:
Purchases of property and equipment		(182,467	)		(104,734	)		(71,770	)
Purchases of short-term investments		(968,669	)		(488,161	)		(625,792	)
Proceeds from maturity or sale of short-term investments		1,020,617			335,330			512,827
Acquisitions, net of cash acquired		(146,820	)		(14,773	)		(19,811	)
Net cash used in investing activities		(277,339	)		(272,338	)		(204,546	)
Cash flows from financing activities:
Issuance of common stock under employee stock plans		67,103			51,400			47,451
Excess tax benefit on stock option exercises		42,265			33,249			—
Repurchases of common stock		(105,360	)		—			—
Repayment of acquired credit line and notes payable		—			(1,754	)		—
Net cash provided by financing activities		4,008			82,895			47,451
Effect of currency translation on cash and cash equivalents		2,919			5,566			(5,023	)
Increase (decrease) in cash and cash equivalents		73,908			68,999			(2,358	)
Cash and cash equivalents, at beginning of year		265,937			196,938			199,296
Cash and cash equivalents, at end of year	$	339,845		$	265,937		$	196,938
Supplemental information:
Cash paid for income taxes during the year	$	43,256		$	14,103		$	17,354

The accompanying notes are an integral part of the consolidated financial statements.

F-6

Notes to Consolidated Financial Statements

(Dollars in thousands)

1. Summary of Significant Accounting Policies

Description of Business. Cognizant Technology Solutions Corporation (“Cognizant” or the “Company”) is a leading provider of custom Information Technology (“IT”) consulting and technology services as well as outsourcing services for Global 2000 Business companies located in North America, Europe and Asia. Cognizant’s core competencies include Technology Strategy Consulting, Complex Systems Development, Enterprise Software Package Implementation and Maintenance, Data Warehousing and Business Intelligence, Application Testing, Application Maintenance, Infrastructure Management and Vertically-Oriented Business Process Outsourcing. The Company tailors its services to specific industries, and utilizes an integrated 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.

Principles of Consolidation. The consolidated financial statements reflect the consolidated financial position, results of operations and cash flows of the Company and its consolidated subsidiaries for all periods presented. All intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents. The Company considers all highly liquid instruments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents included time deposits of $677 at December 31, 2007 and $5,914 at December 31, 2006.

Short-Term Investments. The Company’s short-term investments consist of time deposits which mature in less than one year, valued at cost, which approximates fair value and available-for-sale securities valued at fair value. Interest and amortization of premiums and discounts for debt securities are included in interest income. Available-for-sale securities consist primarily of auction-rate securities with auction rate reset periods of less than three months. The Company’s investment in auction-rate securities consists of municipal debt securities. The Company evaluates its investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery of market value. An impairment charge would be recorded to the extent that the carrying value of the available-for-sale securities exceeds the fair market value of the securities and the decline in value is determined to be other-than-temporary.

Allowance for Doubtful Accounts. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowance for doubtful accounts is determined by evaluating the relative credit-worthiness of each customer, historical collections experience and other information, including the aging of the receivables.

Unbilled Accounts Receivable. Unbilled accounts receivable represent revenues on contracts to be billed, in subsequent periods, as per the terms of the related contracts.

Short-term Financial Assets and Liabilities. Cash and cash equivalents, trade receivables, accounts payable and other accrued liabilities are short-term in nature and, accordingly, their carrying values approximate fair value.

Property and Equipment. Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement. Maintenance and repairs are expensed as incurred, while renewals and betterments are capitalized. Deposits paid towards acquisition of long-lived assets and the cost of assets not put in use before the balance sheet date are disclosed under the caption “capital work-in-progress” in Note 4.

Internal Use Software. Expenditures for major software purchases and software developed or obtained for internal use are capitalized, including the salaries and benefits of employees that are directly involved in the installation of such software. The capitalized costs are amortized on a straight-line basis over the lesser of three years or the software’s useful life. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred.

Goodwill and Other Intangibles. The Company does not amortize goodwill, but instead tests goodwill at the reporting unit level for impairment at least annually or as circumstances warrant. If an impairment is indicated, a write-down to fair value (normally measured by discounting estimated future cash flows) is recorded. Other intangibles represent primarily customer relationships and developed technology which are being amortized on a straight-line basis over their estimated useful lives.

Long-Lived Assets. The Company reviews for impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In general, the Company will recognize an impairment loss when the sum of undiscounted expected future cash flows is less than the carrying amount of such assets. The impairment loss would equal the amount by which the carrying amount of the asset exceeds the fair value of the asset.

F-7

Revenue Recognition. The Company’s services are entered into on either a time-and-materials or fixed-price basis. Revenues related to time-and-material contracts are recognized as the service is performed. Revenues related to fixed-price contracts that provide for highly complex information technology application development services are recognized as the service is performed using the percentage of completion method of accounting, under which the total value of revenue is recognized on the basis of the percentage that each contract’s total cost to date bears to the total expected labor costs (cost to cost method). Revenues related to fixed-priced contracts that provide solely for application maintenance services are recognized on a straight-line basis or as services are rendered or transactions processed in accordance with contractual terms. Expenses are recorded as incurred over the contract period. Contingent or incentive revenues relating to application maintenance contracts are recognized when the contingency is satisfied and the Company concludes the amounts are earned. Volume discounts, if any, are recorded as a reduction of revenue over the contract period as services are provided.

For contracts with multiple deliverables, the Company evaluates at the inception of each new contract all deliverables in an arrangement to determine whether they represent separate units of accounting. For arrangements with multiple units of accounting, primarily fixed-price contracts that provide both application maintenance and application development services and certain application maintenance contracts, arrangement consideration is allocated among the units of accounting, where separable, based on their relative fair values and revenue is recognized for each unit of accounting based on the Company’s revenue recognition policy described above.

Fixed-price contracts are cancelable subject to a specified notice period. All services provided by the Company through the date of cancellation are due and payable under the contract terms. The Company issues invoices related to fixed-price contracts based upon achievement of milestones during a project or other contractual terms. Differences between the timing of billings, based upon contract milestones or other contractual terms, and the recognition of revenue, based upon the percentage-of-completion method of accounting, are recognized as either unbilled or deferred revenue. Estimates of certain fixed-price contracts are subject to adjustment as a project progresses to reflect changes in expected completion costs. The cumulative impact of any revision in estimates is reflected in the financial reporting period in which the change in estimate becomes known and any anticipated losses on contracts are recognized immediately. Warranty provisions generally exist under such contracts for a period of ninety days past contract completion and costs related to such provisions are accrued at the time the related revenues are recorded.

For all services, revenue is recognized when, and if, evidence of an arrangement is obtained and the other criteria to support revenue recognition are met, including the price is fixed or determinable, services have been rendered and collectibility is assured. Revenues related to services performed without a signed agreement or work order are not recognized until there is evidence of an arrangement, such as when agreements or work orders are signed or payment is received; however, the cost related to the performance of such work is recognized in the period the services are rendered.

The Company accounts for reimbursement of out-of-pocket expenses as revenues. Subcontractor costs are included in cost of services as they are incurred.

Accounting for Stock-Based Employee Compensation Plans. Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 123R, “Share-Based Payment,” utilizing the modified prospective method. SFAS No. 123R requires the recognition of stock-based compensation expense in the consolidated financial statements for awards of equity instruments to employees and non-employee directors based on the grant-date fair value of those awards, estimated in accordance with the provisions of SFAS 123R. The Company recognizes these compensation costs on a straight-line or graded vesting basis over the requisite service period of the award, which is generally four years for stock options and three years for performance stock units. Under the modified prospective method, the provisions of SFAS No. 123R apply to all awards granted or modified after the date of adoption. In addition, the unrecognized expense of awards not yet vested at the date of adoption, determined under the original provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), are recognized in net income in the periods after the date of adoption. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow as prescribed under the prior accounting rules. This requirement reduces net operating cash flow and increases net financing cash flows in periods after adoption. Total cash flow remains unchanged from what would have been reported under the prior accounting rules.

Prior to the adoption of SFAS No. 123R, the Company followed the intrinsic value method to account for its employee stock option plans and employee stock purchase plan in accordance with the recognition and measurement principles of Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and Related Interpretations (“APB No. 25”), as allowed by SFAS No. 123 and as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”. Accordingly, no stock-based employee compensation cost was

F-8

recognized, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant and, with respect to the employee stock purchase plan, the discount did not exceed fifteen percent. In accordance with the transitional provisions of SFAS 123R, operating results for 2005 have not been restated. The Company historically reported pro forma results under the disclosure-only provisions of SFAS No. 123.

In November 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. FAS 123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards” (“FSP 123R-3”). The Company has elected to adopt the alternative transition (“short-cut”) method provided in the FSP 123R-3 for calculating the tax effects of stock-based compensation pursuant to SFAS 123R. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (“APIC pool”) related to the tax effects of employee stock-based compensation and to determine the subsequent impact on the APIC pool of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS 123R. See Note 10 for additional information relating to the Company’s employee stock-based compensation plans.

Foreign Currency Translation. The assets and liabilities of the Company’s subsidiaries other than the Company’s Indian subsidiaries (“Cognizant India”), are translated into U.S. dollars from local currencies at current exchange rates and revenues and expenses are translated from local currencies at average monthly exchange rates. The resulting translation adjustments are recorded in a separate component of stockholders’ equity. For Cognizant India, the functional currency is the U.S. dollar, since its sales are made primarily in the United States, the sales price is predominantly in U.S. dollars and there is a high volume of intercompany transactions denominated in U.S. dollars between Cognizant India and its U.S. and European affiliates. Non-monetary assets and liabilities are translated at historical exchange rates, while monetary assets and liabilities are translated at current exchange rates. The resulting foreign currency gain (loss) is included in the caption “other income (expense), net” on the Company’s consolidated statements of operations and comprehensive income. Foreign currency transaction gains/(losses), which are included in the results of operations, totaled $3,216, $1,202 and $(1,339) for the years ended December 31, 2007, 2006 and 2005, respectively. Gains and losses from balance sheet translation are included in accumulated other comprehensive income on the consolidated statements of financial position and represents the only item included in such caption.

Use of Estimates. The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including the recoverability of tangible and intangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. On an on-going basis, management reevaluates these estimates. The most significant estimates relate to the recognition of revenue and profits based on the percentage of completion method of accounting for certain fixed-bid contracts, the allowance for doubtful accounts, income taxes and related deferred tax assets and liabilities, valuation of short-term investments, goodwill and other long-lived assets, assumptions used in determining the fair value of stock-based compensation awards, contingencies and litigation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The actual amounts may vary from the estimates used in the preparation of the accompanying consolidated financial statements.

Risks and Uncertainties. Principally, all of the Company’s IT development centers, including a majority of its employees are located in India. As a result, the Company may be subject to certain risks associated with international operations, including risks associated with foreign currency exchange rate fluctuations and risks associated with the application and imposition of protective legislation and regulations relating to import and export or otherwise resulting from foreign policy or the variability of foreign economic or political conditions. Additional risks associated with international operations include difficulties in enforcing intellectual property rights, the burdens of complying with a wide variety of foreign laws, potential geo-political and other risks associated with terrorist activities and local or cross border conflicts, potentially adverse tax consequences, tariffs, quotas and other barriers.

Concentration of Credit Risk. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, time deposits, investments in short-term securities and trade accounts receivable. The Company maintains its cash and cash equivalents and short-term investments with high credit quality financial institutions, invests in investment-grade short-term debt securities and limits the amount of credit exposure to any one commercial issuer. Trade accounts receivables are dispersed across many customers operating in different industries; therefore, concentration of credit risk is limited.

Income Taxes. The Company provides for income taxes utilizing the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each balance sheet date, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable

F-9

income. If it is determined that it is more likely than not that future tax benefits associated with a deferred tax asset will not be realized, a valuation allowance is provided. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in income in the period that includes the enactment date. Tax benefits earned on exercise of employee stock options in excess of compensation charged to income are credited to additional paid-in capital.

Earnings Per Share (“EPS”). Basic EPS excludes dilution and is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS includes all potential dilutive common stock in the weighted average shares outstanding.

Reclassifications. Certain prior-year amounts have been reclassified to conform to the 2007 presentation.

Accounting Changes and New Accounting Standards

On January 1, 2007, the Company adopted the provisions of the FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of SFAS No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a minimum recognition threshold for a tax position taken or expected to be taken in a tax return that is required to be met before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The cumulative effect of adopting FIN 48 of $850 was recorded as a reduction of beginning retained earnings. See Note 8 for additional information regarding unrecognized tax benefits.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” This Statement replaces FASB Statement No. 141, “Business Combinations.” SFAS No. 141(R) establishes principles and requirements for how an acquiring company: recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) further changes the accounting treatment for certain specific items, including: acquisition costs will be generally expensed as incurred; acquired contingent liabilities will be recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies; in-process research and development (“IPRD”) will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; restructuring costs associated with a business combination will be generally expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. SFAS No. 141(R) applies prospectively to the Company’s business combinations for which the acquisition date is on or after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51” (“SFAS No. 160”). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This statement is effective for the Company beginning January 1, 2009. The Company is currently evaluating the potential impact that SFAS No. 160 will have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”), which is effective for the Company’s financial statements beginning January 1, 2008. SFAS No. 159 permits entities to measure eligible financial assets, financial liabilities and firm commitments at fair value, on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other generally accepted accounting principles. The fair value measurement election is irrevocable and subsequent changes in fair value must be recorded in earnings. The Company is currently evaluating the potential impact that SFAS No. 159 will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. However, on February 12, 2008, the FASB issued FSP SFAS No. 157-2 which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). This FSP partially defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP. Effective for 2008, the Company will adopt SFAS No. 157 except as it applies to those nonfinancial assets and nonfinancial liabilities as noted in FSP SFAS No. 157-2. The Company is currently evaluating the potential impact that SFAS No. 157 will have on its consolidated financial statements.

F-10

2. Acquisitions

In November 2007, the Company acquired marketRx, Inc. (“marketRx”), a U.S.-based leading provider of data analytics and process outsourcing to global life sciences companies in the pharmaceutical, biotechnology and medical devices segments for initial net cash consideration of approximately $135,853 (net of cash acquired of $305 and including direct transaction costs). In addition, the purchase price also included the estimated fair value of unvested stock options assumed by Cognizant. The Company completed this acquisition to strengthen its life sciences industry expertise as well as its data analytics capabilities in order to leverage such capabilities across multiple industries. The Company has made a preliminary allocation of the purchase price to the tangible and intangible assets and liabilities acquired, pending the completion of an appraisal, which will provide additional information concerning asset and liability valuations. Accordingly, the allocations are subject to revision when the Company receives final information, including the appraisal and other analyses. As part of the preliminary allocation of the purchase price, the Company recorded approximately $104,920 of non-tax deductible goodwill and $32,590 of intangible assets, principally customer relationships and developed technology. Amortization of $551 related to amortizable intangible assets has been included in depreciation and amortization in the accompanying consolidated statements of income and comprehensive income for the year ended December 31, 2007. The intangible assets are being amortized over a weighted average life of 8.7 years.

In September 2006, the Company acquired AimNet Solutions, Inc. (“AimNet”), a U.S.-based managed infrastructure and professional services firm for initial net cash consideration of approximately $14,773 (net of cash acquired of $971, and including assumed debt of $1,754 and direct transaction costs). The Company completed this acquisition to strengthen its IT infrastructure management capabilities. The Company has made an allocation of the purchase price to the tangible and intangible assets and liabilities acquired based on their fair values, including approximately $12,708 to tax deductible goodwill and $2,750 to intangible assets, principally customer relationships and developed technology. The intangible assets are being amortized over a weighted average life of 5.5 years.

In April 2005, the Company acquired substantially all the assets of Fathom Solutions, LLC (“Fathom”), a U.S.-based company specializing in IT consulting in the telecommunications and financial services industries, for initial consideration of approximately $23,300 (including direct transaction costs) in cash and stock. The Company made cash payments of approximately $18,600 and issued 226,450 shares of Class A common stock valued at $4,722 related to the acquisition. Additional purchase price of $11,955 that was contingent on Fathom achieving certain financial and operating targets over the two years ended April 30, 2007 was paid in July 2007 and allocated to goodwill. The Company completed this acquisition primarily to strengthen its service capabilities in the telecommunications industry. The Company has allocated the purchase price to the tangible and intangible assets and liabilities acquired based on their fair values, including $21,033 to tax deductible goodwill and $6,750 to intangible assets, principally customer relationships. The intangible assets are being amortized over a weighted average life of 9.8 years.

The operating results of marketRx, AimNet and Fathom have been included in the consolidated financial statements of the Company, effective November 16, 2007, September 5, 2006 and April 16, 2005, respectively. The acquisitions in 2007, 2006 and 2005 were not material to the Company’s operations, financial position or cash flows.

3. Short-term Investments

The following is a summary of short-term investments:

	December 31,
	2007		2006
Available-for-sale-securities:
Auction-rate securities	$	282,800	$	330,275
Asset-backed securities		4		2,983
Agency discount notes		159		1,109
Commercial paper		977		8,044
Corporate bonds		498		1,001
Total available-for-sale-securities		284,438		343,412
Time deposits		46,142		38,810
Total short-term investments	$	330,580	$	382,222

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The carrying value of short-term investments as of December 31, 2007 and 2006 approximated fair value. Realized gains or losses, if any, on these investments were insignificant for the years ended December 31, 2007, 2006 and 2005. Contractual maturities of available-for-sale-securities at December 31, 2007 are as follows: $1,136 in 2008, $3,998 in 2009, $0 in 2010, $0 in 2011, $12,000 in 2012 and $267,304 maturing after 2013. The Company’s investments in auction-rate securities generally have contractual maturities in excess of one year; however, they provide liquidity to the Company every ninety days or less when interest rates are reset through a “Dutch” auction process. As of December 31, 2007, investments in auction-rate securities consisted of municipal debt securities and the Company had not participated in any failed auctions.

As of February 26, 2008, the Company held $176,300 of auction-rate securities whose underlying assets are generally student loans which are substantially backed by the Federal government. During the period February 14, 2008 to February 26, 2008 auctions failed for $71,000 of the auction-rate securities held by the Company. Since there has not been a deterioration of the underlying credit quality of the auction-rate securities, and the Company has the ability to hold the securities until final maturity, if necessary, no impairment charge has been recorded.

4. Property and Equipment, net

Property and equipment consist of the following:

		December 31
	Estimated Useful Life (Years)	2007			2006
Buildings	30	$	97,356		$	56,907
Computer equipment and purchased software	3		131,355			96,986
Furniture and equipment	5 – 9		67,950			50,042
Land			12,866			9,004
Leasehold land			16,930			1,880
Capital work-in-progress			121,901			36,382
Leasehold improvements	Over shorter of lease term or life of asset		50,670			64,492
Sub-total			499,028			315,693
Accumulated depreciation and amortization			(142,981	)		(95,539	)
Property and Equipment – net		$	356,047		$	220,154

Depreciation and amortization expense related to property and equipment was $50,337, $31,503 and $19,311, for the years ended December 31, 2007, 2006 and 2005, respectively.

Leasehold land is leased by the Company from the government of India with lease terms ranging from 90 to 99 years. Lease payments are made at the inception of the lease agreement and amortized over the lease term. Amortization expense of leasehold land is immaterial for the periods presented and is included in depreciation and amortization expense in the Company’s consolidated statements of operations and comprehensive income.

5. Goodwill and Intangible Assets, net

Changes in goodwill for the years ended December 31, 2007 and 2006 are as follows:

	2007		2006
Balance, beginning of year	$	27,190	$	18,223
Acquisitions and adjustments		121,045		8,534
Cumulative translation adjustments		554		433
Balance, end of year	$	148,789	$	27,190

In 2007, the increase in goodwill primarily relates to the acquisition of marketRx and a contingent payment earned upon the achievement of certain performance targets related to the Fathom acquisition. In 2006, the increase in goodwill relates to the acquisition of AimNet. No impairment losses were recognized during the three years ended December 31, 2007.

F-12

Components of intangible assets are as follows as of December 31:

	2007			2006			Weighted Average Life
Customer relationships	$	47,990		$	24,971		9.9 years
Developed technology		5,888			2,803		4.0 years
Other		3,035			1,044		4.6 years
		56,913			28,818
Accumulated amortization		(11,348	)		(8,355	)
Intangible assets, net	$	45,565		$	20,463

All of the intangible assets have finite lives and as such are subject to amortization. Amortization of intangibles totaled $3,581 for 2007, $2,660 for 2006 and $2,089 for 2005. Estimated amortization expenses of the Company’s existing intangible assets for the next five years are as follows:

Year	Amount
2008	$	7,031
2009	$	7,015
2010	$	6,831
2011	$	5,884
2012	$	4,395

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

	December 31
	2007		2006
Accrued compensation and benefits	$	154,265	$	122,419
Accrued taxes		3,145		1,725
Accrued professional fees		13,898		12,221
Accrued vacation		40,493		23,874
Accrued travel and entertainment		11,450		12,177
Other		52,237		29,847
Total	$	275,488	$	202,263

7. Employee Benefits

The Company has a 401(k) Savings Plan which allows eligible U.S. employees of the Company to contribute a percentage of their compensation into the plan and the Company matches up to 50.0% of the eligible employee’s contribution. The amount charged to expense for the matching contribution was $4,074, $3,655 and $1,577 for the years ended December 31, 2007, 2006 and 2005, respectively. The Company recorded an expense of $5,700 in the year ended December 31, 2006 relating to an operational failure in the administration of the 401(k) Savings Plan. Of such amount, approximately $1,400 related to 2006 and is included in the 2006 matching contribution and approximately $4,300 related to periods prior to 2006. Certain of the Company’s employees participate in defined contribution plans in Europe, primarily the United Kingdom, sponsored by the Company. The costs to the Company related to these plans were not material to the Company’s results of operations or financial position for the years presented.

Cognizant India maintains employee benefit plans that cover substantially all India-based employees. The employees’ provident fund, pension and family pension plans are statutory defined contribution retirement benefit plans. Under the plans, employees contribute up to 12% of their base compensation, which is matched by an equal contribution by Cognizant India. Contribution expense recognized was $12,963, $6,265 and $3,758 for the years ended December 31, 2007, 2006 and 2005, respectively.

Cognizant India also maintains a statutory gratuity plan that is a statutory post-employment benefit plan providing defined lump sum benefits. Cognizant India makes annual contributions to an employees’ gratuity fund established with a government-owned insurance corporation to fund a portion of the estimated obligation. The Company accounts for the gratuity plan in accordance with the provisions of EITF 88-1, “Determination of Vested Benefit Obligation for a Defined Benefit Pension Plan”. Accordingly, the Company’s liability for the gratuity plan reflects the undiscounted benefit obligation payable as of the balance sheet date which was based upon the employees’ salary and years of service. As of December 31, 2007 and 2006, the amount accrued under the gratuity plan was $11,859 and $8,552, respectively. Expense recognized by the Company was $7,013, $4,548 and $3,477 for the years ended December 31, 2007, 2006 and 2005, respectively.

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8. Income Taxes

Income before provision for income taxes shown below is based on the geographic location to which such income is attributed for years ended December 31:

	2007		2006		2005
United States	$	131,430	$	92,157	$	59,386
Foreign		282,926		185,654		125,886
Total	$	414,356	$	277,811	$	185,272

The provision of income taxes consists for the following components for the years ended December 31:

	2007			2006			2005
Current:
Federal and state	$	58,830		$	48,256		$	26,218
Foreign		30,683			14,121			15,437
Total current		89,513			62,377			41,655
Deferred:
Federal and state		(11,193	)		(14,387	)		(15,059	)
Foreign		(14,097	)		(2,974	)		(7,590	)
Total deferred		(25,290	)		(17,361	)		(22,649	)
Total provision	$	64,223		$	45,016		$	19,006

A reconciliation between the Company’s effective income tax rate and the U.S. Federal statutory rate is as follows:

	2007			%		2006			%		2005			%
Tax expense, at U.S. Federal statutory rate	$	145,025		35.0		$	97,234		35.0		$	64,845		35.0
State and local income taxes, net of Federal benefit		7,559		1.8			5,048		1.8			3,262		1.8
Rate differential on foreign earnings		(83,397	)	(20.1	)		(55,465	)	(20.0	)		(36,964	)	(19.9	)
Repatriation of previously undistributed Indian earnings		—		—			—		—			(12,411	)	(6.7	)
Other		(4,964	)	(1.2	)		(1,801	)	(0.6	)		274		0.1
Total income taxes	$	64,223		15.5		$	45,016		16.2		$	19,006		10.3

The Company’s deferred income tax assets and liabilities are comprised of the following at December 31:

	2007		2006
Deferred income tax assets:
Net operating losses	$	37,730	$	43,905
Revenue recognition		9,063		184
Compensation and benefits		24,717		23,637
Stock-based compensation		10,905		5,283
Depreciation and amortization		—		1,821
Minimum alternative tax and other credits		16,074		—
Other		1,566		2,240
		100,055		77,070
Less valuation allowance		5,887		3,989
Deferred tax assets, net		94,168		73,081
Deferred income tax liabilities:
Undistributed Indian income		6,161		6,080
Depreciation and amortization		2,646		—
Intangible assets		13,087		—
Other		—		4,720
Deferred income tax liabilities		21,894		10,800
Net deferred income tax asset	$	72,274	$	62,281

F-14

At December 31, 2007, Cognizant has estimated net operating loss carryforwards for U.S. tax purposes of approximately $79,000, including approximately $7,900 of acquired net operating loss carryforwards. For Federal purposes, these losses have expiration dates ranging from December 31, 2023 through December 31, 2026. For State purposes, the date of expiration varies but will generally be less than or equal to the Federal expiration period. The Company has foreign net operating loss carryforwards of approximately $18,400, of which approximately $6,300 relates to pre-acquisition net operating losses. The Company has recorded a full valuation allowance on most of the foreign net operating loss carryforwards. If tax benefits are recognized through reduction of the valuation allowance, approximately $1,600 of such benefits will reduce goodwill. During 2007, the Indian government passed tax legislation that, among other items, subjects Indian taxpayers to a Minimum Alternative Tax (“MAT”). The MAT calculation includes all Indian profits and the resulting income tax may be credited against Indian income taxes due in future years. The Company has recorded a deferred income tax asset for taxes due under the MAT.

Cognizant India as an export-oriented company, which, under the Indian Income Tax Act of 1961 is entitled to claim tax holidays for a period of ten consecutive years for each Software Technology Park (“STP”) with respect to export profits for each STP. Substantially all of the earnings of Cognizant India are attributable to export profits. The majority of the Company’s STPs in India are currently entitled to a 100% exemption from Indian income tax. Under current law, these tax holidays will be completely phased out by March 2009. The incremental Indian taxes related to the taxable STPs have been incorporated into the Company’s effective income tax rate for 2007. For the years ended December 31, 2007, 2006 and 2005, the effect of the income tax holiday was to reduce the overall income tax provision and increase net income by approximately $81,691, $51,345 and $34,664, respectively, and increase diluted EPS by $0.27, $0.17 and $0.12, respectively.

Prior to January 1, 2002, it was the Company’s intent to repatriate all accumulated earnings from India to the United States. Accordingly, Cognizant provided deferred income taxes on such pre–2002 undistributed earnings. During the first quarter of 2002, Cognizant made a strategic decision to pursue an international strategy that includes expanded infrastructure investments in India and geographic expansion in Europe and Asia. As a component of this strategy, Cognizant intends to use 2002 and future Indian earnings to expand operations outside of the United States instead of repatriating these earnings to the United States. Accordingly, effective January 1, 2002, pursuant to APB No. 23, Cognizant no longer accrues incremental U.S. taxes on all Indian earnings recognized in 2002 and subsequent periods as these earnings are considered to be indefinitely reinvested outside of the United States. As of December 31, 2007, the amount of unrepatriated Indian earnings and total foreign earnings, including unrepatriated Indian earnings, upon which no incremental U.S. taxes have been recorded is approximately $709,200 and $765,133, respectively. If such earnings are repatriated in the future, or no longer deemed to be indefinitely reinvested, Cognizant will accrue the applicable amount of taxes associated with such earnings. Due to the various methods by which such earnings could be repatriated in the future, it is not currently practicable to determine the amount of applicable taxes that would result from such repatriation.

On October 22, 2004, the American Jobs Creation Act of 2004 (the “Act”) was enacted into law. The Act created a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. Under the provisions of the Act, in December 2005, the Company repatriated $60,000 of undistributed Indian earnings that were not considered permanently reinvested under APB No. 23 and recorded a net income tax benefit of $12,411, consisting of a reversal of deferred income tax liabilities of $22,939 partially offset by current U.S. and Indian income taxes of $10,528. The U.S. income tax benefit was attributed to the fact that U.S. taxes due under the Act were substantially less than the amount the Company previously accrued, based on the U.S. federal statutory rate of 35%, on such undistributed Indian earnings. The repatriation reduced the Company’s effective tax rate for the year ended December 31, 2005 from 17.0% to 10.3% and increased basic and diluted EPS by $0.05 and $0.04, respectively. As of December 31, 2007, the Company has an accrual of approximately $6,200 on remaining pre-2002 undistributed Indian earnings that the Company intends to repatriate in the future.

The Company will continue to assert permanent reinvestment of all Indian earnings after December 31, 2001. Deferred U.S. income taxes on unremitted earnings from other foreign entities have not been provided for as such earnings are deemed to be permanently reinvested.

Due to the geographical scope of our operations, the Company is subject to tax examinations in various jurisdictions. Accordingly, the Company may record incremental tax expense, in accordance with FIN 48, based upon the more-likely-than-not outcomes of any uncertain tax positions. In addition, when applicable, the Company adjusts the previously recorded tax expense to reflect examination results when the position is effectively settled. The Company’s

F-15

ongoing assessments of the more-likely-than-not outcomes of the examinations and related tax positions require judgment and can increase or decrease our effective tax rate, as well as impact our operating results. The specific timing of when the resolution of each tax position will be reached is uncertain.

A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:

Balance at January 1, 2007	$	7,686
Additions based on tax positions related to the current year		2,435
Additions for tax positions of prior years		279
Additions for tax positions of acquired subsidiaries		1,192
Reductions for tax positions due to lapse of statutes of limitations		(2,922	)
Settlements		(738	)
Balance at December 31, 2007	$	7,932

Approximately $6,740 and $7,500 of the total amount of unrecognized tax benefits at December 31, 2007 and January 1, 2007, respectively, would affect the effective tax rate, if recognized. The remaining $1,192 as of December 31, 2007 would be adjusted against goodwill. It is reasonably possible that within the next 12 months certain U.S. state and foreign examinations will be resolved or reach the statute of limitations, which could result in a decrease in unrecognized tax benefits of $867. The Company recognizes accrued interest and penalties associated with uncertain tax positions as part of its provision for income taxes. The total amount of accrued interest and penalties at December 31, 2007 and January 1, 2007 was $646 and $614, respectively, and relates to foreign tax matters. The Company has not accrued interest on U.S. unrecognized tax benefits as the Company currently has net operating loss carryforwards that would mitigate any current interest cost. The amount of interest and penalties expensed for 2007 were immaterial.

During 2007, the Company reduced its liability for unrecognized tax benefits by $2,922 upon the expiration of the statute of limitations for certain U.S. Federal income tax positions. In addition, the Company recognized $738 upon the effective settlement of certain foreign income tax positions

The Company files a U.S. federal consolidated income tax return. The U.S. federal statute of limitations remains open for the year 2004 and onward. Years still under examination by foreign tax authorities are years 2001 and forward.

9. Capital Stock

Stock Split—In September 2007, the Company’s Board of Directors declared a two-for-one stock split to be effected by a 100% stock dividend paid on October 16, 2007 to stockholders of record as of October 1, 2007. The stock split has been reflected in the accompanying consolidated financial statements, and all applicable references as to the number of outstanding common shares and per share information have been retroactively adjusted to reflect the stock split as if it occurred at the beginning of the earliest period presented. Stockholders’ equity accounts have been retroactively adjusted to reflect a 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.

Stock Repurchase Program—The Company’s stock repurchase program authorizes both open market and private repurchase transactions of up to $200 million, excluding fees and expenses, of Class A common stock through September 17, 2008. The program authorizes management to repurchase shares opportunistically from time to time, depending on market conditions. During 2007, the Company completed stock repurchases of approximately 3,388,000 shares for $105,360, inclusive of fees and expenses. As of December 31, 2007, the Company had remaining authorization of $94,742 for future stock repurchases. At time of repurchase, shares are returned to the status of authorized and unissued shares. The Company has accounted for the repurchases during 2007 as constructively retired and recorded such repurchases as a reduction of Class A common stock and additional paid-in capital.

Capital Stock—On June 13, 2006, the Company’s stockholders approved an amendment to the Restated Certificate of Incorporation to increase the maximum number of authorized shares of the Company’s capital stock, all classes, from 340,000,000 shares, consisting of (i) 325,000,000 shares of Class A common stock, and (ii) 15,000,000 shares of preferred stock, to 515,000,000 shares, consisting of (x) 500,000,000 shares of Class A common stock, and (y) 15,000,000 shares of preferred stock.

F-16

10. Employee Stock-Based Compensation Plans

On June 7, 2007, the Company’s stockholders approved an amendment to the Company’s Amended and Restated 1999 Incentive Compensation Plan (the “Incentive Plan”) to increase the maximum number of shares of Class A common stock reserved for issuance under the Incentive Plan by an additional 7,000,000 shares from 76,523,160 to 83,523,160 shares of Class A common stock. The Key Employees’ Stock Option Plan , as amended, (“Key Employees Plan”) provides for the grant of up to 15,246,840 stock options to eligible employees and The Non-Employee Directors’ Stock Option Plan (the “Non-Employee Directors’ Plan”) provides for the grant of up to 1,716,000 stock options to eligible directors. Effective June 13, 2006, there were no shares available for future grant under the Key Employees Plan. The Company has issued both stock options and performance stock units under the Incentive Plan and stock options under both the Key Employees Plan and Non-Employee Directors’ Plan. As of December 31, 2007, the Company has 5,704,112 and 8,000 shares available for grant under the Incentive Plan and Non-Employee Directors’ Plan, respectively.

Stock options granted to employees under the Company’s plans have a life of ten years, vest proportionally over four years, unless specified otherwise, and have an exercise price equal to the fair market value of the common stock on the date of grant. Grants to non-employee directors under the Incentive Plan and Non-Employee Directors’ Plan vest proportionally over two years. Stock-based compensation expense relating to stock options is recognized on a straight-line basis over the requisite service period.

During 2007, the Company began to issue performance stock units under the Incentive Plan. The performance stock unit grants have a term of ten years and vesting is contingent on both meeting revenue performance targets and continued service. During 2007, the Company granted performance stock units that cliff vest after three years, principally to executive officers, and performance stock units that vest proportionally over three years to employees other than the executive officers. Stock-based compensation costs for performance stock units that cliff vest are recognized on a straight-line basis and awards that vest proportionally are recognized on a graded-vesting basis over the vesting period based on the most probable outcome of the performance conditions. If the minimum performance targets are not met, no compensation cost is recognized and any recognized compensation cost is reversed.

The Company’s 2004 Employee Stock Purchase Plan (the “Purchase Plan”) provides for the issuance of up to 6,000,000 shares of Class A common stock to eligible employees. The Purchase Plan provides for eligible employees to purchase whole shares of Class A common stock at a price of 90% of the lesser of: (a) the fair market value of a share of Class A common stock on the first date of the purchase period or (b) the fair market value of a share of Class A common stock on the last date of the purchase period. Stock-based compensation expense for the Purchase Plan is recognized over the vesting period of three months on a straight-line basis. No employee can purchase more than $25 worth of stock annually, and no stock can be purchased by any person which would result in the purchaser owning more than five percent or more of the total combined voting power or value of all classes of stock of the Company. As of December 31, 2007, the Company has 3,189,786 shares available for future grants and issuances under the Purchase Plan.

In 2007 and 2006, stock-based compensation costs were $35,916 and $29,934, respectively, and after the related tax benefit, reduced net income by $29,100 and $26,019 in 2007 and 2006, respectively. The allocation of stock-based compensation expense between cost of revenues and selling, general and administrative expenses was as follows for the years ended December 31:

	2007		2006
Cost of revenues	$	17,206	$	13,400
Selling, general and administrative expenses		18,710		16,534
Total stock-based compensation expense	$	35,916	$	29,934

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation for the year ended December 31, 2005:

	2005
Net income, as reported	$	166,266
Add: Stock-based employee compensation expense included in reported net earnings, net of related tax effects		—
Deduct: Total stock-based employee compensation determined using the fair value-based method for all awards, net of related tax effects		17,990
Pro forma net income	$	148,276

F-17

	2005
Earning per share:
Basic-as reported	$	0.61
Basic-pro forma	$	0.54
Diluted-as reported	$	0.57
Diluted-pro forma	$	0.50

Effective April 1, 2007, the Indian government enacted a fringe benefit tax (“FBT”) on the intrinsic value of stock options as of the vesting date that is payable by the Company at time of option exercise. The Company has elected to recover this cost from the employee and withholds the FBT from the employee’s stock option proceeds at the time of exercise before remitting the tax to the Indian government. Since the Company is the primary obligor of this tax obligation, the Company records the FBT as an operating expense and the recovery from the employee is recorded in additional paid-in capital as proceeds from stock issuance. For the year ended December 31, 2007, the Company recorded stock-based FBT expense of $5,922.

In determining the fair value of stock options issued to employees subject to the FBT, the Company must estimate the future stock issuance proceeds, including FBT, at time of grant. The Monte Carlo simulation model is used to estimate the future price of the Company’s stock on the respective vesting dates of stock option grants. Accordingly, effective April 1, 2007, the Company began to segregate its employees into two groups for determining the fair value of stock options at date of grant: employees subject to the FBT and employees not subject to the FBT. In 2007, the fair value of each stock option granted to employees subject to the FBT was estimated at the date of grant using the Monte Carlo simulation model and the fair value of each stock option granted to employees not subject to the FBT was estimated at date of grant using the Black-Scholes option-pricing model. For 2006, the fair value of each stock option was estimated on the date of grant using a Black-Scholes option-pricing model. For the years ended December 31, 2007 and 2006, expected volatility was calculated using implied market volatilities. In addition, the expected term, which represents the period of time, measured from the grant date, that vested options are expected to be outstanding, was derived by incorporating exercise and post-vest termination assumptions, based on historical data, in a Monte Carlo simulation model. For the year ended December 31, 2005, expected volatility was based on historical volatility of the Company’s Class A common stock and the expected term was based on historical employee exercise behavior. The risk-free rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The Company does not pay dividends. Forfeiture assumptions used in amortizing stock-based compensation expense are based on an analysis of historical data.

The fair values of option grants, including the Purchase Plan, were estimated at the date of grant with the following assumptions:

	For the Year Ended December 31,
	2007			2006			2005
Dividend yield		0	%		0	%		0	%
Weighted average volatility factor:
Stock options		33.37	%		36.05	%		44.20	%
Purchase Plan		32.76	%		34.70	%		43.77	%
Weighted average expected life (in years):
Stock options		5.26			5.23			4.00
Purchase Plan		0.25			0.25			0.25
Weighted average risk-free interest rate:
Stock options		4.43	%		4.79	%		3.77	%
Purchase Plan		4.84	%		4.71	%		2.81	%
Weighted average fair value:
Stock options	$	13.32		$	12.93		$	8.26
Purchase Plan	$	6.69		$	5.39		$	4.26

During the year ended December 31, 2007, the Company issued 870,290 shares of Class A common stock under the Purchase Plan with a total vested fair value of approximately $5,823.

A summary of the activity for stock options granted under the Company’s stock-based compensation plans as of December 31, 2007 and changes during the year then ended is presented below:

F-18

	Number of Options		Weighted Average Exercise Price (in dollars)		Weighted Average Remaining Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2007	28,894,716		$	10.28
Granted and assumed through acquisition	4,000,829		$	37.28
Exercised	(5,504,369	)	$	5.85
Cancelled	(607,802	)	$	23.86
Expired	(17,150	)	$	11.44
Outstanding at December 31, 2007	26,766,224		$	14.91	5.93	$	532,943
Vested and expected to vest at December 31, 2007	25,326,796		$	13.87	5.77	$	527,352
Exercisable at December 31, 2007	18,096,625		$	7.27	4.67	$	483,803

As of December 31, 2007, $70,612 of total remaining unrecognized stock-based compensation cost related to stock options is expected to be recognized over the weighted-average remaining requisite service period of 2.45 years. The total intrinsic value of options exercised was $195,363, $156,580 and $186,118 for the years ended December 31, 2007, 2006 and 2005, respectively.

A summary of the activity for performance stock units granted under the Incentive Plan as of December 31, 2007 and changes during the year then ended is presented below:

	Number of Units	Weighted Average Grant Date Fair Value (in dollars)
Outstanding at January 1, 2007	—	$	—
Granted	1,058,257	$	29.36
Vested	—	$	—
Forfeited	—	$	—
Outstanding at December 31, 2007	1,058,257	$	29.36
Exercisable at December 31, 2007	—	$	—

The fair value of performance stock units is determined based on the number of performance stock units granted and the quoted price of the Company’s stock at date of grant. For employees subject to the FBT, the grant date fair value is reduced by the amount of the FBT expected to be recovered by the Company from the employee. Under the Monte Carlo simulation model, the value of the FBT is equal to the FBT tax rate multiplied by the quoted price of the Company’s stock at date of grant. As of December 31, 2007, $16,077 of total remaining unrecognized stock-based compensation cost related to performance stock units is expected to be recognized over the weighted-average remaining requisite service period of three years.

11. Commitments

The Company leases office space and equipment under operating leases, which expire at various dates through the year 2015. 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, 2007 are as follows:

2008	$	51,040
2009		52,824
2010		52,133
2011		47,832
2012		39,005
Thereafter		32,472
Total minimum lease payments	$	275,306

Rental expense totaled $54,475, $24,743 and $17,499 for years ended December 31, 2007, 2006 and 2005, respectively.

F-19

The Company’s current India real estate development program includes planned construction of approximately 4,300,000 square feet of new space. The expanded program, which commenced during the quarter ended March 31, 2007, includes the expenditure of approximately $330,000 through the end of 2009 on land acquisition, facilities construction and furnishings to build new state-of-the-art IT development centers in regions primarily designated as Special Economic Zones located in India. As of December 31, 2007, the Company had outstanding fixed capital commitments of $126,658 related to our India development center expansion program.

12. Contingencies

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 business, 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 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 the Company that exceed available insurance coverage or changes in the Company’s insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, would have a material adverse effect on the Company’s business, results of operations and financial condition.

13. Segment Information

The Company’s reportable segments are: Financial Services, which includes customers providing banking / transaction processing, capital markets and insurance services; Healthcare, which includes healthcare providers and payers as well as life sciences customers; Manufacturing/Retail/Logistics, which includes manufacturers, retailers, travel and other hospitality customers, as well as customers providing logistics services; and Other, which is an aggregation of industry segments which, individually, are less than 10% of consolidated revenues and segment operating profit. The Other reportable segment includes media and information services, communications, and high technology operating segments. The Company’s sales managers, account executives, account managers and project teams are aligned in accordance with the specific industries they serve.

The Company’s chief operating decision maker evaluates the Company’s performance and allocates resources based on segment revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as a per seat charge for use of the Company’s development centers. Certain expenses, such as general and administrative, and a portion of depreciation and amortization, are not specifically allocated to specific segments as management does not believe it is practical to allocate such costs to individual segments because they are not directly attributable to any specific segment. Further, stock-based compensation expense and the related stock-based Indian fringe benefit tax expense are not allocated to individual segments in internal management reports used by the chief operating decision maker. Accordingly, these expenses are separately disclosed as “unallocated” and adjusted only against the total income from operations of the Company. Additionally, management has determined that it is not practical to allocate identifiable assets, by segment, since such assets are used interchangeably among the segments.

Revenues from external customers and segment operating profit, before unallocated expenses, for the Financial Services, Healthcare, Manufacturing/Retail/Logistics, and Other reportable segments were as follows for the years ended December 31:

	2007		2006		2005
Revenues:
Financial Services	$	1,001,420	$	679,901	$	440,958
Healthcare		504,504		330,860		176,102
Manufacturing/Retail/Logistics		320,116		209,703		152,536
Other		309,537		203,803		116,234
Total revenue	$	2,135,577	$	1,424,267	$	885,830
Segment Operating Profit:

F-20

	2007		2006		2005
Financial Services	$	355,696	$	254,115	$	153,542
Healthcare		199,791		135,374		71,226
Manufacturing/Retail/Logistics		108,480		73,443		46,210
Other		111,319		63,657		39,100
Total segment operating profit		775,286		526,589		310,078
Less—unallocated costs(1)		393,764		267,646		132,366
Less—other costs(2)		—		—		96
Income from operations	$	381,522	$	258,943	$	177,616

(1) Includes $35,916 of stock-based compensation expense and $5,922 of stock-based Indian fringe benefit tax expense for the year ended December 31, 2007 and $29,934 of stock-based compensation expense for the year ended December 31 2006. Results for 2005 do not include such expenses.

(2) Represents costs related to the wind-down of the Company’s development facility in Limerick, Ireland. The costs associated with the closure of this facility have been disclosed separately since these costs were not allocated to a reportable segment in management’s internal reporting. All costs have been paid as of December 31, 2005.

Geographic Area Information

Revenue and long-lived assets, by geographic area, are as follows:

	North America(2)		Europe(3)		Asia(5)		Total
2007
Revenues(1)	$	1,768,763	$	342,866	$	23,948	$	2,135,577
Long-lived assets(4)	$	12,860	$	1,873	$	341,314	$	356,047
2006
Revenues(1)	$	1,227,641	$	183,868	$	12,758	$	1,424,267
Long-lived assets(4)	$	9,224	$	1,392	$	209,538	$	220,154
2005
Revenues(1)	$	772,775	$	103,707	$	9,348	$	885,830
Long-lived assets(4)	$	8,151	$	281	$	138,550	$	146,982

⁽¹⁾ Revenues are attributed to regions based upon customer location.

⁽²⁾ Substantially all relates to operations in the United States.

⁽³⁾ Includes revenue from operations in United Kingdom of $221,029, $134,926 and $80,834 in 2007, 2006 and 2005, respectively.

⁽⁴⁾ Long-lived assets include property and equipment net of accumulated depreciation and amortization.

⁽⁵⁾ Substantially all of these long-lived assets relate to the Company’s operations in India.

14. Quarterly Financial Data (Unaudited)

Summarized quarterly results for the two years ended December 31, 2007 are as follows:

	Three Months Ended								Full Year
2007	March 31		June 30		September 30		December 31
Revenue	$	460,270	$	516,514	$	558,837	$	599,956	$	2,135,577
Income from Operations	$	83,602	$	90,671	$	101,130	$	106,119	$	381,522
Net Income	$	75,446	$	82,277	$	96,154	$	96,256	$	350,133
Basic EPS(1)	$	0.26	$	0.29	$	0.33	$	0.33	$	1.22	(2)
Diluted EPS(1)	$	0.25	$	0.27	$	0.32	$	0.32	$	1.15	(2)
2006	March 31		June 30		September 30		December 31		Full Year
Revenue	$	285,479	$	336,836	$	377,522	$	424,430	$	1,424,267
Income from Operations	$	53,156	$	60,671	$	68,764	$	76,352	$	258,943
Net Income	$	47,164	$	55,071	$	61,027	$	69,533	$	232,795
Basic EPS(1)	$	0.17	$	0.20	$	0.22	$	0.24	$	0.83
Diluted EPS(1)	$	0.16	$	0.18	$	0.20	$	0.23	$	0.77

⁽¹⁾ Reflects a two-for-one stock split effected by a 100% stock dividend paid on October 16, 2007.

⁽²⁾ The sum of the quarterly basic and diluted EPS for each of the four quarters may not equal the EPS for the year due to rounding.

F-21

Cognizant Technology Solutions Corporation

Valuation and Qualifying Accounts

For the Years Ended December 31, 2007, 2006 and 2005

(Dollars in Thousands)

Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts		Deductions/ Other		Balance at End of Period
Accounts receivable allowance for doubtful accounts:
2007	$	3,719	$	3,560	$	216	$	1,156	$	6,339
2006	$	2,325	$	1,507	$	61	$	174	$	3,719
2005	$	1,560	$	1,626	$	124	$	985	$	2,325
Warranty accrual:
2007	$	2,772	$	4,824	$	—	$	3,362	$	4,234
2006	$	1,747	$	3,142	$	—	$	2,117	$	2,772
2005	$	1,216	$	2,020	$	—	$	1,489	$	1,747

F-22

EX-10.21

Exhibit 10.21

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

by and among

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION,

COGNIZANT TECHNOLOGY CORPORATION,

and

MARKETRX, INC.,

and

Jaswinder S. Chadha as the Stockholder Representative

Dated as of October 18, 2007

TABLE OF CONTENTS

		Page
ARTICLE I        THE MERGER		2
1.1	The Merger	2
1.2	Closing; Effective Time	2
1.3	Effects of the Merger	2
1.4	Further Assurances	3
ARTICLE II        MERGER CONSIDERATION AND CONVERSION OF SECURITIES		3
2.1	Merger Consideration	3
2.2	Effect on Company Capital Stock	5
2.3	Effect on Company Options and Series C Preferred Warrants	6
2.4	Closing Payments	7
2.5	Exchange Procedures and Payment of Merger Consideration	9
2.6	Schedule of Merger Consideration	11
2.7	Conversion of Buyer Subsidiary Capital Stock, Treasury Stock and Stock Owned by Buyer	11
2.8	Dissenting Shares	12
2.9	No Further Ownership Rights	12
2.10	Lost Certificates	12
2.11	No Further Transfer of Shares	12
ARTICLE III        REPRESENTATIONS AND WARRANTIES OF THE COMPANY		13
3.1	Organization, Qualification and Corporate Power	13
3.2	Capitalization	13
3.3	Authorization of Transaction	15
3.4	Noncontravention	16
3.5	Subsidiaries	16
3.6	Financial Statements	17
3.7	Absence of Certain Changes	18
3.8	Undisclosed Liabilities	18
3.9	Tax Matters	18
3.10	Assets	21
3.11	Owned Real Property	21

- i -

3.12	Real Property Leases	21
3.13	Intellectual Property	23
3.14	Contracts	26
3.15	Accounts Receivable and Unbilled Receivables	29
3.16	Powers of Attorney	30
3.17	Insurance	30
3.18	Litigation	30
3.19	Warranties	30
3.20	Employees	31
3.21	Employee Benefits	33
3.22	Environmental Matters	35
3.23	Legal Compliance	36
3.24	Customers and Suppliers	36
3.25	Permits	36
3.26	Certain Business Relationships With Affiliates	37
3.27	Brokers’ Fees	37
3.28	Books and Records	37
3.29	Disclosure	37
3.30	Backlog	38
3.31	Absence of Certain Changes or Events	38
3.32	Related Party Transactions	40
3.33	No Illegal Payments	40
3.34	Government Contracts	40
3.35	Conditions Affecting the Company and the Subsidiaries	40
3.36	Stockholder Approval	40
ARTICLE IV        REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE BUYER SUBSIDIARY		41
4.1	Organization and Corporate Power	41
4.2	Authorization of Transaction	41
4.3	Noncontravention	41
4.4	Brokers’ Fees	42
4.5	Litigation	42
4.6	Payment of Merger Consideration	42

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4.7	Buyer Subsidiary	42
4.8	Disclosure	42
ARTICLE V        COVENANTS		42
5.1	Closing Efforts	42
5.2	Governmental and Third-Party Notices and Consents	43
5.3	Stockholder Approval	44
5.4	Operation of Business	44
5.5	Negative Covenants	45
5.6	Access to Information	47
5.7	Notification of Certain Matters	47
5.8	Exclusivity	48
5.9	Expenses	48
5.10	Employees	48
5.11	Tax Matters	48
5.12	Company Plans	50
5.13	Employee Matters	51
5.14	Severance, Other Arrangements and Prior Service	51
ARTICLE VI        CONDITIONS TO CONSUMMATION OF MERGER		52
6.1	Conditions to Each Party’s Obligations	52
6.2	Conditions to Obligations of the Buyer and the Buyer Subsidiary	52
6.3	Conditions to Obligations of the Company	56
ARTICLE VII        INDEMNIFICATION		57
7.1	Indemnification by the Indemnifying Stockholders	57
7.2	Indemnification by the Buyer	57
7.3	Indemnification Claims	57
7.4	Survival of Representations and Warranties	59
7.5	Limitations	60
7.6	Stockholder Representative and Adoption of Provisions	61
7.7	Tax Indemnification	62
7.8	Procedures Relating to Indemnification of Tax Claims	62
7.9	Tax Treatment of Indemnification Payments	63
ARTICLE VIII        TERMINATION		64
8.1	Termination of Agreement	64

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8.2	Effect of Termination	64
8.3	Remedies	65
ARTICLE IX        DEFINITIONS		65
9.1	Definitions	65
9.2	Other Defined Terms	75
ARTICLE X        MISCELLANEOUS		76
10.1	Press Releases and Announcements	76
10.2	No Third Party Beneficiaries	76
10.3	Entire Agreement	76
10.4	Succession and Assignment	77
10.5	Counterparts and Facsimile Signature	77
10.6	Headings	77
10.7	Notices	77
10.8	Governing Law	78
10.9	Amendments and Waivers	78
10.10	Severability	79
10.11	Submission to Jurisdiction	79
10.12	Construction	79
Schedule A - Merger Consideration
Schedule B - Indebtedness
Exhibit A-1 - Certificate of Assistant Secretary of the Company
Exhibit A-2 Opinion of Counsel
Exhibit B - Form of Net Assets Statement
Exhibit C - Escrow Agreement
Exhibit D - Exchange Agreement
Exhibit E - Transmittal Letter
Exhibit F - Cancellation Acknowledgement
Exhibit G - Standard Proprietary Information Agreement
Exhibit H - Noncompetition Agreement

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (“Agreement”), dated as of October 18, 2007, is made by and among Cognizant Technology Solutions Corporation, a Delaware corporation (the “Buyer”), Cognizant Technology Corporation, a Delaware corporation and a wholly-owned subsidiary of the Buyer (the “Buyer Subsidiary”), marketRx, Inc., a Delaware corporation (the “Company”), and Jaswinder S. Chadha, solely in his capacity as representative of the Company Stockholders pursuant to the terms of this Agreement (the “Stockholder Representative”). Capitalized terms used in this Agreement are defined in ARTICLE IX or in the applicable Section of this Agreement to which reference is made in ARTICLE IX.

RECITALS:

WHEREAS, this Agreement contemplates a merger of the Buyer Subsidiary into the Company and in such merger, the Company Stockholders will receive cash in exchange for their capital stock of the Company;

WHEREAS, the respective Boards of Directors of the Buyer, the Buyer Subsidiary, the Company and the Subsidiaries deem it advisable and in the best interests of their respective stockholders to consummate the business combination provided for herein;

WHEREAS, the Board of Directors of the Company has recommended to the Company Stockholders the adoption of this Agreement;

WHEREAS, each of the Board of Directors of the Subsidiaries has recommended the adoption of this Agreement to the Company;

WHEREAS, the Buyer, as the sole stockholder of the Buyer Subsidiary, has adopted this Agreement; and

WHEREAS, immediately following the execution and delivery of this Agreement, certain of Company Stockholders, including WestBridge Ventures I, LLC, WestBridge Ventures II, LLC, WestBridge Ventures Co-Investment I, LLC, CBD Holdings, Richard S. Braddock, Incept LLC and the Key Management Stockholders, and each of their respective Affiliates (collectively, the “Major Investors”) are executing and adopting a stockholder consent approving this Agreement and the transactions set forth herein, including the Merger (the “Stockholder Consent”) and the Stockholder Consent shall constitute the Requisite Stockholder Approval; and

WHEREAS, immediately following the execution and delivery of this Agreement, the Buyer, as the sole stockholder of the Buyer Subsidiary, will execute and deliver to the Buyer Subsidiary an Action by Written Consent of Sole Stockholder, pursuant to which the Buyer will adopt this Agreement pursuant to and in accordance with the applicable provisions of Delaware Law and the Buyer Subsidiary’s Certificate of Incorporation and By-laws.

NOW, THEREFORE, in consideration of the foregoing premises and the respective representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the Buyer, the Buyer Subsidiary, the Stockholder Representative, the Company and each of the Subsidiaries agree as follows:

ARTICLE I

THE MERGER

1.1 The Merger. Subject to the terms and conditions of this Agreement and the Certificate of Merger in such form as is required by the relevant provisions of the Delaware General Corporation Law (the “DGCL”), at the Effective Time, the Buyer Subsidiary shall be merged with and into the Company and the separate corporate existence of the Buyer Subsidiary shall thereupon cease (the “Merger”). As a result of the Merger, the outstanding shares of capital stock of the Buyer Subsidiary and the Company shall be converted or canceled in the manner provided in ARTICLE II of this Agreement, the separate corporate existence of the Buyer Subsidiary shall cease and the Company shall be the surviving corporation following the Merger. The Company, as the surviving corporation following the Merger, is sometimes referred to herein as the “Surviving Corporation”.

1.2 Closing; Effective Time. The closing of the Merger (the “Closing”) shall take place at the offices of Morgan, Lewis & Bockius LLP, Princeton, New Jersey, at 10:00 a.m. on a date to be specified by the Parties, which shall be no later than two (2) Business Days after satisfaction (or waiver as provided herein) of the conditions set forth in ARTICLE IV (other than those conditions that by their nature will be satisfied at the Closing), unless another time, date and/or place is agreed to in writing by the Parties. The date upon which the Closing occurs is herein referred to as the “Closing Date”. Simultaneously with the Closing, the Company as the surviving corporation shall file the Certificate of Merger with the Secretary of State of the State of Delaware as is required by, and executed in accordance with, the relevant provisions of the DGCL. The Merger shall become effective, pursuant to the Certificate of Merger, at such time as the Certificate of Merger is so filed, which time is hereinafter referred to as the “Effective Time”.

1.3 Effects of the Merger.

(a) At and after the Effective Time, the Merger shall have the effects specified in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all of the property, rights, privileges, powers, immunities, purposes and franchises of each of the Company, the Subsidiaries and the Buyer Subsidiary shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company, the Subsidiaries and the Buyer Subsidiary shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation, all without act or deed.

(b) At the Effective Time, the Certificate of Incorporation of the Company shall be amended and restated in its entirety to be identical to the Certificate of Incorporation of the Buyer Subsidiary as in effect immediately prior to the Effective Time, except that Article I of the Certificate of Incorporation shall read: “The name of this corporation is marketRx, Inc.”. The Buyer may elect, in its sole discretion, to use a different name for the Surviving Corporation. As so amended and restated, the Certificate of Incorporation of the Company shall be the Certificate of Incorporation of the Surviving Corporation, until amended thereafter in accordance with applicable Law.

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(c) At the Effective Time, the by-laws of the Buyer Subsidiary as in effect immediately prior to the Effective Time shall be the by-laws of the Surviving Corporation until amended thereafter in accordance with applicable Law.

(d) At the Effective Time, each of the directors and officers of the Buyer Subsidiary immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation, each to hold office until their respective death, permanent disability, resignation or removal or until his or her respective successor is duly elected and qualified, all in accordance with the Certificate of Incorporation and by-laws of the Surviving Corporation and applicable Law.

1.4 Further Assurances. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or similar instruments are necessary or proper to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation its right, title and interest in, to or under any of the rights, privileges, powers, franchises, properties, assets, liabilities or other obligations of either of the Buyer Subsidiary, the Company, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either the Buyer Subsidiary or the Company, all such deeds, bills of sale, assignments and other similar instruments as may be necessary, desirable or proper to vest, perfect or confirm the Surviving Corporation’s right, title and interest in, to and under any of the rights, privileges, powers, franchises, properties, assets, liabilities or other obligations of either the Buyer Subsidiary or the Company.

ARTICLE II

MERGER CONSIDERATION AND CONVERSION OF SECURITIES

2.1 Merger Consideration.

(a) Estimated Net Assets. On or before the third Business Day prior to the Closing Date, the Company shall deliver to the Buyer a statement setting forth the Company’s good faith estimate of the Net Assets (“Estimated Net Assets”). The amount, if any, by which $5,778,000 exceeds the Estimated Net Assets is referred to herein as the “Initial Deficiency”, and the amount, if any, by which the Estimated Net Assets exceeds $5,778,000 is referred to herein as the “Initial Surplus”. On the Closing Date, if there is an Initial Deficiency, the Merger Consideration shall be reduced by the amount of the Initial Deficiency pursuant to Section 2.1(b). On the Closing Date, if there is an Initial Surplus, then such amount shall be subject to the final settlement of the Final Net Assets pursuant to Section 2.1(c).

(b) General. Subject to the post closing adjustment set forth in Section 2.1(c) hereof, the aggregate amount to be paid by the Buyer on the Closing Date with respect to all of the outstanding shares of capital stock of the Company and any options or other rights to acquire any securities of the Company (including Common Stock, Preferred Stock and Vested Company Options) shall equal (such amount, the “Merger Consideration”) $135,000,000; provided, however, the amount actually payable to each Holder on the Closing Date is subject to reduction pursuant to (i) Section 2.1(a) with respect to an Initial Deficiency, (ii) Section 2.4(a)(i) with respect to the Indemnity Escrow Amount, (iii) Section 2.4(a)(ii) with respect to the Stockholder

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Representative Escrow Amount, (iv) the satisfaction of all outstanding Indebtedness as described in 2.4(b) below and as set forth on Schedule B; (v) Section 2.5(g) with respect to the Merger Compensation Payments, (vi) Section 5.9 with respect to the Company’s costs and expenses (including legal and accounting fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby, and (vii) the terms of this Agreement. Pursuant to Section 2.6, the Merger Consideration shall be paid to each Company Stockholder as set forth on Schedule A, which Schedule A, the Parties acknowledge will be updated not more than two (2) Business Days prior to the Closing Date (hereafter, as so updated, “Schedule A”).

(c) Net Assets Adjustment. The Merger Consideration shall be subject to adjustment on a dollar for dollar basis as set forth in this Section 2.1(c).

(i) Net Assets Statement; Buyer’s Review. No later than seventy five (75) days following the Closing Date, the Buyer shall prepare and deliver to the Stockholder Representative (or its designee) the Net Assets Statement setting forth its calculation of the actual amount of the Net Assets as of the Closing Date calculated in accordance with GAAP consistently applied. The Stockholder Representative shall have a period of thirty (30) days from the receipt of the Net Assets Statement (the “Review Period”) to review the Net Assets Statement, during which Review Period the Buyer shall, upon reasonable request and during normal business hours, make available to the Stockholder Representative all relevant books and records in the Buyer’s possession or control and all personnel with knowledge of information relevant to the determination of the Net Assets as of the Closing Date. If as a result of such review, the Stockholder Representative disagrees with the Net Assets Statement, the Stockholder Representative shall deliver to the Buyer a written notice of disagreement (a “Net Assets Dispute Notice”) prior to the expiration of the Review Period. Any Net Assets Dispute Notice shall (i) specify in reasonable detail the nature and amount of any disagreement so asserted and (ii) include a calculation by the Stockholder Representative of the Net Assets as of the Closing Date.

(ii) Acceptance; Failure to Respond. If the Stockholder Representative does not disagree with the Net Assets Statement, the Stockholder Representative shall deliver a written statement to the Buyer within the Review Period accepting the Net Assets Statement (an “Acceptance Notice”), in which case the Buyer’s determination of the Net Assets as of the Closing Date as shown on the Net Assets Statement shall be final and binding on the parties, effective as of the date on which the Buyer receives the Acceptance Notice. If the Stockholder Representative does not deliver a Net Assets Dispute Notice or an Acceptance Notice within the Review Period, then the Buyer’s determination of the Net Assets as of the Closing Date as shown on the Net Assets Statement shall be final and binding on the parties, effective as of the first Business Day after the expiration of the Review Period.

(iii) Resolution of Net Assets Disputes. If the Stockholder Representative delivers a Net Assets Dispute Notice to the Buyer in a timely manner, then the Buyer and the Stockholder Representative shall attempt in good faith to resolve such dispute by negotiation between representatives who have authority to settle the dispute within thirty (30) days after delivery of the Net Assets Dispute Notice. If the Buyer and the Stockholder Representative cannot reach agreement within such thirty (30) day period (or such longer period as they may mutually agree), then the Buyer and the Stockholder Representative shall promptly

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refer the dispute to either Ernst & Young LLP or KPMG LLP (whichever shall be reasonably acceptable to both the Buyer and the Stockholder Representative) (the “CPA Firm”). The CPA Firm shall work to resolve such dispute promptly, based solely on written submissions by the Buyer and the Stockholder Representative, and, to the extent practicable, within thirty (30) days from the date the dispute is submitted to the CPA Firm. Any item not specifically referred to the CPA Firm for evaluation shall be deemed final and binding on the parties. The CPA Firm shall determine the Net Assets in accordance with GAAP consistently applied by selecting with respect to each item in dispute an amount between the Buyer’s position, as set forth in the Net Assets Statement, and the Stockholder Representative’s position, as set forth in the Net Assets Dispute Notice, or equal to the Buyer’s position or the Stockholder Representative’s position. The CPA Firm shall deliver to both the Buyer and the Stockholder Representative a written opinion setting forth the CPA Firm’s final determination of the Net Assets calculated in accordance with the provisions of this Agreement. The determination of the CPA Firm shall be final and binding on the Buyer and the Stockholder Representative, effective as of the date the CPA Firm’s written opinion is received by the Buyer and the Stockholder Representative. The fees, costs and expenses of the CPA Firm shall be borne equally by the Buyer and the Stockholder Representative. The final determination of the Net Assets, either pursuant to Section 2.1(c)(ii) or this Section 2.1(c)(iii) shall be referred to as the “Final Net Assets.”

(iv) Final Settlement. Within ten (10) days of the determination of the Final Net Assets, (i) if the Final Net Assets is less than the Estimated Net Assets and also less than $5,778,000, then, from the Indemnity Escrow Fund, without giving effect to any limitations set forth in Section 7.5(a) of this Agreement, Stockholder Representative shall make an adjustment payment to the Buyer equal to the difference between the Final Net Assets and the lesser of $5,778,000 or the Estimated Net Assets, (ii) if the Final Net Assets is less than $5,778,000, but greater than the Estimated Net Assets, then the Buyer shall make an adjustment payment to Company Stockholders through the Exchange Agent equal to the difference between the Final Net Assets and the Estimated Net Assets, and (iii) if the Final Net Assets is greater than $5,778,000, then the Buyer shall make an adjustment payment to Company Stockholders through the Exchange Agent equal to the difference between the Final Net Assets and the lesser of Estimated Net Assets or $5,778,000. Any such payments shall include interest at the applicable Federal Funds Rate.

(v) Calculation of Net Assets, Estimated Net Assets and Final Net Assets. Net Assets, Estimated Net Assets and Final Net Assets shall all be calculated, prepared or determined as of immediately prior to the Merger, in accordance with the definition of Net Assets set forth in ARTICLE IX.

2.2 Effect on Company Capital Stock.

(a) Each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common Stock of the Company (including all rights attendant thereto) issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares) shall, by virtue of the Merger and without any action on the part of the Buyer, the Company or the Holder thereof, be automatically converted into the right to receive an amount of cash equal to the amount set forth next to such Holder’s name on Schedule A, all as has been calculated in accordance with the Company’s Charter Documents.

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2.3 Effect on Company Options and Series C Preferred Warrants.

(a) After the date of this Agreement and prior to the Effective Time, the Board of Directors of the Company shall cause each outstanding Company Option that is listed on Section 2.3 of the Disclosure Schedule to become vested and exercisable to the extent set forth on such schedule. Upon the effectiveness of such action by the Board of Directors of the Company, the vested portion of each such Company Options that is listed on Section 2.3 of the Disclosure Schedule shall be a “Vested Company Option.”

(b) At the Effective Time, each Vested Company Option that is outstanding immediately prior to the Effective Time, without any payment therefor except as otherwise provided in this Section 2.3, shall be automatically cancelled in accordance with its terms, and, prior to the Effective Time, the Board of Directors of the Company shall adopt appropriate resolutions and take all other actions necessary to terminate the portion of the Company Stock Plans and individual option agreements outside of the Company Stock Plans attributable to the Vested Company Options, as of the Effective Time. Each Vested Company Option, to the extent unexercised as of the Effective Time, shall thereafter no longer be exercisable but shall entitle each Holder of a Vested Company Option, in cancellation and settlement therefor, to a payment in cash, at the Effective Time, equal to the product of (i) the excess, if any, of the Merger Consideration per share of Common Stock underlying such Vested Company Option over the exercise price per share of Common Stock of such Vested Company Option, multiplied by (ii) the total number of vested shares of Common Stock as of the Effective Time subject to such Vested Company Option immediately prior to its cancellation (such payment to be net or withholding Taxes and without interest). Such payment shall be made at the same time as Company Stockholders receive the Merger Consideration, and if any Holder of a Vested Company Option is entitled to any portion of the Merger Consideration, such Holder shall deliver to the Company, prior to the Effective Time as a condition to any payment under this Section 2.3, documents evidencing the surrender of such Vested Company Options and release of claims related thereto in form and substance reasonably satisfactory to the Company and the Buyer.

(c) At the Effective Time, the portion of each Company Option that is not vested in accordance with Section 2.3(a) above, and any portion of each Company Option that becomes vested and exercisable after the Effective Time (the applicable portion of each such Company Option is referred to as an “Unvested Company Option”) and the portion of each Company Stock Plan and the individual option agreements outside of the Company Stock Plans attributable to the Unvested Company Options, if any, shall be assumed by the Buyer in a transaction described in Sections 409A or 424(a), as applicable, of the Code. Each Unvested Company Option so assumed by the Buyer under this Agreement will continue to have, and be subject to, the same terms and conditions of such Unvested Company Option immediately prior to the Effective Time, except that (i) each Unvested Company Option will be exchanged and converted into an option to purchase shares of common stock of the Buyer (“Buyer Common Stock”) in accordance with the applicable requirements of Sections 409A and 424 of the Code and the regulations promulgated thereunder. As soon as practicable after the Effective Time, the Buyer shall, or shall cause the Surviving Corporation to, deliver to the holders of Unvested Company Options, notices describing the conversion of such Unvested Company Options, and the agreements evidencing the Unvested Company Options shall continue in effect on the same

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terms and conditions. The Buyer shall comply with the terms of all such Unvested Company Options. Prior to the Effective Time, the Buyer shall reserve for issuance the number of shares of Buyer Common Stock necessary to satisfy the Buyer’s obligations under this Section 2.3. As soon as practicable after the Effective Time, provided, however no later than fifteen (15) days after the Effective Time, the Buyer shall file a registration statement or statements on Form S-8 (or any successor form) with respect to the shares of Buyer Common Stock subject to Unvested Company Options assumed by the Buyer pursuant to this Agreement in the event such shares are not already covered by an effective registration statement.

(d) Each Series C Preferred Warrant that is outstanding immediately prior to the Effective Time, shall, by virtue of the Merger and without any action on the part of the Buyer, the Company or the Holder thereof, be cancelled and converted into the right to receive a cash payment from the Merger Consideration equal to (i) the amount of cash to be paid to each Holder for each share of Series C Preferred Stock pursuant to Section 2.2(a) of this Agreement multiplied by (ii) the number of shares of Series C Preferred Stock issuable upon the net exercise of such Series C Preferred Warrant. Prior to the Effective Time, the Company shall take all actions that are reasonably necessary and appropriate to provide for such cancellation and conversion (or exercise) as of the Effective Time. In addition, each holder of Series C Preferred Warrant, for purposes of the applicable exchange procedures, shall be treated as a Participating Preferred Holder in accordance with Section 2.5(b) of this Agreement.

(e) Prior to the Effective Time, the Buyer and the Company shall take all such steps as may be required to cause any acquisitions of Buyer equity securities (including derivative securities with respect to any Buyer equity securities) and dispositions of Company equity securities (including derivative securities with respect to any Company equity securities) resulting from the transactions contemplated by this Agreement by each individual who is anticipated to be subject to the reporting requirements of Section 16(a) of the Exchange Act, with respect to the Buyer, to be exempt under Rule 16b-3 promulgated under the Exchange Act.

2.4 Closing Payments. At the Closing, the Buyer shall pay or cause to be paid the following amounts by wire transfers of immediately available funds:

(a) Escrow Amounts.

(i) Indemnity Escrow Amounts. At the Closing, a portion of the Merger Consideration in an amount equal to the Indemnity Escrow Amount shall be deposited by the Buyer with the escrow agent (the “Escrow Agent”) designated in the Escrow Agreement, substantially in the form of Exhibit C hereto, to be entered into at the Closing by the Buyer, the Company, the Stockholder Representative and the Escrow Agent. At any time, the amount of cash held by the Escrow Agent related to the Indemnity Escrow Amount, together with any proceeds thereon (which shall be apportioned pursuant to the terms of the Escrow Agreement), shall at such time constitute the “Indemnity Escrow Fund” and shall be used to satisfy Damages of an Indemnified Party pursuant to ARTICLE VII and to satisfy any payment to the Buyer pursuant to Section 2.1(c)(iv)(i). The Escrow Agreement sets forth the terms upon which disbursements shall be made by the Escrow Agent. Except as described below with respect to the portion of the Indemnity Escrow attributable to the Merger Compensation Payments, the Indemnity Escrow Fund shall be held in a separate trust fund and shall not be subject to any lien,

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attachment, trustee process or any other judicial process of any creditor of any Person. The Buyer shall cause the portion of the Indemnity Escrow Fund attributable to the Merger Compensation Payments (and any interest with respect thereto) to be structured in a manner so that under applicable tax law, such amount is not subject to income tax with respect to the Company Stockholders until distribution is made in accordance with the applicable terms of the Escrow Agreement. The Buyer shall cause such structure to be reflected in the terms of the Escrow Agreement. In addition, any amount to be paid from the Indemnity Escrow Fund attributable to the Merger Compensation Payments (and any interest with respect thereto) shall be administered and interpreted in accordance with Section 409A of the Code, and if required to avoid adverse consequences under Section 409A of the Code, all amounts then held in the Indemnity Escrow Fund attributable to the Merger Compensation Payments (and any interest with respect thereto) shall be distributed not later than five years following the Closing Date.

(ii) Stockholder Representative Escrow Amounts. At the Closing, a portion of the Merger Consideration in an amount equal to the Stockholder Representative Escrow Amount shall be deposited by the Buyer for a period of two (2) years with the Escrow Agent pursuant to the Escrow Agreement. At any time, such amount of cash held by the Escrow Agent, together with any proceeds thereon (which shall be apportioned pursuant to the terms of the Escrow Agreement), shall at all times constitute the “Stockholder Representative Escrow Funds” and shall be used to satisfy all costs and expenses of the Stockholder Representative pursuant to Section 7.5. Except as described below with respect to the portion of the Stockholder Representative Escrow Funds attributable to the Merger Compensation Payments, the Stockholder Representative Escrow Funds shall be held in a separate trust fund and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any Person. The Buyer shall cause the portion of the Stockholder Representative Escrow Funds attributable to the Merger Compensation Payments (and any interest with respect thereto) to be structured in a manner so that under applicable tax law, such amount is not subject to income tax with respect to the Company Stockholders until distribution is made in accordance with the applicable terms of the Transmittal Letter. The Company shall cause such structure to be reflected in the terms of the Transmittal Letter. In addition, any amount to be paid from the Stockholder Representative Escrow Funds attributable to the Merger Compensation Payments (and any interest with respect thereto) shall be administered and interpreted in accordance with Section 409A of the Code, and if required to avoid adverse consequences under Section 409A of the Code, all amounts then held in the Stockholder Representative Escrow Funds attributable to the Merger Compensation Payments (and any interest with respect thereto) shall be distributed not later than five years following the Closing Date.

(b) Payoff of Indebtedness. Prior to the Closing, the Company shall pay the full amounts due in satisfaction of all outstanding Indebtedness, as set forth on Schedule B.

(c) Remaining Merger Consideration. At the Closing, the Buyer shall deposit, or shall cause to be deposited, with American Stock Transfer & Trust Company or such other bank or trust company as may be designated by the Buyer and reasonably acceptable to the Company (the “Exchange Agent”) for the benefit of the Holders, the aggregate amount of the Merger Consideration (such Merger Consideration, together with any interest with respect thereto, being hereinafter referred to as the “Exchange Fund”) less the Indemnity Escrow Amount deposited with the Escrow Agent pursuant to Section 2.4(a)(i), less the Stockholder

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Representative Escrow Amount deposited with the Escrow Agent pursuant to Section 2.4(a)(a)(ii) and any other adjustments to the Merger Consideration required under this Agreement. The Exchange Agent shall, pursuant to irrevocable instructions set forth in the Exchange Agent Agreement (the “Exchange Agreement”) substantially in the form of Exhibit D hereto, deliver the cash out of the Exchange Fund in exchange for the outstanding Company Securities. The Exchange Fund shall be held as a trust fund and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any Person. Except as contemplated by this Section 2.4(c), the Exchange Fund shall not be used for any other purpose.

2.5 Exchange Procedures and Payment of Merger Consideration. The Merger Consideration shall be payable as follows:

(a) Exchange Procedures. As promptly as practicable after the Effective Time, the Buyer shall cause the Exchange Agent to mail to each Holder of stock certificates, options or other securities which, immediately prior to the Effective Time represented outstanding Company Securities (collectively, the “Certificates”) (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent), substantially in the form attached hereto as Exhibit E (the “Transmittal Letter”), (ii) counterpart signature pages to the Escrow Agreement, (iii) in the case of a Holder of a Vested Company Option, a duly executed cancellation acknowledgement (a “Cancellation Acknowledgement”), substantially in the form attached hereto as Exhibit F and (iv) in the case of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common Stock instructions for use in effecting the surrender of the Certificates in exchange for cash, in each case to the extent the Company has not previously received such documents duly executed by the applicable Holder. Upon surrender to the Exchange Agent of a Certificate for cancellation, together with such Transmittal Letter, Escrow Agreement and the Cancellation Acknowledgement, to the extent applicable (in each case to the extent the Company has not previously received such documents duly executed by the applicable Holder), each duly executed, and such other documents as may be reasonably required pursuant to such instructions (collectively, the “Holder Documents”), the Holder of such Certificate shall be entitled to receive in exchange therefor an amount of cash which such Holder has the right to receive in respect of the Company Securities formerly represented by such Certificates, and the Certificates so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of a Company Security which is not registered in the transfer records of the Company, the proper amount of cash may be paid to a transferee if the Certificate representing such Company Security is presented to the Exchange Agent, accompanied by such documents reasonably required to evidence and effect such transfer and by reasonable evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.5(a), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash to which such Holder is entitled pursuant to the terms of this Agreement.

(b) Exchange of Preferred Stock. Regarding Holders of Preferred Stock issued and outstanding as of the Effective Time (each, a “Participating Preferred Holder”), as soon as practicable after receipt by Exchange Agent of a Participating Preferred Holder’s Certificates and applicable Holder Documents executed and delivered in accordance with this Agreement, Exchange Agent shall deliver to that Participating Preferred Holder the amount of

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cash due to such Participating Preferred Holder for each share of Preferred Stock held by such Participating Preferred Holder as of the Effective Time as determined in accordance with the applicable provisions of Section 2.2 (less such Participating Preferred Holder’s portion of the Indemnity Escrow Fund and Stockholder Representative Escrow Funds).

(c) Exchange of Common Stock. Regarding Holders of Common Stock issued and outstanding as of the Effective Time (each, a “Participating Common Holder”), as soon as practicable after receipt by Exchange Agent of a Participating Common Holder’s Certificates and applicable Holder Documents executed and delivered in accordance with this Agreement, Exchange Agent shall deliver to that Participating Common Holder the amount of cash due to such Participating Common Holder for each share of Common Stock held by such Participating Common Holder as of the Effective Time as determined in accordance with the applicable provisions of Section 2.2 (less such Participating Common Holder’s portion of the Indemnity Escrow Fund and Stockholder Representative Escrow Funds).

(d) Exchange of Vested Company Options. Regarding Holders of Vested Company Options as of immediately prior to the Effective Time (each, a “Participating Common Convertible Holder”), as soon as practicable after receipt by Exchange Agent of a Participating Common Convertible Holder’s Vested Company Options, as applicable, and applicable Holder Documents executed and delivered in accordance with this Agreement, Exchange Agent shall deliver to that Participating Common Convertible Holder, an amount of cash due to such Participating Common Convertible Holder for each Vested Company Option held by such Participating Common Convertible Holder as of the Effective Time as determined in accordance with the applicable provision of Section 2.3 (less such Participating Common Convertible Holder’s portion of the Indemnity Escrow Fund and Stockholder Representative Escrow Funds), subject, in all cases, to the provisions of Section 2.5(g).

(e) Full Satisfaction. Except as provided herein, all cash paid upon exchange of the Company Securities (including amounts deposited into escrow pursuant to the Escrow Agreement) in accordance with the terms of this Agreement shall be deemed to have been paid in full satisfaction of all rights pertaining to such Company Securities.

(f) Undistributed Portions of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the Holders of Company Securities for one (1) year after the Effective Time, and all certificates or other documents in possession of the Exchange Agent relating to the transactions contemplated hereby, shall be promptly delivered to the Buyer, and the Exchange Agent’s duties shall terminate. Thereafter, each Holder of a Certificate representing Company Securities (other than certificates representing Dissenting Shares) may surrender such certificate to the Surviving Corporation and (subject to any applicable abandoned property, escheat or similar Law) receive in consideration therefor, the Merger Consideration relating thereto, without any interest thereon (except as otherwise set forth in the Escrow Agreement), calculated in accordance with this Section 2.5. Any portion of the Exchange Fund remaining unclaimed by Holders of Company Securities as of a date which is immediately prior to such time as such amounts would otherwise escheat to or become property of any Governmental Entity shall, to the extent permitted by applicable Law, become the property of the Buyer free and clear of any claims or interest of any Person previously entitled thereto. None of the Buyer, the Company, the Surviving Corporation or the Exchange Agent shall be liable to any Holder for any cash delivered to a public official pursuant to any abandoned property, escheat or similar Law.

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(g) Payment of Merger Compensation Payments; Withholding Taxes. Notwithstanding any other provision of this Agreement, the Exchange Agent shall not directly pay Merger Compensation Payments to the former holders of Vested Company Options and Restricted Company Stock for which election under Section 83(b) of the Code was not timely made and which remain unvested as of the Closing Date as contemplated by Section 2.3, but shall instead transfer Merger Compensation Payments to the Surviving Corporation for immediate payment to such recipients through the Surviving Corporation’s payroll systems. The Surviving Corporation shall be entitled to deduct and withhold from Merger Compensation Payments and any other consideration otherwise payable pursuant to this Agreement to any person such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any other applicable state, local or foreign Taxes Law. To the extent that amounts are so withheld by the Company, as the case may be, such withheld amounts (i) shall be remitted by the Company to the applicable Governmental Entity, and (ii) shall be treated for all purposes of this Agreement as having been paid to the Holder in respect of which such deduction and withholding was made by the Company, as the case may be.

(h) Adoption of Agreement. The adoption of this Agreement and the Requisite Stockholder Approval constitutes approval of the Exchange Agreement, the Escrow Agreement and of all of the arrangements relating thereto, including the placement of the Indemnity Escrow Fund and the Stockholder Representative Escrow Funds in escrow and the appointment of the Stockholder Representative.

2.6 Schedule of Merger Consideration. Schedule A sets forth, as of the date hereof, (i) the amount due in satisfaction of all outstanding Indebtedness pursuant to Section 2.4(b), (ii) the estimated amount of the Merger Consideration calculated pursuant to the formula set forth in Section 2.1, (iii) the estimated amount of Merger Consideration to be received at the Closing by each Holder (assuming no deductions related to Indemnity Escrow Fund or Stockholder Representative Escrow Funds), (iv) the estimated amount of the Indemnity Escrow Amount and Stockholder Representative Escrow Amount allocated to each Holder, and (v) the estimated net Merger Consideration payable to each Holder as of the Effective Time. At the Closing, the Company shall deliver to the Buyer an updated Schedule A as of the Closing Date which shall fully comply with the terms of the Charter Documents of the Company and with the terms of the Vested Company Options.

2.7 Conversion of Buyer Subsidiary Capital Stock, Treasury Stock and Stock Owned by Buyer. Notwithstanding anything to the contrary contained herein, the following shall apply:

(a) Stock of Buyer Subsidiary. Each share of capital stock of the Buyer Subsidiary issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the Buyer or the Company, be converted into one (1) share of common stock of the Surviving Corporation.

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(b) Treasury Shares and Stock owned by Buyer or Buyer Subsidiary. Each (i) share of Company Stock held in the Company’s treasury immediately prior to the Effective Time and (ii) Company Security owned beneficially by the Buyer or the Buyer Subsidiary immediately prior to the Effective Time, shall not represent the right to receive any Merger Consideration, and each such security shall, as of the Effective Time, be cancelled and retired and shall cease to exist, and no cash, securities or other property shall be payable in respect thereof, in each case without any conversion thereof pursuant to Sections 2.2 and 2.3.

2.8 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, the shares of Company Stock that are issued and outstanding immediately prior to the Effective Time and that are held by the Company Stockholders who did not vote in favor of the Merger and who comply with all of the relevant provisions of Section 262 of the DGCL (the “Dissenting Shares”) shall not be converted into or represent the right to receive the Merger Consideration and the Buyer shall retain the Merger Consideration applicable to such Dissenting Shares, unless and until such Holders shall have failed to perfect or shall have effectively withdrawn or lost their rights to appraisal under the DGCL; and any such Holder shall have only such rights in respect of the Dissenting Shares owned by them as are provided by Section 262 of the DGCL. If any such Holder shall have failed to perfect or shall have effectively withdrawn or lost such right, such Holder’s Dissenting Shares shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Effective Time, for the right to receive the applicable Merger Consideration without any interest thereon, pursuant to the terms of this ARTICLE II. Prior to the Effective Time, the Company will not, except with the prior written consent of the Buyer, voluntarily make any payment with respect to, or settle or offer to settle, any claim made by the Company Stockholders with respect to the Dissenting Shares. Dissenting Shares, if any, after payments of fair value in respect thereto have been made to the Holders thereof pursuant to applicable Law, shall be canceled.

2.9 No Further Ownership Rights. Except as otherwise provided in this Agreement or in the Escrow Agreement, no interest will be paid or accrued on the amounts payable upon the surrender of the Certificates. Until surrendered in accordance with the provisions of Section 2.5, each Certificate shall represent for all purposes, only the right to receive the consideration pursuant to the terms of this ARTICLE II and the Escrow Agreement.

2.10 Lost Certificates. In the event any Certificates representing shares of Company Securities or exercisable for Company Securities (as of immediately prior to the Effective Time) shall have been lost, stolen or destroyed, Exchange Agent or the Buyer, as applicable, shall make such payment in accordance with Section 2.5 in exchange for such lost, stolen or destroyed Certificates upon the making of an affidavit of that fact by the Holder thereof in a form reasonably acceptable to the Buyer.

2.11 No Further Transfer of Shares. After the Effective Time, there shall be no transfers of shares of Company Stock that were outstanding immediately prior to the Effective Time on the stock transfer books of the Surviving Corporation. If, after the Effective Time, Certificates for Company Stock are presented to the Surviving Corporation for transfer, they shall be canceled and exchanged for cash as provided in this ARTICLE II. At the close of business on the day of the Effective Time, the stock ledger of the Company shall be closed.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Buyer that, except as set forth in the Disclosure Schedule, the statements contained in this ARTICLE III are true and correct as of the date of this Agreement and will be true and correct as of the Closing as though made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties will be true and correct as of such date). The Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this ARTICLE III. The disclosures in any section or subsection of the Disclosure Schedule shall qualify only the corresponding section or subsection in this ARTICLE III. For purposes of this ARTICLE III, the phrase “to the knowledge of the Company or each of the Subsidiaries” or any phrase of similar import shall be deemed to refer to the actual knowledge of the executive officers of the Company and each of the Subsidiaries, as well as any other knowledge which such executive officers would have possessed had they made reasonable inquiry of appropriate employees and agents of the Company and each of the Subsidiaries with respect to the matter in question.

3.1 Organization, Qualification and Corporate Power. The Company is a corporation duly organized, validly existing and in corporate and tax good standing under the laws of the State of Delaware. The Company is duly qualified to conduct business and is in corporate and tax good standing under the laws of each jurisdiction listed in Section 3.1 of the Disclosure Schedule, which jurisdictions constitute the only jurisdictions in which the nature of the Company’s businesses or the ownership or leasing of its properties requires such qualification. The Company has all requisite corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. The Company has furnished to the Buyer complete and accurate copies of its Certificate of Incorporation and By-laws. The Company is not in default under or in violation of any provision of its Certificate of Incorporation or By-laws.

3.2 Capitalization.

(a) The authorized capital stock of the Company consists of (i) 20,000,000 shares of Common Stock, of which, as of the date of this Agreement, 5,443,587 shares were issued and outstanding and 102,667 shares were held in the treasury of the Company, and (ii) 8,430,000 shares of Preferred Stock, of which (A) 1,400,000 shares have been designated as Series A Preferred Stock, of which, as of the date of this Agreement, 1,293,333 shares were issued and outstanding, (B) 3,000,000 shares have been designated as Series B Preferred Stock, of which, as of the date of this Agreement, 1,603,865 shares were issued and outstanding and (C) 4,030,000 shares have been designated as Series C Preferred Stock, of which, as of the date of this Agreement, 3,763,853 shares were issued and outstanding.

(b) Section 3.2 of the Disclosure Schedule sets forth a complete and accurate list, as of the date of the Agreement, of the Holders of capital stock of the Company, showing the number of shares of capital stock, and the class or series of such shares, held by each Company Stockholder and (for shares other than Common Stock) the number of shares of Common Stock (if any) into which such shares are convertible. Section 3.2 of the Disclosure Schedule also

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indicates all outstanding shares of Common Stock that constitute restricted stock or that are otherwise subject to a repurchase or redemption right, indicating the name of the applicable Company Stockholder, the vesting schedule (including any acceleration provisions with respect thereto), and the repurchase price payable by the Company. All of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable. All of the issued and outstanding shares of capital stock of the Company have been offered, issued and sold by the Company in compliance with all applicable federal and state securities laws.

(c) Section 3.2 of the Disclosure Schedule sets forth a complete and accurate list, as of the date of this Agreement of: (i) all Company Stock Plans, indicating for each Company Stock Plan the number of shares of Common Stock issued to date under such Plan, the number of shares of Common Stock subject to outstanding options under such Plan and the number of shares of Common Stock reserved for future issuance under such Plan; and (ii) all Holders of outstanding Company Options, indicating with respect to each Company Option the Company Stock Plan under which it was granted, the number of shares of Common Stock subject to such Company Option, the exercise price, the date of grant, and the vesting schedule (including any acceleration provisions with respect thereto). The Company has provided to the Buyer complete and accurate copies of all Company Stock Plans, forms of all stock option agreements evidencing Company Options. All of the shares of capital stock of the Company subject to Company Options will be, upon issuance pursuant to the exercise of such instruments, duly authorized, validly issued, fully paid and nonassessable. All Company Options have been granted with an exercise price that was not less then the fair market value of a share of Common Stock as of the date the Company Option was granted.

(d) Except as set forth in this Section 3.2 or in Section 3.2 of the Disclosure Schedule and other than the warrants to purchase 11,673 shares of Series C Preferred Stock (originally issued as Series B-1 Convertible Preferred Stock) held by Silicon Valley Bank, (i) no subscription, warrant, option, convertible security or other right (contingent or otherwise) to purchase or acquire any shares of capital stock of the Company is authorized or outstanding, (ii) the Company has no obligation (contingent or otherwise) to issue any subscription, warrant, option, convertible security or other such right, or to issue or distribute to Holders of any shares of its capital stock any evidences of Indebtedness or assets of the Company, (iii) the Company has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or to make any other distribution in respect thereof, except as set forth in Section 6.2(t) of this Agreement; and (iv) there are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company.

(e) No Company Option will by its terms require an adjustment in connection with the Merger, except as contemplated by this Agreement. Except as contemplated by this Agreement, neither the consummation of the transactions contemplated by this Agreement, nor any action taken or to be taken by the Company in connection with such transactions, will result in (i) any acceleration of exercisability or vesting (including, without limiting the foregoing, any right to acceleration of vesting that is contingent upon the occurrence of a subsequent event) in favor of any Holder of any Company Option, (ii) any additional benefits for any Holder of any Company Option, or (iii) the inability of the Buyer after the Effective Time to exercise any right

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or benefit held by the Company prior to the Effective Time with respect to any Company Option assumed by the Buyer. The assumption by the Buyer of the Company Stock Plans and the Unvested Company Options will not give rise to any event described in clauses (i) through (iii) of the immediately preceding sentence. Each Holder of a Company Option has been or will be given, or shall have properly waived, any required notice of the Merger prior thereto, and all such rights of notice will terminate at or prior to the Effective Time.

(f) Except as set forth in Section 3.2 of the Disclosure Schedule, there is no agreement, written or oral, between the Company and any Holder of its securities, or, to the best of the Company’s knowledge, among any Holders of its securities, relating to the sale or transfer (including agreements relating to rights of first refusal, co-sale rights or “drag-along” rights), registration under the Securities Act, or voting, of the capital stock of the Company.

(g) The conversion, exercise and/or exchange of Preferred Stock and Company Options prior to the Effective Time will be in compliance with the terms of the agreement pursuant to which such securities were issued and in compliance with all federal and state securities laws, and the issuance of shares of Common Stock upon conversion, exercise and/or exchange of such securities shall have been duly authorized by all requisite corporate action on the part of the Company. Any such issuance of Common Stock upon conversion, exercise and/or exchange of such securities shall be in accordance with the Company’s Charter Documents and shall not violate the rights of any Company Stockholder.

(h) Except as set forth in Section 3.2 of the Disclosure Schedule and except for the repurchase at cost of shares of Common Stock from employees of the Company and its Subsidiaries in connection with the termination of their employment, the Company has not repurchased or otherwise reacquired any of the Company Securities. The repurchase of any such securities was duly approved and authorized by the Board of Directors and complied in all respects with applicable law, and the Company has no liability, contingent or otherwise, to make any payments with respect to any such repurchased securities. There are no obligations, contingent or otherwise, of the Company to repurchase, redeem or otherwise acquire any of the Company Securities. There are no declared or accrued unpaid dividends with respect to any of the Company Securities.

(i) Except as set forth in Section 3.2 of the Disclosure Schedule, the Company does not have outstanding any bonds, debentures, notes or other obligations or debt securities the holders of which have the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matter.

3.3 Authorization of Transaction. The Company has all requisite power and authority to execute and deliver this Agreement and the other Transaction Documents to which the Company is a party and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and the other Transaction Documents to which the Company is a party and, subject to obtaining the Requisite Stockholder Approval, the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company. Without limiting the generality of the foregoing, the Board of Directors of the Company, at a meeting duly called and held, by the unanimous vote of all directors (i) determined that the Merger is in the best interests of the

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Company and the Company Stockholders, (ii) adopted this Agreement in accordance with the provisions of the DGCL, and (iii) directed that this Agreement and the Merger be submitted to the Company Stockholders for their adoption and approval and resolved to recommend that the Company Stockholders vote in favor of the adoption of this Agreement and the approval of the Merger. This Agreement has been (and the other Transaction Documents to which the Company is a party when executed and delivered at the Closing will be) duly and validly executed and delivered by the Company and constitutes (and with respect to such other Transaction Documents will constitute at the Closing) a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

3.4 Noncontravention.

(a) Except as set forth in Section 3.4 of the Disclosure Schedule, and subject to the filing of the Certificate of Merger as required by the DGCL, neither the execution and delivery by the Company of this Agreement (and the other Transaction Documents to which it is a party), nor the consummation by the Company of the transactions contemplated hereby, will (a) conflict with or violate any provision of the Certificate of Incorporation or By-laws of the Company or the charter, by-laws or other organizational document of any Subsidiary, (b) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound or to which any of their respective assets is subject, (c) result in the imposition of any Security Interest upon any assets of the Company or any Subsidiary or (d) assuming compliance by the Company with the matters referred to Section 3.4(a), require on the part of the Company or any Subsidiary any notice to or filing with, or any permit, authorization, consent or approval of, any Governmental Entity, other than any notice, filing, permit, authorization, consent or approval which if not obtained would not have a Company Material Adverse Effect or violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any Subsidiary or any of their respective properties or assets, other than such violations which would not have a Company Material Adverse Effect.

(b) No Authorization or Order of, registration, declaration or filing with, or notice to any Governmental Entity is required by the Company or any Subsidiary in connection with the execution and delivery of this Agreement (and the other Transaction Documents to which the Company or any Subsidiary is a party) and the consummation of the Merger, except for such Authorizations, Orders, declarations, filings and notices as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “Hart-Scott-Rodino Act”) and the Other Antitrust Laws and the filing of the Certificate of Merger as may be required by the DGCL.

3.5 Subsidiaries.

(a) Section 3.5 of the Disclosure Schedule sets forth: (i) the name of each Subsidiary; (ii) the number and type of outstanding equity securities of each Subsidiary and a list of the Holders thereof; (iii) the jurisdiction of organization of each Subsidiary; (iv) the names of the officers and directors of each Subsidiary; and (v) the jurisdictions in which each Subsidiary is qualified or holds licenses to do business as a foreign corporation or other entity.

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(b) Each Subsidiary is a corporation duly organized, validly existing and in corporate and tax good standing under the laws of the jurisdiction of its incorporation. Each Subsidiary is duly qualified to conduct business and is in corporate and tax good standing under the laws of each jurisdiction in which the nature of its businesses or the ownership or leasing of its properties requires such qualification. Each Subsidiary has all requisite power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. The Company has delivered or made available to the Buyer complete and accurate copies of the charter, by-laws or other organizational documents of each Subsidiary. No Subsidiary is in default under or in violation of any provision of its charter, by-laws or other organizational documents. All of the issued and outstanding shares of capital stock of each Subsidiary are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. All shares of each Subsidiary that are held of record or owned beneficially by either the Company or any Subsidiary are held or owned free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), claims, Security Interests, options, warrants, rights, contracts, calls, commitments, equities and demands. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Company or any Subsidiary is a party or which are binding on any of them providing for the issuance, disposition or acquisition of any capital stock of any Subsidiary. There are no outstanding stock appreciation, phantom stock or similar rights with respect to any Subsidiary. There are no voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of any Subsidiary.

(c) No Subsidiary of the Company has outstanding any bonds, debentures, notes or other obligations or debt securities the holders of which have the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any Company matter.

(d) The Company does not control directly or indirectly or have any direct or indirect equity participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust or other business association or entity which is not a Subsidiary.

3.6 Financial Statements.

(a) The Company has provided to the Buyer the audited financial statements set forth in paragraph (a) of the definition of Financial Statements set forth in this Agreement. Section 3.6 of the Disclosure Schedule includes the unaudited financial statements set forth in paragraph (b) of the definition of Financial Statements set forth in this Agreement. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, fairly present the consolidated financial condition, results of operations and cash flows of the Company and the Subsidiaries as of the respective dates thereof and for the periods referred to therein and are consistent with the books and records of the Company and the Subsidiaries; provided, however, that the Financial Statements referred to in clause (b) of the definition of such term do not include footnotes.

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(b) The Company and its Subsidiaries have in place systems and processes that are: (i) designed to provide reasonable assurances regarding the reliability of the Financial Statements; and (ii) to the Company’s knowledge, adequate for a company at the same stage of development as the Company. There have been no instances of fraud, whether or not material, which occurred during any period covered by the Financial Statements.

3.7 Absence of Certain Changes. Except as set forth in Section 3.7 of the Disclosure Schedule, since the Most Recent Balance Sheet Date, (a) there has occurred no event or development which, individually or in the aggregate, has had, or could reasonably be expected to have in the future, a Company Material Adverse Effect, and (b) neither the Company nor any Subsidiary has taken any of the actions set forth in paragraphs (a) through (r) of Section 5.5.

3.8 Undisclosed Liabilities. Except as set forth in Section 3.8 of the Disclosure Schedule, none of the Company and its Subsidiaries has any liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the Most Recent Balance Sheet, (b) liabilities which have arisen since the Most Recent Balance Sheet Date in the Ordinary Course of Business and (c) contractual and other liabilities incurred in the Ordinary Course of Business which are not required by GAAP to be reflected on a balance sheet.

3.9 Tax Matters.

(a) All Tax Returns required to have been filed by or with respect to the Company and each of its Subsidiaries have been duly and timely filed, and each such Tax Return correctly and completely reflects liability for Taxes and all other information required to be reported thereon. All Taxes owed by the Company and each of its Subsidiaries (whether or not shown on any Tax Return) have been timely paid. The Company and each of its Subsidiaries has adequately provided for, in its books of account and related records, liability for all unpaid Taxes, being current Taxes not yet due and payable.

(b) There is no action or audit currently proposed, threatened or pending against, or with respect to, the Company or any of its Subsidiaries in respect of any Taxes. Neither the Company nor any of its Subsidiaries is the beneficiary of any extension of time within which to file any Tax Return, nor has the Company or any of its Subsidiaries made any request for such an extension. No claim has ever been made by an authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that the Company or any of its Subsidiaries is or may be subject to taxation by that jurisdiction or that the Company or any of its Subsidiaries must file Tax Returns. There are no Security Interests on any of the stock or assets of the Company or any of its Subsidiaries with respect to Taxes, other than Security Interests for Taxes not yet due and payable.

(c) The Company and each of its Subsidiaries has withheld and timely paid all Taxes required to have been withheld with respect to amounts paid or owed to any Person and has complied with all information reporting and withholding requirements, including maintenance of required records with respect thereto.

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(d) There is no dispute or claim concerning any liability for Taxes with respect to the Company or any of its Subsidiaries for which notice from a Governmental Entity has been received, or which is asserted or threatened, or which is otherwise known to the Company Stockholders or the Company. No issues have been raised in any Taxes examination with respect to the Company or any of its Subsidiaries which, by application of similar principles, could be expected to result in liability for Taxes for any period not so examined. Section 3.9 of the Disclosure Schedule (i) lists all U.S. federal, state, local, and foreign income Tax Returns filed with respect to the Company and each of its Subsidiaries for taxable periods ended on or after 2000, (ii) indicates those Tax Returns that have been audited, and (iii) indicates those Tax Returns that currently are the subject of audit. The Stockholder Representative has delivered or made available to the Buyer correct and complete copies of all U.S. federal income Tax Returns filed, examination reports, and statements of deficiencies assessed against or agreed to by the Company since 2000. Neither the Company nor any of its Subsidiaries has waived (or is subject to a waiver of) any statute of limitations in respect of Taxes or has agreed to (or is subject to) any extension of time with respect to a Tax assessment or deficiency.

(e) Neither the Company nor any of its Subsidiaries has filed (or is subject to) a consent pursuant to the collapsible corporation provisions of the former Section 341(f) of the Code (or any corresponding provisions of state, local or foreign income Tax Law). None of the assets or properties of the Company or any of its Subsidiaries constitutes tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code. Neither the Company nor any of its Subsidiaries is a party to any “safe harbor lease” within the meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982, or to any “long-term contract” within the meaning of Section 460 of the Code. Neither the Company nor any of its Subsidiaries has ever been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code. Neither the Company nor any of its Subsidiaries has ever made any payments, nor is obligated to make any payments, nor is a party to any agreement that as a result of the Merger and any other event could obligate it to make payments that would result in a nondeductible expense under Section 280G of the Code or an excise Tax to the recipient of such payments pursuant to Section 4999 of the Code. Neither the Company nor any of its Subsidiaries has participated in or cooperated with an international boycott as defined in Section 999 of the Code.

(f) Neither the Company nor any of its Subsidiaries has agreed to make and is not required to make, by reason of a change in accounting method, a proposed or threatened change in accounting method or otherwise, any adjustment under Section 481(a) of the Code. Neither the Company nor any of its Subsidiaries has been the “distributing corporation” (within the meaning of Section 355(c)(2) of the Code) with respect to a transaction described in Section 355 of the Code within the five-year period ending as of the date of this Agreement. Neither the Company nor any of its Subsidiaries has received (nor is it subject to) any ruling from any Taxing Authority, nor has it entered into (nor is it subject to) any agreement with a Taxing Authority. The Company has disclosed on its U.S. federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of U.S. federal income Tax within the meaning of Section 6662 of the Code.

(g) Except with respect to the affiliated group of corporation of which the Company is the common parent (as defined in Section 1504 of the Code), neither the Company

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or any of its Subsidiaries has ever been a member of an affiliated group of corporations (as that term is used by Section 1504 of the Code) or any comparable provision of state, local or foreign law. Except as set forth in Section 3.9 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to any Tax allocation or sharing agreement. Except with respect to the affiliated group of corporations of which the Company is the common parent (as defined in Section 1504 of the Code), neither the Company nor any of its Subsidiaries has any liability for the Taxes of any Person, (i) as a transferee or successor, (ii) by contract, (iii) under Section 1.1502-6 of the Regulations (or any similar provision of state, local or foreign Law), or (iv) otherwise. Neither the Company nor any of its Subsidiaries is a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes.

(h) Neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) intercompany transactions or excess loss accounts described in Treasury regulations under Section 1502 of the Code (or any similar provision of state, local, or foreign Tax Law), (ii) installment sale or open transaction disposition made on or prior to the Closing Date or (iii) prepaid amount received on or prior to the Closing Date.

(i) Section 3.9 of the Disclosure Schedule sets forth the following information with respect to the Company and the Subsidiaries as of August 31, 2007: (i) the basis of the Company and each of its Subsidiaries in its assets, (ii) the current and accumulated earnings and profits of the Company and each of its Subsidiaries, (iii) the basis of the stock of the Company and each of its Subsidiaries (or the amount of any excess loss account), (iv) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax credit, or excess charitable contribution allocable to the Company or any of the Subsidiaries, (v) the amount of any deferred gain or loss allocable to the Company arising out of any intercompany transaction as described in the Treasury regulations under Section 1502 of the Code, and (vi) tax elections affecting the Company or any of its Subsidiaries.

(j) Neither the Company nor any of its Subsidiaries has operating losses or other tax attributes presently subject to limitation under Sections 279, 382, 383, or 384 of the Code, or the federal consolidated return regulations.

(k) Neither the Company nor any of its Subsidiaries has at any time been subject to (i) the dual consolidated loss provisions of Section 1503(d) of the Code, (ii) the overall foreign loss provisions of Section 904(f) of the Code or (iii) the recharacterization provisions of Section 952(c)(2) of the Code. Neither the Company nor any of its Subsidiaries has any “non-recaptured net Section 1231 losses” within the meaning of Section 1231(c)(2) of the Code.

(l) Neither the Company nor any of its Subsidiaries has entered into any transaction that is either a “listed transaction” or that the Company or its Stockholders believe in good faith is a “reportable transaction” or a “transaction of interest” (all as defined in Treas. Reg. § 1.6011-4).

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(m) No Subsidiary of the Company that is incorporated in a non-U.S. jurisdiction has, or at any time has had, an investment in “United States property” within the meaning of Section 956(c) of the Code. No Subsidiary of the Company is, or at any time has been, a passive foreign investment company within the meaning of Section 1297 of the Code and neither the Company nor any of its Subsidiaries is a shareholder, directly or indirectly, in a passive foreign investment company. No Subsidiary of the Company that is incorporated in a non-U.S. jurisdiction is, or at any time has been, engaged in the conduct of a trade or business within the United States, or treated as or considered to be so engaged and neither the Company nor any of its Subsidiaries has a permanent establishment in any country outside of its country of incorporation.

(n) All material related party transactions involving the Company, and any of its Subsidiaries or Affiliates, have been supported by an arm’s length study in compliance with Section 482 of the Code and the Treasury Regulations promulgated thereunder, and to the extent applicable, any comparable provisions of state, local, or foreign Law.

(o) The operations conducted by marketRx India, prior to the Closing Date, properly qualify for exemption from Taxes under Section 10A of the Income Tax Act of 1961.

3.10 Assets.

(a) The Company or the applicable Subsidiary is the true and lawful owner, and has good title to, all of the assets (tangible or intangible) purported to be owned by the Company or the Subsidiaries, free and clear of all Security Interests. Each of the Company and the Subsidiaries owns or leases all tangible assets sufficient for the conduct of its businesses as presently conducted and as presently proposed to be conducted. Each such tangible asset is free from material defects, has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear) and is suitable for the purposes for which it presently is used.

(b) Section 3.10(b) of the Disclosure Schedule lists individually (i) all fixed assets (within the meaning of GAAP) of the Company or the Subsidiaries having a book value greater than $10,000, indicating the cost, accumulated book depreciation (if any) and the net book value of each such fixed asset as of the Most Recent Balance Sheet Date, and (ii) all other assets of a tangible nature (other than inventories) of the Company or the Subsidiaries whose book value exceeds $10,000.

(c) Each item of equipment, motor vehicle and other asset that the Company or a Subsidiary has possession of pursuant to a lease agreement or other contractual arrangement is in such condition that, upon its return to its lessor or owner under the applicable lease or contract, the obligations of the Company or such Subsidiary to such lessor or owner will have been discharged in full.

3.11 Owned Real Property. The Company does not own any Owned Real Property.

3.12 Real Property Leases. Section 3.12 of the Disclosure Schedule is an accurate and complete list of all Leases and lists all documents comprising such Leases, the term

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of such Leases, any extension and expansion options, the rent payable thereunder, the type of use (e.g., office, warehouse), and the location. The Company has delivered or made available to the Buyer complete and accurate copies of the Leases. With respect to each Lease:

(a) such Lease is legal, valid, binding, enforceable and in full force and effect;

(b) such Lease will continue to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing and no consent of the landlord, sublandlord or any other party is required under the such Lease in connection with the transactions contemplated hereby;

(c) neither the Company nor any Subsidiary nor, to the knowledge of the Company or any Subsidiary, any other party, is in breach or violation of, or default under, any such Lease, and no event has occurred, is pending or, to the knowledge of the Company or any Subsidiary, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default by the Company or any Subsidiary or, to the knowledge of the Company or any Subsidiary, any other party under such Lease;

(d) there are no disputes, oral agreements or forbearance programs in effect as to such Lease;

(e) neither the Company nor any Subsidiary has licensed, assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold;

(f) to the knowledge of the Company or any Subsidiary, all facilities leased or subleased thereunder are supplied with utilities and other services adequate for the operation of said facilities;

(g) the Company or any Subsidiary is not aware of any Security Interest, easement, covenant or other restriction applicable to the real property subject to such lease which would reasonably be expected to materially impair the current uses or the occupancy by the Company or a Subsidiary of the property subject thereto;

(h) the Company or a Subsidiary enjoys peaceful and quiet possession of the leased property;

(i) to the knowledge of the Company or any Subsidiary, such Lease and the use and operation thereof comply with all applicable Laws and conditions affecting the leased property and no written notice or other information has been received by the Company or any Subsidiary calling attention to the need for any material work, repairs or environmental remediation;

(j) there is no damage to the leased property from fire or other casualty that has not been repaired and, to the knowledge of the Company or any Subsidiary, no condemnation or similar proceedings are pending or threatened with regard to the leased property; and

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(k) no work has been performed and there is no work in progress at the leased property for which a mechanic’s or materialmen’s lien may be filed.

3.13 Intellectual Property.

(a) Section 3.13 of the Disclosure Schedule sets forth an accurate and complete list and description of all Company Intangibles, and, in the case of Company Software, a product description, the language in which it is written, and the type of hardware platform(s) on which it runs. Except as set forth on Section 3.13 of the Disclosure Schedule, no other Intangibles are used to operate or held in connection with the Company.

(b) Except as set forth on Section 3.13 of the Disclosure Schedule, the Company has good, marketable, and indefeasible title to, and has the full right to use, all of Company Intangibles, free and clear of any Security Interest. Except as set forth on Section 3.13 of the Disclosure Schedule, no rights of any third party are necessary to market, sell, distribute, support, maintain, license or grant any rights in or to, sell, modify, update, or create derivative works based upon any or all of the Company Intangibles. Neither the Company nor any Subsidiary has granted or assigned to any other person or entity any right to manufacture, have manufactured, assemble or sell the products or proposed products or to provide the services or proposed services of the Company or any Subsidiary.

(c) Except as set forth on Section 3.13 of the Disclosure Schedule, all of the copyrights, websites, logos, symbols, Software, written works, visual works, audio works, multimedia works, and databases and other works eligible for copyright protection of any kind or fashion included in the Company Intangibles were created as works made for hire (as defined under U.S. copyright law) by regular full-time employees of the Company. To the extent that (i) any author, contributor, creator, or developer of any Company Intangible (A) was not a regular full-time employee of the Company at the time such person contributed to, authored, created, or developed any Company Intangible, or (B) was a regular full-time employee of the Company at the time such person contributed to, authored, created, or developed any Company Intangible, but such authoring, creation, contribution, or development was not in the scope of such person’s employment with the Company, or (ii) such person authored, contributed, created, developed, designed, conceived, or reduced to practice any Intangible that is not a work made for hire, such author, contributor, creator, or developer has irrevocably assigned to the Company in writing all Intellectual Property Rights in such Person’s work with respect to such Company Intangibles. All authors, creators, contributors, and developers of Company Intangibles have waived any and all paternity, integrity, moral and other similar rights that they may have now or in the future in the Company Intangibles. None of the employees, contractors, or consultants of the Company (y) is subject to any contractual or legal restrictions that might interfere with the use of his or her best efforts to promote the interests of the Company, or (z)(A) has used any other Person’s trade secrets or other confidential information in the course of his or her work or (B) is, or is reasonably expected to be, in default under any term of any Contract or restrictive covenant relating to the Company Intangibles or any other Contract or restrictive covenant. No employee of the Company has entered into any Contract that restricts or limits in any way the scope or type of work in which the employee may be engaged or requires the employee to transfer, assign, convey, or disclose information concerning any Company Intangible to anyone other than the Company.

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(d) With respect to the Company Software included in the Company Intangibles, (i) the Company maintains machine-readable master-reproducible copies, source code listings, technical documentation and user manuals for the most current releases or versions thereof and for all earlier releases or versions thereof currently being supported or maintained by or on behalf of the Company; (ii) in each case, the machine-readable copy substantially conforms to the corresponding source code listing; (iii) it is written in the language set forth on Section 3.13 of the Disclosure Schedule for use on the hardware set forth on Section 3.13 of the Disclosure Schedule or with standard operating systems; (iv) it can be maintained and modified by reasonably competent programmers familiar with such language, hardware and operating systems; (v) in each case, it operates in accordance with the user manual therefor without material operating defects; and, (vi) none of the Company Intangibles contains, uses, includes, is based upon, is integrated or bundled with, is derived from, or incorporates (A) any version of any Software that contains, or is derived in any manner (in whole or in part) from, any Software that is distributed as free software, open source software (for example, among others, Linux), public software, or via similar licensing or distribution models (including GNU’s General Public License or Lesser/Library GPL, the Artistic/PERL License, the Mozilla Public License, the Netscape Public License, the Sun Community Source License, or the Sun Industry Standards License), (B) any version of any Software that requires as a condition of use, modification or distribution that other Software distributed with such Software (I) be disclosed or distributed in source code form, (II) be licensed for the purpose of making derivative works, or (III) be redistributable at no charge, or (C) any version of any Software the design or development of which was funded in whole or in part by any Governmental Entity. Except as disclosed on Section 3.13 of the Disclosure Schedule, all modifications, fixes, work-arounds, circumventions, improvements, enhancements, versions, new releases, updates, and upgrades of the Company Software, to the extent the foregoing are in development or design by or on behalf of the Company (whether in alpha test mode, beta test mode, production, or otherwise) are either (i) fully backwards compatible with any and all releases, versions, and other forms of the Company Software in use on the date of this Agreement without further development or the expenditure of additional time or money, or (ii) can be promptly made fully backwards compatible without any further material development effort or the expenditure of a material amount of time or money.

(e) None of the Company Intangibles or their respective past or current uses, including the preparation, distribution, marketing or licensing thereof, has violated or infringed upon or has interfered with, or is violating or infringing upon or interfering with, any Intellectual Property Right of any Person. None of the Company Intangibles is subject to any Judgment. No Legal Proceeding is pending or, to the Company’s knowledge, is threatened, nor has any claim or demand been made, which challenges or challenged the legality, validity, enforceability, use or exclusive ownership by the Company of any of the Company Intangibles. No Person is violating or infringing upon or interfering with, or has violated or infringed upon or interfered with at any time, any of the Company Intangibles. Except as listed on Schedule 3.13, there are no registered copyrights, copyright applications, patents or patent applications (including divisions, continuations, continuations-in-part, substitutes, renewals, reissues and extensions of the foregoing (as and to the extent applicable)) covering any of the Company Intellectual Property.

(f) The Company has adequately maintained all Intellectual Property Rights with respect to the Company Intangibles. Except as set forth on Schedule 3.13, the Company has

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not disclosed or delivered to any escrow agent or to any other Person, or permitted the disclosure to any escrow agent or to any other Person of, the source code (or any aspect or portion thereof) for or relating to any Company Software or any past, present or future product of the Company. The trade secrets included in the Company Intellectual Property are not part of the public knowledge or literature, and, have not been used, divulged, or appropriated either for the benefit of any Person (other than the Company) or to the detriment of the Company. All necessary registration, maintenance and renewal fees currently due in connection with the Company Intangibles have been made, all formal legal requirements (including the timely post-registration applications) have been met, and all necessary documents, recordations and certificates in connection with such Company Intangibles have been filed with the relevant patent, trademark or other authorities in the U.S. or foreign jurisdictions, as the case may be, for the purposes of perfecting and maintaining such Company Intangibles.

(g) All licenses, sublicenses and other Contracts covering or relating to the Company Intangibles are legal, valid, binding, enforceable and in full force and effect, and upon consummation of the transactions contemplated hereby, will continue to be legal, valid, binding, enforceable and in full force and effect on terms identical to those in effect immediately prior to the consummation of the transactions contemplated hereby. The Company is not in breach of or default under any license, sublicense or other Contract covering or relating to any Company Intangible and has not performed any act or omitted to perform any act which gives any Person any right to be indemnified, defended, released, or held harmless by the Company under any license, sublicense or other Contract covering or relating to any Company Intangible. No Legal Proceeding is pending or, to the Company’s knowledge, threatened which challenges the legality, validity, enforceability or ownership of any license, sublicense or other Contract covering or relating to any Company Intangible.

(h) None of the Company Software or other Company Intangibles is owned by or registered in the name of any current or former owner, shareholder, partner, director, executive, officer, employee, salesman, agent, customer, representative or contractor of the Company or any Affiliate nor does any such Person have any interest therein or right thereto, including the right to royalty payments.

(i) No portion of any Company Software or other Company Intangible contains any “back door,” “time bomb,” “Trojan horse,” “worm,” “drop dead device,” “virus” or other Software routines, coding, or programming or hardware components that damage, interfere with, intercept, permit access to, or disable or erase software, hardware, any computer or other system, information, or data without the consent of the user, or that are intended to do so or that facilitate or enable the doing of such.

(j) There is no governmental prohibition or restriction on the use of any of the Company Intangibles in any jurisdiction or on the export or import of any of the Company Intangibles from or to any jurisdiction.

(k) The Company maintains, in connection with the Company and the Company Intangibles, access detection controls and filters, authorization and authentication policies, intrusion and misuse controls, virus detection and eradication Software, information security vulnerability and risk management controls and policies, and similar information

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security controls, devices, and policies, and the foregoing (i) ensure the integrity and confidentiality of the Company Intangibles and the data and information processed in connection therewith, and (ii) are at least as stringent and efficacious as the highest information security controls, devices, and policies used in the data processing, information technology, and software industries.

(l) To the best of the Company’s knowledge, no third party has claimed or has reason to claim, or has threatened, that any person employed by or affiliated with the Company, in connection with his or her employment by or affiliation with the Company, (i) has violated or is violating any of the terms or conditions of his employment, non-competition or non-disclosure agreement with such third party, (ii) has disclosed or is disclosing or has utilized or is utilizing any trade secret or proprietary information or documentation of such third party or (iii) has interfered or is interfering in the employment relationship between such third party and any of its present or former employees. To the best of the Company’s knowledge, no person employed by or affiliated with the Company has employed or proposes to employ any trade secret or any information or documentation proprietary to any former employer, and to the best of the Company’s knowledge, no person employed by or affiliated with the Company has violated any confidential relationship which such person may have had with any third party, in connection with the development, manufacture or sale or any product or proposed product or the development or sale of any service or proposed service of the Company, and the Company has no reason to believe there will be any such employment or violation. To the best of the Company’s knowledge, none of the execution or delivery of this Agreement, or the carrying on of business of the Company as officers, employees or agents by any officer, director or key employee of the Company, or the conduct or proposed conduct of the business of the Company, will conflict with or result in a breach of the terms, conditions or provisions of or constitute a default under any contract, covenant or instrument under which any such person is obligated.

3.14 Contracts.

(a) Section 3.14 of the Disclosure Schedule contains a complete and accurate list of each Contract or series of related Contracts to which the Company or any Subsidiary is a party or is subject, or by which any of their respective assets are bound, to as of the date of this Agreement:

(i) for the purchase of materials, products, supplies, goods, services, equipment or other assets or for the furnishing or receipt of services (A) which calls for performance over a period of more than one (1) year, (B) which involves annual payments by the Company or any of the Subsidiaries of $50,000 or more, (C) ) which involves aggregate payments by the Company or any of the Subsidiaries of $50,000 or more or (D) in which the Company or any Subsidiary has granted “most favored nation” pricing provisions or marketing or distribution rights relating to any products or territory or has agreed to purchase a minimum quantity of goods or services or has agreed to purchase goods or services exclusively from a certain party;

(ii) for the sale by the Company or any of the Subsidiaries of materials, products, supplies, goods, services, equipment or other assets or for the furnishing or receipt of services (A) which calls for performance over a period of more than one (1) year, (B) which

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involves a specified annual minimum dollar sales amount by the Company or any of the Subsidiaries of $50,000 or more, (C) pursuant to which the Company or any of its Subsidiaries received payments of more than $50,000 in the year ended 2006 or expects to receive payments of more than $50,000 in the year ended 2007, or (D) in which the Company or any Subsidiary has granted “most favored nation” pricing provisions or marketing or distribution rights relating to any products or territory or has agreed to purchase a minimum quantity of goods or services or has agreed to purchase goods or services exclusively from a certain party;

(iii) that requires the Company or any of the Subsidiaries to purchase its total requirements of any product or service from a third party or that contains “take or pay” provisions;

(iv) pursuant to which (A) the Company or any of the Subsidiaries purchases components for inclusion into its products other than components purchased solely on a purchase order basis or (B) pursuant to which a third party manufactures or assembles products on behalf of the Company or any of the Subsidiaries;

(v) that continues over a period of more than six (6) months from the date hereof and involves payments to or by the Company or any of its Subsidiaries exceeding $50,000, other than arrangements disclosed pursuant to the preceding subparagraphs (i) and (ii);

(vi) that is a Software license, Software support, Software maintenance, managed services or statement of work Contract under which the Company is the licensor, marketer, developer, designer, distributor or provider of services;

(vii) that is a Contract for the purchase, lease and/or maintenance of computer equipment and other equipment under which the Company is the purchaser, licensee, lessee or user;

(viii) that is a Contract under which any rights in and/or ownership of any Company Software or other Company Intangible, or any prior version thereof, or any part of the customer base were obtained or acquired;

(ix) that is a (A) Lease or (B) Contract for the lease of personal property from or to third parties, in either case providing for payments to or by the Company or any of the Subsidiaries in any one case in excess of $50,000 per annum, $50,000 or more over the term of the lease or having a remaining term longer than six (6) months;

(x) that is a partnership, joint venture, limited liability company or similar Contract;

(xi) that is a distribution, dealer, representative or sales agency Contract;

(xii) with any Governmental Entity;

(xiii) that under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) Indebtedness (including capitalized lease obligations) involving more than $50,000 or under which it has imposed (or may impose) a Security Interest on any of its assets, tangible or intangible;

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(xiv) that is a note, debenture, bond, equipment trust, letter of credit, loan or other Contract for Indebtedness or lending of money (other than to employees for travel expenses in the Ordinary Course of Business) or Contract for a line of credit or guarantee, pledge or undertaking of the Indebtedness of any other Person;

(xv) for a charitable or political contribution in any one case in excess of $10,000 or any such Contracts in the aggregate greater than $25,000;

(xvi) for any capital expenditure or leasehold improvement in any one case in excess of $25,000 or any such Contracts in the aggregate greater than $50,000;

(xvii) that restricts or purports to restrict the right of the Company or any of its Subsidiaries to engage in any line of business, acquire any property, develop or distribute any product or provide any service (including geographic restrictions) or to compete with any Person or granting any exclusive distribution rights, in any market, field or territory;

(xviii) for the disposition of any significant portion of the assets or business of the Company or any Subsidiary (other than sales of products in the Ordinary Course of Business) or for the acquisition of the assets or business of any other entity (other than purchases of inventory or components in the Ordinary Course of Business);

(xix) that concerns confidentiality or noncompetition;

(xx) that is an employment, consulting, employee benefit, pension, bonus, profit-sharing, stock option, stock purchase or similar plan or arrangement, distributor or sales representative, termination or severance Contract, other than any such Contract that is terminable at-will by the Company or any of its Subsidiaries without material liability to the Company or such Subsidiary;

(xxi) that involves any current or former officer, director or stockholder of the Company or an Affiliate or “associate” (as such term is defined in the rules and regulations promulgated under the Securities Act) thereof, including without limitation any agreement or other arrangement providing for the furnishing of services by, rental of real or personal property from, or otherwise requiring payments to, any such person or entity;

(xxii) that under which the consequences of a default or termination would reasonably be expected to have a Company Material Adverse Effect;

(xxiii) that contains any provisions requiring the Company or any Subsidiary to indemnify any other party (excluding indemnities contained in agreements for the purchase, sale or license of products entered into in the Ordinary Course of Business);

(xxiv) that either involves more than $50,000 or is not entered into in the Ordinary Course of Business; and

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(xxv) that is otherwise material to the Company and its Subsidiaries as a whole and not previously disclosed pursuant to this Section 3.14.

(b) Except as set forth in Section 3.14 of the Disclosure Schedule, each of the customers of the Company has signed and is bound by a written contract (including click wrap Contracts) that is similar to one of the form agreements in all material respects that is referred to on Section 3.14 of the Disclosure Schedule, and, to the knowledge of the Company, the provisions of each such customer Contract, including provisions regarding proprietary protection and limitations on liability, are binding on the customer. Except as set forth in Section 3.14 of the Disclosure Schedule, all customers have accepted the Software, products and/or services described in their respective customer Contracts. Except as set forth in Section 3.14 of the Disclosure Schedule, within the last three (3) years, the Company (i) has not failed to achieve a service level commitment set forth in any Contract, (ii) has no outstanding claims for service level commitments, or (iii) has not breached any “most favored customer” pricing provisions contained in any agreement listed in Section 3.13 or Section 3.14 of the Disclosure Schedule.

(c) The Company has delivered or made available to the Buyer a complete and accurate copy of each agreement listed in Section 3.13 or Section 3.14 of the Disclosure Schedule. With respect to each agreement so listed: (i) the agreement is legal, valid, binding and enforceable and in full force and effect; (ii) the agreement will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing; and (iii) neither the Company nor any Subsidiary nor, to the knowledge of the Company, any other party, is in breach or violation of, or default under, any such agreement, and no event has occurred, is pending or, to the knowledge of the Company, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default by the Company or any Subsidiary or, to the knowledge of the Company, any other party under such agreement.

(d) Except as set forth on Section 3.14 of the Disclosure Schedule, no Person is renegotiating, or has the right to renegotiate, any amount paid or payable to the Company under any Material Contract or another other term or provision of any Material Contract.

(e) The Material Contracts are all the Contracts necessary and sufficient to operate the Company’s business as currently operated.

3.15 Accounts Receivable and Unbilled Receivables.

(a) Accounts Receivable. All accounts receivable of the Company and the Subsidiaries reflected on the Most Recent Balance Sheet (other than those paid since such date) are valid receivables subject to no setoffs, credits or counterclaims and are collectible (within one hundred eighty (180) days after the Closing Date), net of the applicable reserve for bad debts on the Most Recent Balance Sheet. A complete and accurate list of the accounts receivable reflected on the Most Recent Balance Sheet, showing the aging thereof, is included in Section 3.15 of the Disclosure Schedule. All accounts receivable of the Company and the Subsidiaries that have arisen since the Most Recent Balance Sheet Date are valid receivables subject to no setoffs or counterclaims and are collectible (within one hundred eighty (180) days after the Closing Date), net of a reserve for bad debts in an amount proportionate to the reserve shown on

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the Most Recent Balance Sheet. Neither the Company nor any Subsidiary has received any written notice from an account debtor stating that any account receivable in an amount in excess of $25,000 is subject to any contest, claim or setoff by such account debtor.

(b) Unbilled Receivables. For each Unbilled Receivable of the Company and the Subsidiaries reflected on the Most Recent Balance Sheet, there is a valid and binding Contract with the Company’s customer and all such services have been performed. Each Unbilled Receivable has been recorded in accordance with GAAP, is realizable and (i) at least 90% of the dollar amount of such Unbilled Receivables reflected on the Most Recent Balance Sheet can be billed by the Company, based on the Company’s customer agreements, within fifteen (15) days following the Closing Date; (ii) 100% of the Unbilled Receivables reflected on the Most Recent Balance Sheet can be billed, based on the Company’s customer agreements, by the Company within one hundred twenty (120) days following the Closing Date; and (iii) 100% of the Unbilled Receivables as of the Closing Date are collectible by the Company within three hundred and sixty-five (365) days following the Closing Date.

3.16 Powers of Attorney. Except as set forth in Section 3.16 of the Disclosure Schedule, there are no outstanding powers of attorney executed on behalf of the Company or any Subsidiary.

3.17 Insurance. Section 3.17 of the Disclosure Schedule lists each insurance policy (including fire, theft, casualty, comprehensive general liability, workers compensation, business interruption, environmental, product liability and automobile insurance policies and bond and surety arrangements) to which the Company or any Subsidiary is a party, all of which are in full force and effect (the “Policies”). Such Policies are of the type and in amounts customarily carried by organizations conducting businesses or owning assets similar to those of the Company and the Subsidiaries. There is no material claim pending under any such Policy as to which coverage has been questioned, denied or disputed by the underwriter of such Policy. All premiums due and payable under all such Policies have been paid, neither the Company nor any Subsidiary may be liable for retroactive premiums or similar payments, and the Company and the Subsidiaries are otherwise in compliance in all material respects with the terms of such Policies. The Company has no knowledge of any threatened termination of, or premium increase with respect to, any such Policy. Each such Policy will continue to be enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing.

3.18 Litigation. There is no Legal Proceeding which is pending or has been threatened in writing against the Company, any Subsidiary, any of the Company’s directors or officers or any of the Company Stockholders which (a) seeks either damages in excess of $50,000 or equitable relief or (b) in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement. There are no judgments, orders or decrees outstanding against the Company or any Subsidiary.

3.19 Warranties. No product or service manufactured, sold, leased, licensed or delivered by the Company or any Subsidiary is subject to any guaranty, warranty, right of return, right of credit or other indemnity other than (i) the applicable standard terms and conditions of sale or lease of the Company or the appropriate Subsidiary, which are set forth in Section 3.19 of

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the Disclosure Schedule and (ii) manufacturers’ warranties for which neither the Company nor any Subsidiary has any liability. Section 3.19 of the Disclosure Schedule sets forth the aggregate expenses incurred by the Company and the Subsidiaries in fulfilling their obligations under their guaranty, warranty, right of return and indemnity provisions during each of the fiscal years and the interim period covered by the Financial Statements; and the Company does not know of any reason why such expenses should significantly increase as a percentage of sales in the future.

3.20 Employees.

(a) Section 3.20 of the Disclosure Schedule contains a list of all employees of the Company and each Subsidiary (including any employee of the Company and each Subsidiary who is on leave of absence or on layoff status) (the “Company Employees”) as of the date hereof, along with (i) their titles or responsibilities; (ii) their dates of hire; (iii) their current salaries or wages and all bonuses, commissions and incentives paid at any time during the past twelve (12) months; and (iv) the amount of any target bonuses, commissions or other compensation (whether payable in cash, securities or other property) for him or her for calendar year 2007. The Company has made no commitments to Company Employees for salaries or wages, bonuses, commissions and incentives expected to be paid during calendar year 2008. Section 3.20 of the Disclosure Schedule indicates those employees of the Company and each Subsidiary who are not citizens of the United States, and provides the current immigration status of each non-citizen employee, as well as a short description of any currently active immigration process for any employee. In addition, Section 3.20 of the Disclosure Schedule discloses any contractual obligations into which the Company or any Subsidiary has entered with any employee or prospective employee to assist in obtaining permanent residence on behalf of the employee, or to offer any other type of immigration assistance.

(b) The Company has on file a valid Form I-9 for each employee hired by the Company on or after November 7, 1986 and continuously employed after November 6, 1986 or the applicable date of hire. To the knowledge of the Company, all employees of the Company are (A) United States citizens, or lawful permanent residents of the United States, (B) aliens whose right to work in the United States is unrestricted, (C) aliens who have valid, unexpired work authorizations issued by the Attorney General of the United States (Immigration and Naturalization Service) or Department of Homeland Security or (D) aliens who have been continually employed by the Company since November 6, 1986 or the applicable date of hire. The Company has not been the subject of an immigration compliance or employment visit from, nor has the Company been assessed any fine or penalty by, or been the subject of any order or directive of, the United States Department of Labor, the Attorney General of the United States (Immigration and Naturalization Service) or the Department of Homeland Security.

(c) Each current or past employee of the Company or any Subsidiary has entered into a standard confidentiality/assignment of inventions/non-competition agreement with the Company or a Subsidiary, as applicable, complete and accurate copies or forms of which have previously been delivered or made available to the Buyer, and are each attached hereto as Exhibit G (collectively, the “Standard Proprietary Information Agreement”). Section 3.20 of the Disclosure Schedule contains a list of all employees of the Company or any Subsidiary who are a party to a non-competition agreement with the Company or any Subsidiary. All of the agreements referenced in the two preceding sentences will continue to be legal, valid, binding

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and enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing. To the knowledge of the Company, no key employee or group of employees has any plans to terminate employment with the Company or any Subsidiary.

(d) Section 3.20 of the Disclosure Schedule contains an accurate and complete list of each employee that has entered into any employment, consulting, termination or severance Contract with the Company that provides a bonus, commission or other compensation (whether payable in cash, securities or other property) for such employee as a result of any merger, reorganization, consolidation, recapitalization, business combination, liquidation, dissolution, share exchange, sale of stock, sale of material assets or similar business transaction involving the Company, any Subsidiary or any division of the Company, and the amount of such bonus, commission or other compensation (whether payable in cash, securities or other property) to be received by each employee.

(e) Section 3.20 of the Disclosure Schedule contains an accurate and complete list of all sales representatives and independent contractors engaged by the Company as of the date hereof, a brief description of their jobs or projects currently in progress, and material Contract terms, including compensation, termination, notice, and severance provisions, with respect to each thereof.

(f) Except as limited by the specific and express terms of any employment Contract listed on Section 3.20 of the Disclosure Schedule, the Company has the right to terminate the employment of each of the Company Employees at will and to terminate the engagement of any of its independent contractors without payment to such Company Employee or independent contractor other than for services rendered through termination and without incurring any penalty or liability.

(g) To the knowledge of the Company: (i) no Company Employee has received an offer to join a business that may be competitive with the Company; and (ii) no Company Employee is a party to or is bound by any confidentiality agreement, noncompetition agreement or other Contract (with any Person) that may have an adverse effect on the performance by such Company Employee of any of his duties or responsibilities as an employee of the Buyer, if hired by the Buyer.

(h) Neither the Company nor any Subsidiary is a party to or bound by any collective bargaining agreement, nor have any of them experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes. The Company has no knowledge of any organizational effort made or threatened, either currently or within the past two (2) years, by or on behalf of any labor union with respect to employees of the Company or any Subsidiary.

(i) The Company is in compliance in all material respects with all currently applicable legal requirements respecting employment, human rights in employment, pay equity, terms and conditions of employment, employment standards (including wages, hours, vacation and overtime), labor relations, worker classification (including the proper classification of workers as independent contractors and consultants, and as employees and managers),

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occupational health and safety, workplace safety and insurance, and employment practices and policies. The Company is not liable for any arrears or withholding of wages, severance pay and other compensation or any Taxes or any penalty for failure to comply with any of the foregoing legal requirements. The Company is not liable for any material payment to any trust or other fund or to any Governmental Entity with respect to employment insurance, workplace safety and insurance, employment standards or other benefits or obligations for any of its employees (other than routine payments to be made in the Ordinary Course of Business).

(j) Section 3.20 of the Disclosure Schedule contains a list of all Company Employees who are Members of the Immediate Family of any shareholder, officer, director or employee of the Company.

3.21 Employee Benefits.

(a) Section 3.21 of the Disclosure Schedule contains a complete and accurate list of all Company Plans. Complete and accurate copies of (i) all Company Plans which have been reduced to writing, (ii) written summaries of all unwritten Company Plans, (iii) all related trust agreements, insurance contracts and summary plan descriptions, and (iv) all annual reports filed on IRS Form 5500 and (for all funded plans) all plan financial statements for the last three (3) plan years for each Company Plan, have been delivered or made available to the Buyer.

(b) Each Company Plan has been administered in all material respects in accordance with its terms and each of the Company, the Subsidiaries and the ERISA Affiliates has in all material respects met its obligations with respect to each Company Plan and has made all required contributions thereto. The Company, each Subsidiary, each ERISA Affiliate and each Company Plan are in compliance in all material respects with the currently applicable provisions of ERISA and the Code and the regulations thereunder (including Section 4980 B of the Code, Subtitle K, Chapter 100 of the Code and Sections 601 through 608 and Section 701 et seq. of ERISA). All filings and reports as to each Company Plan required to have been submitted to the Internal Revenue Service or to the United States Department of Labor have been duly submitted. No Company Plan has assets that include securities issued by the Company or any ERISA Affiliate.

(c) There are no Legal Proceedings (except claims for benefits payable in the normal operation of the Company Plans and proceedings with respect to qualified domestic relations orders) against or involving any Company Plan or asserting any rights or claims to benefits under any Company Plan that could give rise to any material liability.

(d) All of the Company Plans that are intended to be qualified under Section 401(a) of the Code have received determination letters from the Internal Revenue Service to the effect that such Company Plans are qualified and the plans and the trusts related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been revoked and revocation has not been threatened, or such Company Plans use a form of prototype or volume submitter plan document whose sponsor has received an opinion or advisory letter from the Internal Revenue Service, and no act or omission has occurred, that would reasonably be expected to adversely affect its qualification or materially increase its cost. Each Company Plan which is required to satisfy Section

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401(k)(3) or Section 401(m)(2) of the Code has been tested for compliance with, and satisfies the requirements of Section 401(k)(3) and Section 401(m)(2) of the Code for each plan year ending prior to the Closing Date, or may have satisfied such requirements using a legally permissible alternative method for compliance.

(e) Neither the Company, any Subsidiary, nor any ERISA Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.

(f) At no time has the Company, any Subsidiary or any ERISA Affiliate been obligated to contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).

(g) There are no unfunded obligations under any Company Plan providing benefits after the last day of the month of an employee’s termination of employment (or to any beneficiary of any such employee), including but not limited to retiree health coverage and deferred compensation, but excluding continuation of health coverage required to be continued under Section 4980B of the Code or other applicable law and insurance conversion privileges under state law. The assets of each Company Plan which is funded are reported at their fair market value on the books and records of such Company Plan.

(h) To the knowledge of the Company, no act or omission has occurred and no condition exists with respect to any Company Plan that would reasonably be expected to subject the Company, any Subsidiary or any ERISA Affiliate to (i) any material fine, penalty, tax or liability of any kind imposed under ERISA or the Code or (ii) any contractual indemnification or contribution obligation protecting any fiduciary, insurer or service provider with respect to any Company Plan.

(i) No Company Plan is funded by, associated with or related to a “voluntary employee’s beneficiary association” within the meaning of Section 501(c)(9) of the Code.

(j) Each Company Plan may be terminated by the Company at any time without material liability or expense to the Company or such Company Plan as a result thereof (other than for benefits accrued through the date of termination or amendment and reasonable administrative expenses related thereto) and no Company Plan, plan documentation or agreement, summary plan description or other written communication distributed generally to employees by its terms prohibits the Company from amending or terminating any such Company Plan.

(k) Section 3.21 of the Disclosure Schedule discloses each: (i) agreement with any stockholder, director, executive officer or other key employee of the Company or any Subsidiary (A) the benefits of which are contingent, or the terms of which are altered, upon the occurrence of a transaction involving the Company or any Subsidiary of the nature of any of the transactions contemplated by this Agreement, other than as contemplated by this Agreement, (B) providing any term of employment or compensation guarantee or (C) providing severance benefits or other benefits after the termination of employment of such director, executive officer or key employee; (ii) agreement, plan or arrangement under which any person may receive payments from the Company or any Subsidiary that may be subject to the tax imposed by

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Section 4999 of the Code; and (iii) agreement or plan binding the Company or any Subsidiary, including any stock option plan, stock appreciation right plan, restricted stock plan, stock purchase plan, severance benefit plan or Company Plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement, other than as contemplated by this Agreement.

(l) Section 3.21 of the Disclosure Schedule sets forth the policy of the Company and any Subsidiary with respect to accrued vacation, accrued sick time and earned time off and the amount of such liabilities as of August 31, 2007.

(m) All Foreign Plans are in material compliance with all applicable laws and have been operated in all material respects accordance with the plans’ respective terms. There are no unfunded liabilities under or in respect of the Foreign Plans, and all contributions or other payments required to be made to or in respect of the Foreign Plans prior to the Effective Time have been timely made or are fully reflected on the Financial Statements.

(n) Each Company Plan that is subject to Section 409A of the Code has been maintained and operated in good faith based on the proposed or final regulations promulgated thereunder and related IRS guidance issued with respect to Section 409A of the Code.

3.22 Environmental Matters.

(a) Each of the Company and the Subsidiaries has complied with all applicable Environmental Laws. There is no pending or, to the knowledge of the Company, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any alleged violation of any Environmental Law involving the Company or any Subsidiary.

(b) Neither the Company nor any Subsidiary has any liabilities or obligations arising from the release of any Materials of Environmental Concern into the environment.

(c) Neither the Company nor any Subsidiary is a party to or bound by any court order, administrative order, consent order or other agreement between the Company and any Governmental Entity entered into in connection with any legal obligation or liability arising under any Environmental Law.

(d) Set forth in Section 3.22 of the Disclosure Schedule is a list of all documents (whether in hard copy or electronic form) that contain any environmental reports, investigations and audits relating to premises currently or previously owned or operated by the Company or a Subsidiary (whether conducted by or on behalf of the Company or a Subsidiary or a third party, and whether done at the initiative of the Company or a Subsidiary or directed by a Governmental Entity or other third party), which were issued or conducted during the past five (5) years and which the Company has possession of or access to. A complete and accurate copy of each such document has been provided to the Buyer.

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(e) The Company is not aware of any material environmental liability of any solid or hazardous waste transporter or treatment, storage or disposal facility that has been used by the Company or any Subsidiary.

3.23 Legal Compliance.

(a) Each of the Company and the Subsidiaries is currently conducting, and have at all times conducted, their respective businesses in compliance with each applicable Law (including rules and regulations thereunder) of any federal, state, local or foreign government, or any Governmental Entity, except for any violations or defaults that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any Subsidiary has received any notice or communication from any Governmental Entity alleging noncompliance with any applicable law, rule or regulation.

(b) No event has occurred and no circumstances exist that (with or without the passage of time or the giving of notice) may result in a violation of, conflict with or failure on the part of the Company or any of its Subsidiaries to comply with, any law, except for any such violations, conflicts or failures to comply that would not reasonably be expected to be, individually or in the aggregate, material to the Company and its Subsidiaries taken as a whole.

3.24 Customers and Suppliers. Section 3.24 of the Disclosure Schedule sets forth a list of (a) each customer for the fiscal year ended December 31, 2006 and the eight-month period ended August 31, 2007 and the amount of revenues accounted for by such customer during each such period and (b) the ten (10) largest suppliers of the Company for the fiscal year ended December 31, 2006 and the eight-month period ended August 31, 2007 and sets forth opposite the name of each such supplier the approximate net sales or purchases by the Company attributable to such supplier for each such period. No such customer or supplier has indicated within the past year that it will stop, or materially decrease the rate of, procuring services or supplying products or services, as applicable, to the Company or any Subsidiary. No unfilled customer order or commitment obligating the Company or any Subsidiary to process or perform services will result in a loss to the Company or any Subsidiary upon completion of performance. No purchase order or commitment of the Company or any Subsidiary is in excess of normal requirements, nor are prices provided therein in excess of current market prices for the products or services to be provided thereunder. In addition, there have been no material changes to the prices for products or services to the twenty (20) largest customers of the Company or from the ten (10) largest suppliers of the Company during the fiscal year ended December 31, 2006 and the eight-month period ended August 31, 2007

3.25 Permits.

(a) Section 3.25 of the Disclosure Schedule sets forth a list of all Permits issued to or held by the Company or any Subsidiary. Such listed Permits are the only Permits that are required for the Company and the Subsidiaries to conduct their respective businesses as presently conducted or as proposed to be conducted. Each such Permit is in full force and effect; the Company or the applicable Subsidiary is in compliance with the terms of each such Permit; and, to the knowledge of the Company, no suspension or cancellation of such Permit is threatened. Each such Permit will continue in full force and effect immediately following the Closing. All material Permits are listed in Section 3.25 of the Disclosure Schedule.

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(b) Neither the Company nor any of its Subsidiaries has received notice regarding any violation of, conflict with, failure to comply with the terms of, or any revocation, withdrawal, termination, cancellation, suspension or modification of, any material Permit. Neither the Company nor any of its Subsidiaries is in default, nor has the Company or any of its Subsidiaries received notice of any claim of default, with respect to any material Permit.

(c) No Person other than the Company or one of its Subsidiaries owns or has any proprietary, financial or other interest (direct or indirect) in any Permit which the Company or any of its Subsidiaries owns, possesses or uses in the operation of its business as now or proposed to be conducted.

3.26 Certain Business Relationships With Affiliates. No Affiliate of the Company or of any Subsidiary (a) owns any property or right, tangible or intangible, which is used in the business of the Company or any Subsidiary, (b) has any claim or cause of action against the Company or any Subsidiary, or (c) owes any money to, or is owed any money by, the Company or any Subsidiary. Section 3.26 of the Disclosure Schedule describes any transactions or relationships between the Company or a Subsidiary and any Affiliate thereof which occurred or have existed since the beginning of the time period covered by the Financial Statements (specifically excluding any transactions between the Company and its Subsidiaries).

3.27 Brokers’ Fees. Except for as set forth on Section 3.27 of the Disclosure Schedule, neither the Company nor any Subsidiary has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement. No claim exists or will exist against the Company, any of its Subsidiaries or the Surviving Corporation or, based on any action by the Company or any of its Subsidiaries, against the Buyer for payment of any “topping,” “break-up” or “bust-up” fee or any similar compensation or payment arrangement as a result of the transactions contemplated hereby.

3.28 Books and Records. The minute books and other similar records of the Company and each Subsidiary contain complete and accurate records in all material respects of actions taken at any meetings of the Company’s or such Subsidiary’s stockholders, Board of Directors or any committee thereof and of all written consents executed in lieu of the holding of any such meeting. The books and records of the Company and each Subsidiary accurately reflect in all material respects the assets, liabilities, business, financial condition and results of operations of the Company or such Subsidiary and have been maintained in accordance with good business and bookkeeping practices. The stock ledger of the Company is complete and reflects all issuances, transfers, repurchases and cancellations of shares of capital stock of the Company. Section 3.28 of the Disclosure Schedule contains a list of all bank accounts and safe deposit boxes of the Company and the Subsidiaries and the names of persons having signature authority with respect thereto or access thereto.

3.29 Disclosure. No representation or warranty by the Company contained in this Agreement, and no statement contained in the Disclosure Schedule or any other document, certificate or other instrument delivered or to be delivered by or on behalf of the Company

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pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading. All references in this Agreement with respect to materials to which the Company has represented have been made available to the Buyer shall be limited to the Intralinks due diligence data site managed by William Blair and accessible by the Buyer or the materials that have been directly provided to the Buyer, Morgan, Lewis & Bockius LLP or Deloitte & Touche LLP.

3.30 Backlog. Schedule 3.30 of the Disclosure Schedule sets forth a true and complete list in all material respects of the forty (40) projected largest customers (as defined by the total revenue expected to be recognized by the Company from such customer in the fourth calendar quarter of 2007 and the calendar year 2008). Schedule 3.30 of the Disclosure Schedule sets forth a true and complete breakdown in all material respects by calendar quarter for fourth calendar quarter of 2007 and each calendar quarter of 2008 the revenue reasonably expected by the Company to be recognized in each such quarter for each such customer.

3.31 Absence of Certain Changes or Events. Except for as set forth on Section 3.31 of the Disclosure Schedule, since the Most Recent Balance Sheet Date to the date of this Agreement (with respect to the representation and warranty made as of the date of this Agreement) and to the Closing Date (with respect to the representation and warranty made as of the Closing Date):

(a) there has not been any material adverse change in the business, financial condition, operations or results of operations of the Company and its Subsidiaries taken as a whole;

(b) neither the Company nor any of its Subsidiaries has amended or otherwise modified its Charter Documents;

(c) neither the Company nor any of its Subsidiaries has declared, set aside or paid any dividend or other distribution (whether in cash, stock or property) with respect to any of its securities, except as set forth in Section 6.2(t) of this Agreement;

(d) neither the Company nor any of its Subsidiaries has split, combined or reclassified any of its securities, or issued, or authorized for issuance, any securities other than the grant of Company Options and the issuance of Common Stock upon exercise of Company Options, in each case, in the Ordinary Course of Business;

(e) neither the Company nor any of its Subsidiaries has altered any term of any outstanding securities;

(f) neither the Company nor any of its Subsidiaries has (i) increased or modified the compensation or benefits payable or to become payable to any of their respective current or former directors, employees, contractors or consultants, (ii) increased or modified any bonus, severance, termination, pension, insurance or other employee benefit plan, payment or arrangement made to, for or with any of its current or former directors, employees, contractors or consultants or (iii) entered into any employment, severance or termination agreement;

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(g) neither the Company nor any of its Subsidiaries has except in the Ordinary Course of Business sold, leased, transferred or assigned any property or assets of the Company or any of its Subsidiaries;

(h) neither the Company nor any of its Subsidiaries has incurred, assumed or guaranteed any Indebtedness, or modified the terms of any Indebtedness outstanding as of the Most Recent Balance Sheet Date;

(i) neither the Company nor any of its Subsidiaries has incurred any material liability or created or assumed any Security Interest on any asset, except for Security Interests arising under lease financing arrangements existing as of the Most Recent Balance Sheet Date and Security Interests for taxes not yet due and payable with respect to which the Company maintains adequate reserves;

(j) neither the Company nor any of its Subsidiaries has made any loan, advance or capital contribution to, or investment in, any person or entity other than travel loans or advances in the Ordinary Course of Business;

(k) neither the Company nor any of its Subsidiaries has entered into any Material Contract;

(l) (i) no Material Contract has been modified, (ii) no rights under any Material Contract have been waived or accelerated and (iii) no Contract that would be required to be listed as a Material Contract pursuant to Section 3.14 hereof if such Contract were in effect on the date hereof has been terminated or cancelled;

(m) neither the Company nor any of its Subsidiaries has sold, transferred, pledged or assigned, and there has been no material reduction in the value of, any Company Intellectual Property;

(n) there has not been any labor dispute, other than individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of the Company or any of its Subsidiaries;

(o) there has not been any violation of or conflict with any Law to which the business, operations, assets or properties of the Company or any of its Subsidiaries are subject, except for any such violations and conflicts that could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

(p) neither the Company nor any of its Subsidiaries has agreed or entered into any arrangement to take any action which, if taken prior to the date hereof, would have made any representation or warranty set forth in this ARTICLE III untrue or incorrect as of the date when made;

(q) there has not been any material damage, destruction or loss with respect to the property and assets of the Company or any of its Subsidiaries, whether or not covered by insurance;

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(r) neither the Company nor any of its Subsidiaries has made any change in accounting practices;

(s) neither the Company nor any of its Subsidiaries has made any material Tax election, materially changed any method of Tax accounting or settled any claim for Taxes; or

(t) neither the Company nor any of its Subsidiaries has agreed, whether in writing or otherwise, to do any of the foregoing.

3.32 Related Party Transactions. No Insider of the Company: (i) has borrowed money from or loaned money to the Company or any Subsidiary which has not been repaid; (ii) has any contractual, tort or other claim, express or implied, of any kind whatsoever against the Company or any Subsidiary; (iii) has or has had, since the Company or any Subsidiary’s inception, an interest in any property, rights or assets (including any Company Intellectual Property) owned and/or used by the Company or any Subsidiary in its business; (iv) is party to a contract or other agreement with the Company or any Subsidiary or is engaged in any material transaction or arrangement with the Company or any Subsidiary; (v) has any direct or indirect ownership interest in (A) any firm or corporation with which the Company or any Subsidiary has a material business relationship, or (B) any firm or corporation that competes with the Company or any Subsidiary; or (vi) is directly or indirectly interested in any Material Contract with the Company or any Subsidiary (other than such contracts as relate to any such person’s ownership of membership interests, capital stock or other securities of the Company or any Subsidiary).

3.33 No Illegal Payments. None of the Company, any of its Subsidiaries or, to the knowledge of the Company, any Affiliate, officer, agent or employee thereof, directly or indirectly, has, since inception, on behalf of or with respect to the Company or any of its Subsidiaries, (a) made any unlawful domestic or foreign political contributions, (b) made any payment or provided services which were not legal to make or provide or which the Company, any of its Subsidiaries or any Affiliate thereof or any such officer, employee or other person should reasonably have known were not legal for the payee or the recipient of such services to receive, (c) received any payment or any services which were not legal for the payer or the provider of such services to make or provide, (d) had any material transactions or payments which are not recorded in its accounting books and records or (e) had any off-book bank or cash accounts or “slush funds.”

3.34 Government Contracts. Except as set forth in Section 3.34 of the Disclosure Schedule, neither the Company nor any Subsidiary has any contracts or subcontracts with any Governmental Entity or conducted business with any Governmental Entity.

3.35 Conditions Affecting the Company and the Subsidiaries. The Company has no reason to believe that any loss of any employee, agent, customer or supplier or other advantageous arrangement to the Company and the Subsidiaries will result because of the consummation of the Merger.

3.36 Stockholder Approval. The Company has received the Stockholder Consent from the Major Investors which constitutes the Requisite Stockholder Approval.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE BUYER

AND THE BUYER SUBSIDIARY

Each of the Buyer and the Buyer Subsidiary represents and warrants to the Company that the statements contained in this ARTICLE IV are true and correct as of the date of this Agreement and will be true and correct as of the Closing as though made as of the Closing.

4.1 Organization and Corporate Power. Each of the Buyer and the Buyer Subsidiary is a corporation duly organized, validly existing and in corporate and tax good standing under the laws of the state of its incorporation. The Buyer has all requisite corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it.

4.2 Authorization of Transaction. Each of the Buyer and the Buyer Subsidiary has all requisite power and authority to execute and deliver this Agreement and the other Transaction Documents to which either the Buyer or the Buyer Subsidiary is a party (including the Escrow Agreement and the Exchange Agreement) and to perform its obligations hereunder and thereunder. The execution and delivery by the Buyer and the Buyer Subsidiary of this Agreement and the Transaction Documents to which either the Buyer or the Buyer Subsidiary is a party (including the Escrow Agreement and the Exchange Agreement), subject to the Buyer Subsidiary obtaining consent of the Buyer as its sole stockholder, and the consummation by the Buyer and the Buyer Subsidiary of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Buyer and the Buyer Subsidiary, respectively. This Agreement has been (and the other Transaction Documents to which either the Buyer or the Buyer Subsidiary is a party, including the Escrow Agreement and the Exchange Agreement, when executed and delivered at the Closing will be) duly and validly executed and delivered by the Buyer and the Buyer Subsidiary and constitute (and with respect to such other Transaction Documents will constitute at the Closing) a valid and binding obligation of the Buyer and the Buyer Subsidiary, enforceable against them in accordance with its terms.

4.3 Noncontravention.

(a) Subject to the filing of the Certificate of Merger as required by the DGCL, neither the execution and delivery by the Buyer or the Buyer Subsidiary of this Agreement (and the other Transaction Documents to which each is a party), nor the consummation by the Company of the transactions contemplated hereby, will (a) conflict with or violate any provision of the Certificate of Incorporation or By-laws of the Buyer or the Buyer Subsidiary, (b) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which the Buyer or the Buyer Subsidiary is a party or by which the Buyer or the Buyer Subsidiary is bound or to which any of their respective assets is subject, (c) result in the imposition of any Security Interest upon any assets of the Buyer or the Buyer Subsidiary or (d) assuming compliance by the Buyer and the Buyer Subsidiary with the matters referred to Section 3.4(a), require on the part of the Buyer or the Buyer Subsidiary any notice to or filing with, or

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any permit, authorization, consent or approval of, any Governmental Entity or violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Buyer or the Buyer Subsidiary or any of their respective properties or assets.

(b) No Authorization or Order of, registration, declaration or filing with, or notice to any Governmental Entity is required by the Buyer or the Buyer Subsidiary in connection with the execution and delivery of this Agreement (and the other Transaction Documents to which the Buyer or the Buyer Subsidiary is a party) and the consummation of the Merger, except for such Authorizations, Orders, declarations, filings and notices as may be required under the Hart-Scott-Rodino Act and the Other Antitrust Laws and the filing of the Certificate of Merger as may be required by the DGCL.

4.4 Brokers’ Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement. No claim exists or will exist against the Buyer, any of the Subsidiaries or the Surviving Corporation or, based on any action by Buyer or any of its Subsidiaries, against the Company for payment of any “topping,” “break-up” or “bust-up” fee or any similar compensation or payment arrangement as a result of the transactions contemplated hereby.

4.5 Litigation. There is no Legal Proceeding which is pending or has been threatened in writing against the Buyer, any of its Subsidiaries any of the Buyer’s directors or officers or any of Buyer’s stockholders which any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement. There are no judgments, orders or decrees outstanding against the Buyer or any of the Subsidiaries.

4.6 Payment of Merger Consideration. Buyer has sufficient cash and/or available credit facilities to make payment of the Merger Consideration in full and to make all other necessary payments of its fees and expenses in connection with the transactions contemplated by this Agreement.

4.7 Buyer Subsidiary. Buyer Subsidiary has not conducted any activities other than in connection with its organization, the negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby. Buyer Subsidiary does not have any subsidiaries.

4.8 Disclosure. No representation or warranty by the Buyer contained in this Agreement, and no statement contained in the Disclosure Schedule or any other document, certificate or other instrument delivered or to be delivered by or on behalf of the Buyer pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading.

ARTICLE V

COVENANTS

5.1 Closing Efforts. Each of the Parties shall use its Reasonable Best Efforts to take all actions and to do all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement, including using its Reasonable Best Efforts to

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ensure that (i) its representations and warranties remain true and correct in all material respects through the Closing Date and (ii) the conditions to the obligations of the other Parties to consummate the Merger are satisfied.

5.2 Governmental and Third-Party Notices and Consents.

(a) Government Authorizations. The Parties shall, as promptly as practicable and before the expiration of any relevant legal deadline, but in no event later than five (5) Business Days following the execution and delivery of this Agreement, file with (i) the United States Federal Trade Commission (the “FTC”) and the United States Department of Justice (the “DOJ”), the notification and report form required for the Merger and any supplemental information requested in connection therewith pursuant to the Hart-Scott-Rodino Act, which forms shall specifically request early termination of the waiting period prescribed by the Hart-Scott-Rodino Act and (ii) any other Governmental Entity, any other filings, reports, information and documentation required for the transactions contemplated hereby pursuant to any Other Antitrust Laws. Each of the Buyer and the Company shall furnish to each other’s counsel such necessary information and reasonable assistance as the other may request in connection with its preparation of any filing or submission that is necessary under the Hart-Scott-Rodino Act and any Other Antitrust Laws. The Buyer shall be responsible for all filing fees payable in connection with such filings and for any local counsel fees.

(b) Efforts to obtain Government Authorizations. The Parties shall each use their Reasonable Best Efforts to promptly obtain any clearance required under the Hart-Scott-Rodino Act and any Other Antitrust Laws for the consummation of the transactions contemplated by this Agreement and the other Transaction Documents and shall keep each other apprised of the status of any communications with, and any inquiries or requests for additional information from any Governmental Entity and shall comply promptly with any such inquiry or request.

(c) Cooperation. The Parties hereto commit to instruct their respective counsel to cooperate with each other and use commercially reasonable efforts to facilitate and expedite the identification and resolution of any issues arising under the Hart-Scott-Rodino Act and any Other Antitrust Laws at the earliest practicable dates. Such commercially reasonable efforts and cooperation include counsel’s undertaking (i) to keep each other appropriately informed of communications from and to personnel of the reviewing Governmental Entity, and (ii) to confer with each other regarding appropriate contacts with and response to personnel of such Governmental Entity. From and after the date of this Agreement through the date of termination of the required waiting periods under the Hart-Scott-Rodino Act or any Other Antitrust Law, the Buyer and the Buyer Subsidiary shall not take any action that could reasonably be expected to hinder or delay the obtaining of clearance or the expiration of the required waiting period under the Hart-Scott-Rodino Act or any Other Antitrust Laws.

(d) Third Party Consents. The Company shall use its Reasonable Best Efforts to obtain, at its expense, all such waivers, consents or approvals from third parties, and to give all such notices to third parties, as are required to be listed in the Disclosure Schedule.

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5.3 Stockholder Approval.

(a) The Company shall send, pursuant to Sections 228 and 262(d) of the DGCL, a written notice to all Company Stockholders of the Company that did not execute the Stockholder Consent informing them that this Agreement and the Merger were adopted and approved by the Company Stockholders and that appraisal rights are available for their Company Stock pursuant to Section 262 of the DGCL (which notice shall include a copy of such Section 262).

(b) The Company shall use its Reasonable Best Efforts to seek the necessary stockholder approval of any payments or benefits under any Company Plan or other agreement which would be an “excess parachute payment” under Section 280G of the Code as a result of the transactions contemplated by this Agreement and shall deliver to the Buyer reasonable evidence that (A) the stockholder approval was solicited in conformance with Section 280G and the regulations promulgated thereunder and the necessary stockholder approval was obtained with respect to any payments and/or benefits that were subject to the stockholder vote (the “280G Approval”), or (B) that the 280G Approval was not obtained and as a consequence, that such “parachute payments” shall not be made or provided, as authorized under the waivers of those payments and/or benefits which were executed by all of the affected individuals. Any documentation submitted to stockholders and affected individuals in connection with the Company’s seeking the 280G Approval shall be presented to the Buyer for its review and approval (which approval will not be unreasonably withheld) prior to any submission to the stockholders or the affected individuals.

5.4 Operation of Business. Except as contemplated by this Agreement, during the period from the date of this Agreement to the Closing, the Company shall (and shall cause each Subsidiary to) conduct its operations in the Ordinary Course of Business and in compliance with all applicable laws and regulations and, to the extent consistent therewith, use its Reasonable Best Efforts to preserve intact its current business organization, keep its physical assets in good working condition, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers and others having business dealings with it to the end that its goodwill and ongoing business shall not be impaired in any material respect. Without limiting the generality of the foregoing, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing Date, except with the prior written consent of the Buyer, the Company shall, and it shall cause each of its Subsidiaries to:

(a) maintain its corporate existence, pay its debts and taxes when due, pay or perform other obligations when due, and carry on its business in the Ordinary Course of Business and in accordance with the provisions of this Agreement and in compliance with all Laws, Permits and Contracts;

(b) use its Reasonable Best Efforts consistent with past practices and policies to preserve intact its present business organization, keep available the services of its present employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, to the end that its goodwill and ongoing business be substantially unimpaired on the Closing Date; provided that the Company is not authorized to, and shall not, make any commitments to any of the foregoing persons on behalf of the Buyer;

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(c) maintain its facilities and assets in the same state of repair, order and conditions as they are on the date hereof, reasonable wear and tear excepted;

(d) maintain its books and records in accordance with past practice, and to use its reasonable best efforts to maintain in full force and effect all Permits and Policies;

(e) promptly notify the Buyer of any event or occurrence not in the Ordinary Course of Business;

(f) will provide the Buyer with a list of actions that must be taken by the Company or any of its Subsidiaries within sixty (60) calendar days immediately following the Closing Date for the purposes of obtaining, maintaining, perfecting, preserving or renewing any Company Intellectual Property; and

(g) use its Reasonable Best Efforts to conduct its business in such a manner that on the Closing Date the representations and warranties of the Company contained in this Agreement shall be true and correct, as though such representations and warranties were made on and as of such date, and the Company shall use its Reasonable Best Efforts to cause all of the conditions to the obligations of the Buyer and the Buyer Subsidiary under this Agreement to be satisfied by the Closing Date.

5.5 Negative Covenants. Except as expressly provided in this Agreement, prior to the Closing or as provided in Section 5.5 of the Disclosure Schedule, the Company shall not (and shall cause each Subsidiary not to), without the prior written consent of the Buyer:

(a) issue or sell any stock or other securities of the Company or any Subsidiary or any options, warrants or rights to acquire any such stock or other securities (except pursuant to the conversion or exercise of Preferred Stock or Company Options outstanding on the date hereof), or amend any of the terms of (including the vesting of) any Company Options or restricted stock agreements, or repurchase or redeem any stock or other securities of the Company (except from former employees, directors or consultants in accordance with agreements providing for the repurchase of shares at their original issuance price in connection with any termination of employment with or services to the Company);

(b) split, combine or reclassify any shares of its capital stock; or declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, except as set forth in Section 6.2(t) of this Agreement;

(c) create, incur or assume any Indebtedness (including obligations in respect of capital leases); assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person or entity; or make any loans, advances or capital contributions to, or investments in, any other person or entity;

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(d) enter into, adopt or amend any Employee Benefit Plan or any employment or severance agreement or arrangement of the type described in Section 3.21(k) or (except for normal increases in the Ordinary Course of Business for employees who are not Affiliates) increase in any manner the compensation or fringe benefits of, or materially modify the employment terms of, its directors, officers or employees, generally or individually, or pay any bonus or other benefit to its directors, officers or employees (except for existing payment obligations listed in Section 3.21 of the Disclosure Schedule) or hire any new officers or (except in the Ordinary Course of Business) any new employees;

(e) acquire, sell, lease, license or dispose of any assets or property (including any shares or other equity interests in or securities of any Subsidiary or any corporation, partnership, association or other business organization or division thereof), other than purchases and sales of assets in the Ordinary Course of Business;

(f) mortgage or pledge any of its property or assets or subject any such property or assets to any Security Interest;

(g) other than travel loans or advances in the Ordinary Course of Business consistent with past practice, make any loans, advances or capital contributions to, or investments in, any other person;

(h) discharge or satisfy any Security Interest or pay any obligation or liability other than in the Ordinary Course of Business;

(i) (i) amend, modify or terminate, or waive, release or assign any rights under, any Material Contract, (ii) enter into any Contract which, if entered into prior to the date hereof, would have been required to be set forth in Section 3.12, Section 3.13, Section 3.14 or Section 3.17 of the Disclosure Schedule except in the Ordinary Course of Business, provided, however, that the form of any such Contract shall be subject to the reasonable prior approval of the Buyer, or (iii) otherwise take any action or engage in any transaction that is material to the Company and its Subsidiaries taken as a whole;

(j) amend any Company Option or authorize cash payments in exchange for any Company Option;

(k) be party to (i) any merger, acquisition, consolidation, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its Subsidiaries or (ii) any purchase of all or any substantial portion of the assets or securities of the Company or any of its Subsidiaries;

(l) amend its Charter Documents;

(m) change its accounting methods, principles or practices, except insofar as may be required by a generally applicable change in GAAP, or make or change any material Tax election, settle any claim for Taxes, or amend any Tax Return;

(n) make or commit to make any capital expenditure in excess of $25,000 per item or $50,000 in the aggregate;

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(o) institute or settle any Legal Proceeding;

(p) take any actions outside the Ordinary Course of Business;

(q) take any action or fail to take any action permitted by this Agreement with the knowledge that such action or failure to take action would result in (i) any of the representations and warranties of the Company set forth in this Agreement becoming untrue or (ii) any of the conditions to the Merger set forth in ARTICLE IV not being satisfied; or

(r) agree in writing or otherwise to take any of the foregoing actions.

5.6 Access to Information.

(a) The Company shall (and shall cause each Subsidiary to) permit representatives of the Buyer to have reasonable access (at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Company and the Subsidiaries) to all premises, properties, financial, tax and accounting records (including the work papers of the Company’s independent accountants), contracts, other records and documents, and personnel, of or pertaining to the Company and each Subsidiary.

(b) As soon as practicable, but in no event later than thirty (30) days after the end of each month beginning on the date hereof and prior to the Closing, the Company shall furnish to the Buyer an unaudited income statement for such month and a balance sheet as of the end of such month, prepared on a basis consistent with the Financial Statements. Such financial statements shall present fairly the financial condition and results of operations of the Company and the Subsidiaries on a consolidated basis as of the dates thereof and for the periods covered thereby, and shall be consistent with the books and records of the Company and the Subsidiaries.

(c) Each of the Buyer and the Buyer Subsidiary (i) shall treat and hold as confidential any Confidential Information, (ii) shall not use any of the Confidential Information except in connection with this Agreement, and (iii) if this Agreement is terminated for any reason whatsoever, shall return to the Company all tangible embodiments (and all copies) thereof which are in its possession.

(d) As soon as practicable after the Closing Date, the Company will deliver to Buyer on one or more CD-Rom disks a complete and accurate (as of the Closing Date) electronic copy in all material respects of the Intralinks due diligence data site managed by William Blair.

5.7 Notification of Certain Matters. The Company shall give prompt notice to the Buyer of any fact, event or circumstance known to it that (a) individually or taken together with all other facts, events and circumstances known to it, has had or could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (b) would cause or constitute a breach of any of its representations, warranties, covenants or agreements contained herein, (c) the failure of any condition precedent to the Buyer’s and the Buyer Subsidiary’s obligations, (d) any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the Merger, (e) any notice or other communication from any Governmental Entity in connection with the Merger or (f) any Legal Proceedings commenced relating to the Company or any of its

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Subsidiaries that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.19; provided, however, that (i) the delivery of any notice pursuant to this Section 5.7 shall not limit or otherwise affect any remedies available to the Buyer or prevent or cure any misrepresentations, breach of warranty or breach of covenant and (ii) disclosure by the Company shall not be deemed to amend or supplement the Disclosure Schedule or constitute an exception to any representation or warranty.

5.8 Exclusivity.

(a) The Company shall not, and the Company shall require each of its officers, directors, employees, representatives and agents not to, directly or indirectly, (i) initiate, solicit, encourage or otherwise facilitate any inquiry, proposal, offer or discussion with any party (other than the Buyer) concerning any merger, reorganization, consolidation, recapitalization, business combination, liquidation, dissolution, share exchange, sale of stock, sale of material assets or similar business transaction involving the Company, any Subsidiary or any division of the Company, (ii) furnish any non-public information concerning the business, properties or assets of the Company, any Subsidiary or any division of the Company to any third party (other than the Buyer or any Governmental Entity as required by Law) or (iii) engage in discussions or negotiations with any third party (other than the Buyer or any Governmental Entity as required by Law) concerning any such transaction.

(b) The Company shall immediately notify any party with which discussions or negotiations of the nature described in paragraph (a) above were pending prior to the date hereof that the Company is terminating such discussions or negotiations. If the Company receives any inquiry, proposal or offer of the nature described in paragraph (a) above, the Company shall, within one (1) Business Day after such receipt, notify the Buyer of such inquiry, proposal or offer, including the identity of the other party and the terms of such inquiry, proposal or offer.

5.9 Expenses. Except as set forth in ARTICLE VII and the Escrow Agreement, each of the Parties shall bear its own costs and expenses (including legal and accounting fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby.

5.10 Employees. The Company shall use its reasonable best efforts to cause each of the Key Employees to execute a noncompetition agreement in the form attached as Exhibit H hereto (“Key Employee Noncompetition Agreement”); provided that the Company is not authorized to make any commitment on behalf of the Buyer to any such Key Employee.

5.11 Tax Matters.

(a) Tax Periods Ending on or Before the Closing Date. The Stockholder Representative shall prepare, or cause to be prepared, and file, or cause to be filed, all Tax Returns of the Company and any of its Subsidiaries for all periods ending on or prior to the Closing Date which are filed after the Closing Date. The Stockholder Representative shall permit the Buyer to review and comment on each such Tax Return described in the preceding sentence prior to filing and shall not file any such Tax Return without the consent of the Buyer,

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which consent shall not be unreasonably withheld, delayed, or conditioned. To the extent not otherwise taken into account in the calculation of the Final Net Assets, the Stockholder Representative (on behalf of the Company Stockholders) shall pay the amount of the Taxes with respect to such Tax Returns within five (5) days following any demand by the Buyer for such payment. Notwithstanding the foregoing, at the election of the Stockholder Representative, funds may be released from the Indemnity Escrow Fund and the Stockholder Representative Escrow Fund to satisfy the liability of the Company Stockholders to pay the Taxes described in the preceding sentence.

(b) Tax Periods Beginning Before and Ending After the Closing Date. The Buyer shall prepare, or cause to be prepared, and file, or cause to be filed, all Tax Returns of the Company and any of its Subsidiaries for Tax periods which begin before the Closing Date and end after the Closing Date. To the extent not otherwise taken into account in the calculation of the Final Net Assets, the Stockholder Representative (on behalf of the Company Stockholders) shall pay to the Buyer, within five days following any demand by the Buyer, with respect to such Tax Returns, an amount equal to the portion of such Taxes which relates to the portion of such taxable period ending on the Closing Date (as determined pursuant to Section 5.11(d) hereof). Notwithstanding the foregoing, at the election of the Stockholder Representative, funds may be released from the Indemnity Escrow Fund and the Stockholder Representative Escrow Fund to satisfy the liability of the Company Stockholders to pay the Taxes described in the preceding sentence. The Buyer shall permit the Stockholder Representative to review and comment upon such Tax Returns prior to filing and shall not file any such Tax Return without the consent of the Stockholder Representative, which consent shall not be unreasonably withheld, delayed, or conditioned.

(c) Cooperation in Filing Tax Returns. The Buyer and the Stockholder Representative shall, and shall each cause its Affiliates to, provide to the other such cooperation and information, as and to the extent reasonably requested, in connection with the filing of any Tax Return, amended Tax Return or claim for refund, determining liability for Taxes or a right to refund of Taxes, or in conducting any audit, litigation or other proceeding with respect to Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings and other determinations by Taxing Authorities, and relevant records concerning the ownership and Tax basis of property, which any such party may possess. Each party will retain all Tax Returns, schedules, work papers, and all material records and other documents relating to Tax matters, of the Company and each of its Subsidiaries for the Tax period first ending after the Closing Date and for all prior Tax periods until the later of either (i) the expiration of the applicable statute of limitations (and, to the extent notice is provided with respect thereto, any extensions thereof) for the Tax periods to which the Tax Returns and other documents relate or (ii) eight (8) years following the due date (without extension) for such Tax Returns. Thereafter, the party holding such Tax Returns or other documents may dispose of them provided that such party shall give to the other party the notice described in Section 10.7 prior to doing so. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided.

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(d) Allocation of Certain Taxes.

(i) If the Company or any of its Subsidiaries is permitted but not required under applicable state, local or foreign income tax laws to treat the Closing Date as the last day of a taxable period, then the parties shall treat that day as the last day of a taxable period.

(ii) In the case of Taxes arising in a taxable period of the Company or any of its Subsidiaries that includes, but does not end on, the Closing Date, except as provided in Section 5.11(d)(iii), the allocation of such Taxes between the Pre-Closing Period and the Post-Closing Period shall be made on the basis of an interim closing of the books as of the end of the Closing Date. “Post-Closing Period” means any taxable period or portion thereof beginning after the Closing Date. If a taxable period begins on or prior to the Closing Date and ends after the Closing Date, then the portion of the taxable period that begins on the day following the Closing Date shall constitute a Post-Closing Period. “Pre-Closing Period” means any taxable period or portion thereof that is not a Post-Closing Period. For the avoidance of doubt, for purposes of this Section 5.11(d)(ii), any Tax resulting from the transactions contemplated by this Agreement shall be attributable to the Pre-Closing Period. Notwithstanding the foregoing, the Buyer agrees that any employer taxes resulting from the payment of compensation to employees shall be borne by the Surviving Corporation; provided such amounts are accrued by the Company and included in the calculation of Net Assets.

(iii) In the case of any Taxes that are imposed on a periodic basis and are payable for a taxable period that includes, but does not end on, the Closing Date, the portion of such Tax which relates to the Pre-Closing Period shall, in the case of any Taxes other than Taxes based upon or related to income or receipts, or franchise Taxes, or Taxes based on capitalization, debt or shares of stock authorized, issued or outstanding, be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the Pre-Closing Period and the denominator of which is the number of days in the entire taxable period.

5.12 Company Plans.

(a) Prior to the Closing Date, with respect to each Company Plan, the Company shall: (i) make all required contributions, (ii) cause all of the account balances of the participants under any defined contribution pension or profit sharing plan to become fully vested and non-forfeitable, and (iii) terminate the Company 401(k) Plan and provide evidence reasonably satisfactory to the Buyer of such termination. The Company and the Buyer will take all actions necessary, upon the request of a Company Employee, to facilitate a direct transfer of an eligible rollover distribution (as defined in Section 401(a)(31) of the Code) and any participant loans from any terminating pension or profit sharing plan to the 401(k) plan sponsored by the Buyer.

(b) Prior to the Effective Time, the Company shall amend all Company Plans that are or could be subject to Section 409A of the Code to comply with the final regulations under Section 409A of the Code, subject to the prior review and approval of the Buyer.

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5.13 Employee Matters.

(a) Each employee of the Company who becomes an employee of the Buyer or the Surviving Corporation after the Closing Date may be referred to as a “Continuing Employee.” The Buyer agrees that for a period of twelve (12) months following the Closing Date, each Continuing Employee shall be provided compensation that is, in the aggregate, substantially similar to the compensation provided by the Company to such employee as of immediately prior to the execution and delivery of this Agreement. The Buyer agrees that for a period of twelve (12) months following the Closing Date, each Continuing Employee shall be provided benefits in a manner consistent with similarly situated employees of the Buyer. Within sixty (60) days following the Closing, the Buyer shall increase salaries for certain Continuing Employees, to be agreed upon by the Company and the Buyer prior to Closing, for certain discrepancies between the benefits provided by the Company immediately prior to the execution and delivery of the Agreement and the benefits provided by the Buyer. The Buyer’s obligation to increase salaries for such Continuing Employees for such discrepancies shall not exceed $150,000 in the aggregate.

(b) Until December 31, 2007, the Buyer shall maintain the Company’s health and welfare plans as existing as of the date hereof. After December 31, 2007, except as otherwise expressly provided in this Agreement or in a Contract to which such employee or former employee of the Company is a party, each Continuing Employee shall be entitled to participate in the health and welfare plans sponsored by the Buyer to the same extent as similarly-situated employees of the Buyer are entitled to participate.

(c) After the Closing Date, except as otherwise expressly provided in this Agreement or in a Contract to which such employee or former employee of the Company is a party, each Continuing Employee shall be entitled to participate in the employee pension plan sponsored by the Buyer to the same extent as similarly-situated employees of the Buyer are entitled to participate.

(d) The Buyer agrees to accept rollovers from participants in the Company’s 401(k) plan to the extent permitted under Buyer’s 401(k) plan.

5.14 Severance, Other Arrangements and Prior Service.

(a) Following the Closing, Buyer shall honor or cause its Affiliates to honor all severance agreements and employment Contracts with the officers and employees of the Company as disclosed in the Company Disclosure Schedule and as in effect immediately prior to the Closing Date.

(b) Following the Closing, Buyer will, and it will cause its Affiliates to, use commercially reasonable efforts to (a) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Continuing Employees under any pension, health or welfare plan of Buyer or any of its Affiliates in which such employees are eligible to participate after the Closing, (b) provide each such Continuing Employee with credit for any deductibles paid prior to the Closing in satisfying any applicable deductible requirements under any health or welfare plans of Buyer

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or any of its Affiliates in which such employee is eligible to participate after the Closing to the extent such deductible requirements were incurred in the calendar year or plan year in which such employee becomes eligible to participate in the health or welfare plans maintained by Buyer or any of its Affiliates, (c) provide each such Continuing Employee with credit for all service with the Company under each pension, health or welfare plan of Buyer and its Affiliates in which such Continuing Employee is eligible to participate after the Closing for vesting, eligibility and benefit and contribution calculation purposes, and for purposes of applicable vacation, leave and time-off policies, and (d) and each Continuing Employee shall be entitled to receive any accrued bonus reflected in the Most Recent Balance Sheet for such Continuing Employee as well as any additional amount earned for 2007 on or before January 31, 2008; provided, however, that (i) in no event shall such employees be entitled to any credit to the extent that it would result in a duplication of benefits with respect to the same period of service, and (ii) in no event shall Buyer be required to take, or liable for any failure to take, and action pursuant to this Section 5.14 that is not permitted under the terms and conditions of the pension, health and welfare plans of Buyer and its Affiliates.

ARTICLE VI

CONDITIONS TO CONSUMMATION OF MERGER

6.1 Conditions to Each Party’s Obligations. The respective obligations of each Party to consummate the Merger are subject to the satisfaction of the following conditions:

(a) this Agreement and the Merger shall have received the Requisite Stockholder Approval;

(b) no temporary restraining order, preliminary or permanent injunction or other Order preventing the consummation of the Merger shall be in effect. No Law shall have been enacted or shall be deemed applicable to the Merger which makes the consummation of the Merger illegal; and

(c) the waiting period applicable to the consummation of the Merger under the Hart-Scott-Rodino Act and any applicable waiting periods under the Other Antitrust Laws shall have expired or been terminated and all other Authorizations and Orders of, declarations and filings with, and notices to any Governmental Entity required to permit the consummation of the Merger shall have been obtained or made.

6.2 Conditions to Obligations of the Buyer and the Buyer Subsidiary. The obligation of each of the Buyer and the Buyer Subsidiary to consummate the Merger is subject to the satisfaction (or waiver by the Buyer) of the following additional conditions:

(a) the number of Dissenting Shares shall not exceed ten percent (10%) of the number of outstanding shares of Common Stock as of the Effective Time (calculated after giving effect to the conversion into Common Stock of all outstanding Preferred Stock and exercise of stock options);

(b) the Company and the Subsidiaries shall have obtained at their own expense (and shall have provided copies thereof to the Buyer) all of the waivers, permits,

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consents, approvals or other authorizations (including all necessary consents, approvals or other authorizations from landlords, sublandlords or any other parties that are required under the Leases of the Company in connection with the transactions contemplated hereby), and effected all of the registrations, filings and notices (referred to in Section 5.2) that are required on the part of the Company or the Subsidiaries, except for such Authorizations, Orders, declarations, filings and notices as may be required under the Hart-Scott-Rodino Act, the expenses of which shall be paid by the Buyer;

(c) the representations and warranties of the Company set forth in this Agreement shall have been true and correct at and as of the date hereof and shall be true and correct at and as of the Closing Date as if made at and as of the Closing Date, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date, and the Buyer shall have received a certificate dated the Closing Date signed on behalf of the Company by the President of the Company to such effect;

(d) there shall not have occurred any event, occurrence or change that has had, or could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

(e) the Company shall have performed or complied with its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Closing;

(f) no Legal Proceeding shall be pending or threatened wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of the transactions contemplated by this Agreement, (ii) cause the transactions contemplated by this Agreement to be rescinded following consummation or (iii) have, individually or in the aggregate, a Company Material Adverse Effect, and no such judgment, order, decree, stipulation or injunction shall be in effect;

(g) the Company shall have delivered to the Buyer and the Buyer Subsidiary the Company Certificate;

(h) the Buyer shall have received copies of the resignations, effective as of the Closing, of each director and officer of the Company and the Subsidiaries (other than any such resignations which the Buyer designates, by written notice to the Company, as unnecessary);

(i) all shares of Preferred Stock shall have been converted into, or exercised or exchanged for, shares of Common Stock, and the Buyer shall have received a certificate signed on behalf of the Company by the President of the Company to such effect;

(j) the Company shall have obtained the consent of each Person whose Consent is required under the Material Contracts set forth in Schedule 3.14 and shall have provided evidence of each such consent in form and substance satisfactory to the Buyer;

(k) the Escrow Agent and the Stockholder Representative shall have duly executed and delivered the Escrow Agreement to the Buyer;

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(l) the holders of not less than 95% of the outstanding voting securities of the Company immediately prior to the Effective Time shall have duly executed and delivered to the Buyer the Transmittal Letter;

(m) each of the current Company Employees who has not previously executed and delivered to the Company or a Subsidiary, as applicable, a Standard Proprietary Information Agreement shall have executed and delivered to the Buyer a Standard Proprietary Information Agreement;

(n) no more than 10% of the employees of the Company and its Subsidiaries whose names are set forth in Schedule 3.20 shall have ceased to be employees of, or shall have expressed an intention to terminate their employment with, the Company and its Subsidiaries;

(o) the Buyer shall have received (i) from the assistant secretary to the Company a certificate in substantially the form attached hereto as Exhibit A-1, addressed to the Buyer dated as of the Closing Date and (ii) from counsel to the Company an opinion in substantially the form attached hereto as Exhibit A-2, addressed to the Buyer dated as of the Closing Date;

(p) the Exchange Agent and the Stockholder Representative shall have duly executed and delivered the Exchange Agreement to the Buyer;

(q) the Buyer shall have received such other certificates and instruments (including certificates of good standing of the Company and the Subsidiaries in their jurisdiction of organization and the various foreign jurisdictions in which they are qualified (to the extent available), certified Charter Documents, certificates as to the incumbency of officers and the adoption of authorizing resolutions) as it shall reasonably request in connection with the Closing;

(r) Hemkunt Inc. and CSS Investment LLC shall have duly executed and delivered the Stock Purchase Agreement to the Buyer;

(s) the Company shall have delivered to the Buyer a certificate of the Company, in form and substance acceptable to Buyer, to the effect that neither the Company nor any of its Subsidiaries is a “U.S. real property holding corporation” for purposes of Section 897 and 1445 of the Code and the regulations promulgated thereunder;

(t) immediately prior to the Closing, the Company shall have distributed cash from its operating surplus to the Company Stockholders and employees; provided, however, that such distribution shall not reduce the Net Assets below $5,778,000, measured as of the Closing;

(u) each of the Key Employees shall have executed and delivered to Buyer the Noncompetition Agreement;

(v) the Company shall have delivered to the Buyer an arm’s length study, in relation to the intercompany transactions between the Company and its Subsidiaries, prepared by an accounting firm or law firm of international standing, reasonably acceptable to both Buyer and the Company, in compliance with United States, United Kingdom and Indian transfer pricing rules and documentation requirements, which shall include a detailed analysis of applicable market comparables reviewed in conjunction with the preparation of the study;

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(w) the Company shall, until the sixth anniversary of the Closing, cause to be maintained in effect, to the extent available, the policies of directors’ and officers’ liability insurance maintained by the Company as of the Closing, or policies of at least the same coverage and amounts containing terms that are not materially less advantageous to the insured parties, covering those persons who, immediately prior to the Effective Time, are covered by the Company’s directors’ and officers’ liability insurance policy with respect to claims arising from facts or events that occurred on or prior to the Closing (the “D&O Six-Year Tail Coverage”), and shall deliver written evidence to the Buyer before the Closing of such D&O Six-Year Tail Coverage and payment of all applicable premiums;

(x) the Company shall have delivered to the Buyer the unaudited consolidated balance sheet and income statement of the Company as of and for the nine-month period ended September 30, 2007;

(y) the Company shall have delivered to the Buyer written evidence that any fees, commissions or other payments owed by the Company to William Blair & Company, Avendus Advisors or Richard Braddock with respect to the transactions contemplated by this Agreement shall be paid in full at the Closing;

(z) three (3) days prior to the Closing, the Company shall deliver to the Buyer evidence of an arrangement sufficient to recognize revenue under GAAP for projects representing at least $3,430,000 of the revenue during November and December, 2007. Such evidence of an arrangement shall include at a minimum, the name of the customer, project name, description of services to be provided by the Company to the customer, and all pricing and billing terms, including customer incentive provisions such as volume discounts and rebates, if any, and performance bonuses and penalties, if any. If terms with a customer require a purchase order to be issued in order for payment to be made by the Company’s customer to the Company, then a customer purchase order must be part of the documentation evidencing the arrangement;

(aa) the Company shall have prepared and filed all sales and use Tax Returns required to be filed in the State of New Jersey, State of Arizona and Commonwealth of Pennsylvania for all quarterly periods ending on or prior to the Closing Date;

(bb) the Buyer shall have received an acknowledgment from Jaswinder Chadha, in a form and substance reasonably satisfactory to the Buyer, that Mr. J. Chadha waives the right to any and all severance payments and other obligations due to him from the Company or the Buyer that may be arise in connection with the transactions contemplated hereby, including a change in title or removal from the Company’s Board of Directors, and any further acceleration, not set forth on Section 2.3 of the Disclosure Schedule, of his Company stock options other than in a manner consistent with the provisions of the Buyer’s Amended and Restated 1999 Incentive Compensation Plan; and

(cc) the Buyer shall have received an acknowledgment from each of Navdeep Chadha, David Wood and Patrick Brundage, each in a form and substance reasonably

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satisfactory to the Buyer, that each of Mssrs. N. Chadha, Wood and Brundage waive the right to any further acceleration, not set forth on Section 2.3 of the Disclosure Schedule, of their Company stock options other than in a manner consistent with the provisions of the Buyer’s Amended and Restated 1999 Incentive Compensation Plan.

6.3 Conditions to Obligations of the Company. The obligation of the Company to consummate the Merger is subject to the satisfaction of the following additional conditions:

(a) the representations and warranties of the Buyer and the Buyer Subsidiary set forth in this Agreement shall have been true and correct at and as of the date hereof and shall be true and correct at and as of the Closing Date as if made at and as of the Closing Date, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date, and the Company shall have received a certificate dated the Closing Date signed on behalf of the Buyer by the President of the Buyer to such effect;

(b) each of the Buyer and the Buyer Subsidiary shall have performed or complied with its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Closing;

(c) the Escrow Agreement shall have been duly executed and delivered by the Buyer and the Escrow Agent;

(d) the Exchange Agent, the Buyer and the Stockholder Representative shall have duly executed and delivered the Exchange Agreement to the Company and, at the Closing, the Buyer shall have delivered to the Exchange Agent the Merger Consideration (less the Indemnity Escrow Amounts and Stockholder Representative Escrow Amounts pursuant to Section 2.42.4(a)) in immediately available funds by wire transfer to the account designated in the Exchange Agreement;

(e) no Legal Proceeding shall be pending or threatened wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of the transactions contemplated by this Agreement or (ii) cause the transactions contemplated by this Agreement to be rescinded following consummation, and no such judgment, order, decree, stipulation or injunction shall be in effect;

(f) the Buyer shall have delivered to the Company the Buyer Certificate;

(g) the Company shall have received such other certificates and instruments (including certificates of good standing of the Buyer and the Buyer Subsidiary in their jurisdiction of organization, certified charter documents, certificates as to the incumbency of officers and the adoption of authorizing resolutions) as it shall reasonably request in connection with the Closing; and

(h) the Buyer Subsidiary will have received an Action by Written Consent of the Sole Stockholder from the Buyer, as the sole stockholder of the Buyer Subsidiary, pursuant to which the Buyer will adopt this Agreement pursuant to and in accordance with the applicable provisions of Delaware Law and the Buyer Subsidiary’s Certificate of Incorporation and By-laws.

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ARTICLE VII

INDEMNIFICATION

7.1 Indemnification by the Indemnifying Stockholders. The Indemnifying Stockholders shall indemnify the Buyer in respect of, and hold it harmless against, any and all Damages incurred or suffered by the Surviving Corporation or the Buyer or any Affiliate thereof resulting from, relating to or constituting:

(a) any breach as of the date of this Agreement or as of the Closing Date, of any representation or warranty of the Company contained in this Agreement or in any of the Transaction Documents;

(b) any failure to perform any covenant or agreement of the Company contained in this Agreement or in any of the Transaction Documents; or

(c) any failure of any Company Stockholder to have good, valid and marketable title to the issued and outstanding Company Stock issued in the name of such Company Stockholder, free and clear of all Security Interests (such indemnification to be several by such Company Stockholder).

7.2 Indemnification by the Buyer. The Buyer agrees to indemnify in full the Company, and the Company’s officers, directors, employees, agents and the Company Stockholders (collectively, the “Company Indemnified Parties”) and hold them harmless against any Damages which any of the Company Indemnified Parties may suffer, sustain or become subject to as a result of:

(a) any breach as of the date of this Agreement or as of the Closing Date, of any representation and warranty of the Buyer and the Buyer Subsidiary contained in this Agreement or in any of the Transaction Documents;

(b) any failure to perform any covenant or agreement of the Buyer or the Buyer Subsidiary contained in this Agreement or in any of the Transaction Documents; or

(c) any claims or threatened claims against the Company or the Company Indemnifying Parties arising out of the actions or inactions of the Buyer or the Buyer Subsidiary with respect to the Company’s business after the Effective Time.

7.3 Indemnification Claims.

(a) An Indemnified Party shall give written notification to the Indemnifying Party of the commencement of any Third Party Action. Such notification shall be given within twenty (20) days after receipt by the Indemnified Party of notice of such Third Party Action, and shall describe in reasonable detail (to the extent known by the Indemnified Party) the facts constituting the basis for such Third Party Action and the amount of the claimed damages; provided, however, that no delay or failure on the part of the Indemnified Party in so notifying

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the Indemnifying Party shall relieve the Indemnifying Party of any liability or obligation hereunder except to the extent of any damage or liability caused by or arising out of such failure. Within twenty (20) days after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such Third Party Action with counsel reasonably satisfactory to the Indemnified Party; provided that (i) the Indemnifying Party may only assume control of such defense if (A) it acknowledges in writing to the Indemnified Party that any damages, fines, costs or other liabilities that may be assessed against the Indemnified Party in connection with such Third Party Action constitute Damages for which the Indemnified Party shall be indemnified pursuant to this ARTICLE VII and (B) the ad damnum is less than or equal to the amount of Damages for which the Indemnifying Party is liable under this ARTICLE VII and (ii) the Indemnifying Party may not assume control of the defense of Third Party Action involving criminal liability or in which equitable relief is sought against the Indemnified Party. If the Indemnifying Party does not, or is not permitted under the terms hereof to, so assume control of the defense of a Third Party Action, the Indemnified Party shall control such defense. The Non-controlling Party may participate in such defense at its own expense. The Controlling Party shall keep the Non-controlling Party advised of the status of such Third Party Action and the defense thereof and shall consider in good faith recommendations made by the Non-controlling Party with respect thereto. The Non-controlling Party shall furnish the Controlling Party with such information as it may have with respect to such Third Party Action (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and shall otherwise cooperate with and assist the Controlling Party in the defense of such Third Party Action. The fees and expenses of counsel to the Indemnified Party with respect to a Third Party Action shall be considered Damages for purposes of this Agreement if it is determined that such Third Party Action is subject to indemnification hereunder and (i) the Indemnified Party controls the defense of such Third Party Action pursuant to the terms of this Section 7.3(a) or (ii) the Indemnifying Party assumes control of such defense and the Indemnified Party reasonably concludes that the Indemnifying Party and the Indemnified Party have conflicting interests or different defenses available with respect to such Third Party Action. The Indemnifying Party shall not agree to any settlement of, or the entry of any judgment arising from, any Third Party Action without the prior written consent of the Indemnified Party, which shall not be unreasonably withheld, conditioned or delayed; provided that the consent of the Indemnified Party shall not be required if the Indemnifying Party agrees in writing to pay any amounts payable pursuant to such settlement or judgment and such settlement or judgment includes a complete release of the Indemnified Party from further liability and has no other adverse effect on the Indemnified Party. The Indemnified Party shall not agree to any settlement of, or the entry of any judgment arising from, any such Third Party Action without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, conditioned or delayed.

(b) In order to seek indemnification under this ARTICLE VII, an Indemnified Party shall deliver a Claim Notice to the Indemnifying Party. If the Indemnified Party is the Buyer and is seeking to enforce such claim pursuant to the Escrow Agreement, the Indemnifying Party shall deliver a copy of the Claim Notice to the Escrow Agent.

(c) Within twenty (20) days after delivery of a Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party a Response, in which the Indemnifying

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Party shall: (i) agree that the Indemnified Party is entitled to receive all of the Claimed Amount (in which case the Response shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Claimed Amount, by check or by wire transfer; provided that if the Indemnified Party is the Buyer and is seeking to enforce such claim pursuant to the Escrow Agreement, the Indemnifying Party and the Indemnified Party shall deliver to the Escrow Agent, within three (3) days following the delivery of the Response, a written notice executed by both parties instructing the Escrow Agent to disburse the Claimed Amount to the Buyer), (ii) agree that the Indemnified Party is entitled to receive the Agreed Amount (in which case the Response shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Agreed Amount, by check or by wire transfer; provided that if the Indemnified Party is the Buyer and is seeking to enforce such claim pursuant to the Escrow Agreement, the Indemnifying Party and the Indemnified Party shall deliver to the Escrow Agent, within three (3) days following the delivery of the Response, a written notice executed by both parties instructing the Escrow Agent to disburse the Agreed Amount to the Buyer) or (iii) dispute that the Indemnified Party is entitled to receive any of the Claimed Amount.

(d) For purposes of this Section 7.3 and the third and fourth sentences of Section 7.4, (i) if the Indemnifying Stockholders comprise the Indemnifying Party, any references to the Indemnifying Party (except provisions relating to an obligation to make any payments) shall be deemed to refer to the Stockholder Representative, and (ii) if the Indemnifying Stockholders comprise the Indemnified Party, any references to the Indemnified Party (except provisions relating to an obligation to make or a right to receive any payments) shall be deemed to refer to the Stockholder Representative. The Stockholder Representative shall have full power and authority on behalf of each Indemnifying Stockholder to take any and all actions on behalf of, execute any and all instruments on behalf of, and execute or waive any and all rights of, the Indemnifying Stockholders under this ARTICLE VII. The Stockholder Representative shall have no liability to any Indemnifying Stockholder for any action taken or omitted on behalf of the Indemnifying Stockholders pursuant to this ARTICLE VII.

7.4 Survival of Representations and Warranties. All representations and warranties that are covered by the indemnification agreements in this ARTICLE VII shall (a) survive the Closing and (b) shall expire on the date twenty-four (24) months following the Closing Date. The representations and warranties set forth in Sections 3.1, 3.2, 3.3, 3.5, 3.9, 3.13, 3.14, 3.15, 3.22, 3.23, 4.1 and 4.2 and the covenants contained in Sections 7.7 and 7.8 shall be referred to herein collectively as the “Core Representations”. If an Indemnified Party delivers to an Indemnifying Party, before expiration of a representation or warranty, either a Claim Notice based upon a breach of such representation or warranty, or an Expected Claim Notice based upon a breach of such representation or warranty, then the applicable representation or warranty shall survive until, but only for purposes of, the resolution of the matter covered by such notice. If the legal proceeding or written claim with respect to which an Expected Claim Notice has been given is definitively withdrawn or resolved in favor of the Indemnified Party, the Indemnified Party shall promptly so notify the Indemnifying Party; and if the Indemnified Party has delivered a copy of the Expected Claim Notice to the Escrow Agent and funds have been retained in escrow after the Termination Date (as defined in the Escrow Agreement) with respect to such Expected Claim Notice, the Indemnifying Party and the Indemnified Party shall promptly deliver to the Escrow Agent a written notice executed by both parties instructing the Escrow Agent to disburse such retained funds to the Indemnifying Stockholders in accordance

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with the terms of the Escrow Agreement. The rights to indemnification set forth in this ARTICLE VII shall not be affected by (i) any investigation conducted by or on behalf of an Indemnified Party or any knowledge acquired (or capable of being acquired) by an Indemnified Party, whether before or after the date of this Agreement or the Closing Date (including through supplements to the Disclosure Schedule permitted by Section 5.7), with respect to the inaccuracy or noncompliance with any representation, warranty, covenant or obligation which is the subject of indemnification hereunder or (ii) any waiver by an Indemnified Party of any closing condition relating to the accuracy of representations and warranties or the performance of or compliance with agreements and covenants.

7.5 Limitations.

(a) Notwithstanding anything to the contrary herein, (i) the aggregate liability of the Indemnifying Stockholders for Damages under this ARTICLE VII shall not exceed the Indemnity Escrow Amount and (ii) except with respect to the Core Representations, the Indemnifying Stockholders shall not be liable under this ARTICLE VII unless and until the aggregate Damages for which they would otherwise be liable under this ARTICLE VII exceed $675,000 at which point the Indemnifying Stockholders shall only be liable for the amount of Damages in excess of such amount; provided, that the limitations set forth in this sentence shall not apply to claims based upon any fraud committed by the Company or the Indemnifying Stockholders. Each Indemnifying Stockholder shall only be liable for his, her or its pro rata share (based on the amount of the Merger Consideration received by such Indemnifying Stockholder as a percentage of the total Merger Consideration) of the Indemnity Escrow Amount. For purposes solely of determining the amount of Damages under this ARTICLE VII, all representations and warranties of the Company in ARTICLE III (other than Sections 3.29 and 3.31) shall be construed as if the term “material” and any reference to “Company Material Adverse Effect” (and variations thereof) were omitted from such representations and warranties.

(b) The Escrow Agreement is intended to fully secure the indemnification obligations of the Indemnifying Stockholders under this Agreement and the rights of the Buyer under this ARTICLE VII shall be limited to the Indemnity Escrow Fund.

(c) Except with respect to claims based on fraud, after the Closing, the rights of the Indemnified Parties under this ARTICLE VII and the Escrow Agreement shall be the exclusive remedy of the Indemnified Parties with respect to claims resulting from or relating to any misrepresentation, breach of warranty or failure to perform any covenant or agreement contained in this Agreement.

(d) No Indemnifying Stockholder shall have any right of contribution against the Company or the Surviving Corporation with respect to any breach by the Company of any of its representations, warranties, covenants or agreements.

(e) The amount of any payment to an Indemnified Party shall be reduced, on a dollar-for-dollar basis, by the amount of any corresponding insurance benefit derived or to be derived by the Indemnified Party from payment of the liability upon which the claim for indemnity is based net of any associated increases in related premiums.

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(f) To the extent Buyer receives indemnification under this ARTICLE VII for breach of the representation and warranties set forth in Section 3.15, with the consent of the Buyer, which shall not be unreasonably withheld, the Stockholder Representative shall be entitled to appoint a third party (who shall not be an employee of the Buyer or its Affiliates) reasonably acceptable to the Buyer to collect such accounts receivable and/or Unbilled Receivables and distribute such collections to the Indemnifying Stockholders and in the event the Buyer or any affiliate subsequently collects such accounts receivables and/or Unbilled Receivables, it will directly distribute such amounts to the Indemnifying Stockholders.

7.6 Stockholder Representative and Adoption of Provisions.

(a) By virtue of the Merger, each Company Stockholder hereby appoints the Stockholder Representative as its exclusive agent and attorney-in-fact to act on its behalf with respect to any claims, controversies, or disputes arising out of the terms of this Agreement and the other Transaction Documents (including the Escrow Agreement), including (i) any dispute arising under Sections 2.1(b) of this Agreement; and (ii) defending all indemnity claims, consenting to, compromising or settling all indemnity claims, and otherwise acting pursuant to ARTICLE VII; and all actions taken by the Stockholder Representative pursuant to the foregoing appointment and authority shall be binding upon each Company Stockholder and his successors and assigns as if expressly ratified and confirmed in writing by each Company Stockholder. Each Company Stockholder further agrees that the Stockholder Representative shall have the power to (a) receive all notices and communications directed to the Stockholder Representative or the Company with respect to any claims, controversies, or disputes arising out of the terms of this Agreement (or the other Transaction Documents, including the Escrow Agreement) and to take any action or no action in connection therewith as it may deem appropriate, and (b) to take any action (or determine to take no action) with respect to the foregoing appointment and authority as it may deem appropriate as effectively as the Company or Company Stockholder could act itself, including the settlement or compromise of any dispute or controversy under the indemnification provisions hereof, the Escrow Agreement or any other document entered into in connection herewith. The authority granted hereunder is deemed to be coupled with an interest. The Buyer and the Buyer Subsidiary shall have the right to rely on any actions taken or omitted to be taken by the Stockholder Representative as being the act or omission of the Company Stockholders, without the need for any inquiry. The Company Stockholders agree that the Stockholder Representative shall have no liability to the Company Stockholders for any loss, damage or liability which they may incur as a result of any action taken in good faith hereunder, under the Escrow Agreement or under any other document entered into in connection herewith, and the Company Stockholders, severally, but not jointly, agree to indemnify and hold the Stockholder Representative free and harmless against any and all loss, damage or liability which the Stockholder Representative may sustain as a result of any action taken in good faith hereunder, under the Escrow Agreement or under any other document entered into in connection herewith, including any legal fees and expenses (including any expenses for which the Stockholder Representative is responsible under the Escrow Agreement). The Stockholder Representative Escrow Funds shall be used to pay all such costs, expenses and liabilities incurred by the Stockholder Representative.

(b) In the event that the Stockholder Representative gives notice to the Buyer and the Escrow Agent pursuant to the Escrow Agreement that he disputes the claim for

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indemnity that is subject to the Claim Notice, the dispute shall be resolved in accordance with the provisions of this Agreement and no amounts shall be dispersed to an Indemnified Party from the Indemnity Escrow Fund until resolution of such dispute.

(c) The adoption of this Agreement by the Company Stockholders constitutes approval of the indemnification obligations of the Company Stockholders set forth in this ARTICLE VII.

(d) Additional rights and obligations of the Stockholder Representative are more fully described in the Transmittal Letter.

7.7 Tax Indemnification.

(a) From and after the Closing Date, the Company Stockholders shall be responsible for, shall pay or cause to be paid, and shall indemnify, defend and hold harmless each Tax Indemnitee against, and reimburse such Tax Indemnitee for, on a Grossed-Up Basis, any losses, damages, claims (including third party claims), charges, interest, penalties, Taxes, costs and expenses (including legal fees) (collectively, “Losses”) resulting from, arising out of, relating to, in the nature of, or caused by:

(i) any Tax imposed on or relating to the Company or any of its Subsidiaries with respect to any Pre-Closing Period;

(ii) any Tax imposed upon or relating to any affiliated group of corporations of which the Company or any of its Subsidiaries (or any predecessor) is or was a member pursuant to Section 1.1502-6 of the Regulations (or any similar provision of state, local, or foreign Law);

(iii) any Tax imposed upon or relating to the Company or any of its Subsidiaries as a transferee or successor, by contract, or otherwise; and

(iv) any Tax arising directly or indirectly from a breach or inaccuracy of a representation or warranty set forth in Section 3.9.

(b) Except as otherwise provided in Section 7.8, payment in full of any amount due under Section 7.7(a) shall be made to the Tax Indemnitee in immediately available funds at least five (5) Business Days before the date for payment of the Taxes to which such payment relates is due.

7.8 Procedures Relating to Indemnification of Tax Claims.

(a) If any Taxing Authority or other Person asserts a Tax Claim, then the party hereto first receiving notice of such Tax Claim promptly shall provide written notice of such Tax Claim to the other party hereto; provided that the failure of the Buyer to give such prompt notice to the Stockholder Representative of any such Tax Claim shall not relieve the Stockholders of any of their obligations under this Section 7.8. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of any relevant correspondence received from the Taxing Authority or other Person.

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(b) The Stockholder Representative shall have the right to defend or prosecute, at its sole cost, expense and risk, only those Tax Claims with respect to Taxes set forth in Section 7.8(a). In order to defend or prosecute any such Tax Claim, the Stockholder Representative shall notify the Buyer that it elects to defend or prosecute such Tax Claim (“Election Notice”) within thirty (30) days after (i) the date on which the Stockholder Representative receives notice of any such Tax Claim from the Buyer (with respect to Tax Claims as to which the Buyer first received notice from a Taxing Authority or any other Person), or (ii) the date on which the Stockholder Representative delivered to the Buyer notice of any such Tax Claim (with respect to Tax Claims as to which the Company, the Stockholder Representative or any Company Stockholder first received notice from a Taxing Authority or any other Person). With respect to any Tax Claim as to which the Stockholder Representative has provided an Election Notice to the Buyer, the Stockholder Representative shall defend or prosecute such Tax Claim by all appropriate proceedings, which proceedings shall be defended or prosecuted diligently by the Stockholder Representative to a Final Determination; provided that the Stockholder Representative shall not, without the prior written consent of the Buyer, which consent shall not be unreasonably withheld, conditioned or delayed, enter into any compromise or settlement of such Tax Claim that would result in any Tax detriment to any Tax Indemnitee. The Stockholder Representative shall inform the Buyer of all developments and events relating to such Tax Claim (including providing to the Buyer copies of all written materials relating to such Tax Claim), and the Buyer or its authorized representatives shall be entitled, at the expense of the Buyer, to attend, but not participate in or control, all conferences, meetings and proceedings relating to such Tax Claim.

(c) If, with respect to any Tax Claim, the Stockholder Representative fails to deliver an Election Notice to the Buyer within the period provided in Section 7.8(b), then the Buyer shall at any time thereafter have the right (but not the obligation) to defend or prosecute such Tax Claim, at the sole cost, expense and risk of the Company Stockholders. The Buyer shall have full control of such defense or prosecution and such proceedings, including any settlement or compromise thereof. The Stockholder Representative shall cooperate in good faith with the Buyer and its authorized representatives in order to contest effectively such Tax Claim. The Stockholder Representative may attend, but not participate in or control, any defense, prosecution, settlement, or compromise of any Tax Claim controlled by the Buyer pursuant to this Section 7.8(c), and shall bear its own costs and expenses with respect thereto. In the case of any Tax Claim that is defended or prosecuted by the Buyer pursuant to this Section 7.8(c), the Buyer shall be entitled upon demand to prompt payment from the Company for any and all costs and expenses incurred by the Buyer in connection with such defense or prosecution (including attorneys’, accountants’, and experts’ fees and disbursements, settlement costs, court costs, and any other costs or expenses for investigating, defending or prosecuting such Tax Claim), in each case on a Grossed-Up Basis.

7.9 Tax Treatment of Indemnification Payments. Except as otherwise required by applicable Law, the parties shall treat any indemnification payment made hereunder as an adjustment to the Merger Consideration.

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ARTICLE VIII

TERMINATION

8.1 Termination of Agreement. The Parties may terminate this Agreement prior to the Closing (whether before or after Requisite Stockholder Approval), as provided below:

(a) the Parties may terminate this Agreement by mutual written consent;

(b) the Buyer may terminate this Agreement by giving written notice to the Company in the event the Company is in breach of any representation, warranty or covenant contained in this Agreement, and such breach (i) individually or in combination with any other such breach, would cause the conditions set forth in clauses (c) or (d) of Section 6.2 not to be satisfied and (ii) is not cured within twenty (20) days following delivery by the Buyer to the Company of written notice of such breach;

(c) the Company may terminate this Agreement by giving written notice to the Buyer in the event the Buyer or the Buyer Subsidiary is in breach of any representation, warranty or covenant contained in this Agreement, and such breach (i) individually or in combination with any other such breach, would cause the conditions set forth in clauses (a) or (b) of Section 6.3 not to be satisfied and (ii) is not cured within twenty (20) days following delivery by the Company to the Buyer of written notice of such breach;

(d) any Party may terminate this Agreement by giving written notice to the other Parties at any time after the Company Stockholders have voted on whether to approve this Agreement and the Merger in the event this Agreement and the Merger failed to receive the Requisite Stockholder Approval;

(e) the Buyer may terminate this Agreement by giving written notice to the Company if the Closing shall not have occurred on or before December 18, 2007 by reason of the failure of any condition precedent under Section 6.1 or 6.2 (unless the failure results primarily from a breach by the Buyer or the Buyer Subsidiary of any representation, warranty or covenant contained in this Agreement); or

(f) the Company may terminate this Agreement by giving written notice to the Buyer if the Closing shall not have occurred on or before December 18, 2007 by reason of the failure of any condition precedent under Section 6.1 or 6.3 (unless the failure results primarily from a breach by the Company of any representation, warranty or covenant contained in this Agreement).

8.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 8.1, this Agreement shall immediately become void and there shall be no liability or obligation on the part of the Company or the Buyer or their respective officers, directors, stockholders or Affiliates (except for any liability of any Party for breaches of this Agreement), except as set forth in this Section 8.2; provided, however, that the provisions of Section 10.1 (Press Releases and Announcements) and Section 8.3 (Remedies) and ARTICLE VII of this Agreement shall remain in full force and effect and survive any termination of this Agreement.

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8.3 Remedies. Notwithstanding any other provision in this Agreement to the contrary, upon termination of this Agreement pursuant to Section 8.1(b), (c), (d), (e) or (f), the Company will remain liable to Buyer for any willful breach of this Agreement by the Company existing at the time of such termination, and Buyer will remain liable to the Company for any willful breach of this Agreement by Buyer existing at the time of such termination, and the Company or Buyer may seek such remedies, including damages and reasonable fees of attorneys, against the other with respect to any such breach as are provided in this Agreement or as are otherwise available at Law or in equity.

ARTICLE IX

DEFINITIONS

9.1 Definitions. When used in this Agreement, the following terms shall have the meanings assigned to them in this Section 9.1, or in the applicable Section of this Agreement to which reference is made in this Section 9.1.

“Affiliate” shall mean any affiliate, as defined in Rule 12b-2 under the Exchange Act.

“Agreed Amount” shall mean part, but not all, of the Claimed Amount.

“Authorizations” shall mean any authorization, approval, consent, certificate, license, permit or franchise of or from any Governmental Entity or pursuant to any Law.

“Business Day” shall mean a day other than a Saturday, Sunday or other day on which banks located in New York City are authorized or required by Law to close.

“Buyer Certificate” shall mean a certificate to the effect that each of the conditions specified in clauses (a) through (e) (insofar as clause (e) relates to Legal Proceedings involving the Buyer or the Buyer Subsidiary) of Section 6.3 is satisfied in all respects.

“CERCLA” shall mean the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.

“Certificate of Merger” shall mean the certificate of merger or other appropriate documents prepared and executed in accordance with Section 251(c) of the DGCL.

“Charter Documents” shall mean, with respect to any entity, the certificate of incorporation, the articles of incorporation, by-laws, articles of organization, limited liability company agreement, partnership agreement, formation agreement, joint venture agreement or other similar organizational documents of such entity (in each case, as amended).

“Claim Notice” shall mean written notification which contains (i) a description of the Damages incurred or reasonably expected to be incurred by the Indemnified Party and the Claimed Amount of such Damages, to the extent then known, (ii) a statement that the Indemnified Party is entitled to indemnification under ARTICLE VII for such Damages and a reasonable explanation of the basis therefor, and (iii) a demand for payment in the amount of such Damages.

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“Claimed Amount” shall mean the amount of any Damages incurred or reasonably expected to be incurred by the Indemnified Party.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Common Stock” shall mean the shares of common stock, $0.001 par value per share, of the Company.

“Company Certificate” shall mean a certificate to the effect that each of the conditions specified in clause (a) of Section 6.1 and clauses (a) through (f) (insofar as clause (e) relates to Legal Proceedings involving the Company or a Subsidiary) of Section 6.2 is satisfied in all respects.

“Company Intangible” shall mean all Intangibles owned, marketed, designed, distributed, sold, licensed by, supported, maintained, used or under design or development by or on behalf of the Company or licensed to or with respect to which rights are granted to the Company, and any and all Intellectual Property Rights in, to, and under the foregoing.

“Company Intellectual Property” shall mean the Company Intellectual Property Rights owned by or licensed to the Company or a Subsidiary and covering, incorporated in, underlying or used in connection with the Company Intangibles and Company Software.

“Company Intellectual Property Rights” shall mean all Intellectual Property Rights owned or controlled by the Company or a Subsidiary, or under development or designed by or on behalf of the Company.

“Company Material Adverse Effect” shall mean any material adverse change, event, circumstance or development with respect to, or material adverse effect on, (i) the business, assets, liabilities, capitalization, prospects, condition (financial or other), or results of operations of the Company and the Subsidiaries, taken as a whole, or (ii) the ability of the Buyer to operate the business of the Company and each of the Subsidiaries immediately after the Closing; provided, however, that none of the following shall be deemed either alone or in combination to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Company Material Adverse Effect: (a) any adverse change relating primarily to the announcement or pendency of the transactions described herein (including any cancellations of or delays in customer orders, any reduction in sales, any disruption in customer, supplier, partner or similar relationships or any loss of employees), (b) any adverse change relating to conditions affecting the industry or industry sector in which the Company’s business participates, the U.S. economy as a whole or any foreign economy in any locations where the Company’s business has material operations or sales, (c) any adverse change relating to acts of terrorism or war (whether or not formally declared), or (d) any adverse change relating to compliance with the terms of, or the taking of any action required by, this Agreement or the taking of any action consented to by the Buyer. For the avoidance of doubt, the parties agree that the terms “material”, “materially” or “materiality” as used in this Agreement with an initial lower case “m” shall have their respective customary and ordinary meanings, without regard to the meaning ascribed to Company Material Adverse Effect.

“Company Option” shall mean each option to purchase or acquire Common Stock.

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“Company Plan” shall mean any Employee Benefit Plan, in each case, that is sponsored, maintained or contributed to or required to be contributed to by the Company, any Subsidiary or any of their ERISA Affiliates, all of which together with the Company would be deemed a “single employer” within the meaning of Section 4001(b) of ERISA, for the benefit of any employee or former employee, director or consultant of the Company or any Subsidiary or with respect to which the Company or any Subsidiary has any liability or obligation, contingent or otherwise.

“Company Securities” shall mean, collectively, the Company Stock and the Company Options.

“Company Software” shall mean all Software (other than mass marketed, “shrink-wrap” software utilized by the Company solely for internal purposes) owned, used, controlled, marketed, designed, sold, licensed by, supported, maintained or under development or design by or on behalf of the Company or licensed to or with respect to which rights are granted to the Company.

“Company Stock” shall mean the Common Stock and the Preferred Stock together.

“Company Stock Plan” shall mean any stock option plan or other stock or equity-related plan of the Company.

“Company Stockholders” shall mean the stockholders of record of the Company immediately prior to the Effective Time.

“Confidential Information” shall mean any confidential or proprietary information of the Company or any Subsidiary that is furnished in writing to the Buyer by the Company or any Subsidiary in connection with this Agreement and is labeled confidential or proprietary; provided, however, that it shall not include any information (A) which, at the time of disclosure, is available publicly, (B) which, after disclosure, becomes available publicly through no fault of the Buyer, (C) which the Buyer knew or to which the Buyer had access prior to disclosure or (D) which the Buyer rightfully obtains from a source other than the Company or a Subsidiary.

“Contract” shall mean any agreement, contract, license, lease, commitment, arrangement or understanding, written or oral, including any sales orders and purchase orders.

“Controlling Party” shall mean the party controlling the defense of any Third Party Action.

“Damages” shall mean any and all debts, obligations and other liabilities (whether absolute, accrued, contingent, fixed or otherwise, or whether known or unknown, or due or to become due or otherwise), monetary damages, fines, fees, penalties, interest obligations, deficiencies, losses and expenses (including amounts paid in settlement, interest, court costs, costs of investigators, fees and expenses of attorneys, accountants, financial advisors and other experts, and other expenses of litigation), but expressly excluding lost profits.

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“Disclosure Schedule” shall mean the Disclosure Schedule provided by the Company to the Buyer on the date hereof and accepted in writing by the Buyer, as the same may be supplemented pursuant to Section 5.7.

“Employee Benefit Plan” shall mean any deferred compensation plan, incentive compensation plan, equity compensation plan, “welfare” plan, fund or program (within the meaning of Section 3(1) of ERISA) (whether or not ERISA is applicable to such plan); “pension” plan, fund or program (within the meaning of Section 3(2) of ERISA) (whether or not ERISA is applicable to such plan); each employment, termination or severance agreement; and each other employee benefit plan, fund, program, agreement or arrangement.

“Environmental Law” shall mean any federal, state or local law, statute, rule, order, directive, judgment, Permit or regulation or the common law relating to the environment, occupational health and safety, or exposure of persons or property to Materials of Environmental Concern, including any statute, regulation, administrative decision or order pertaining to: (i) the presence of or the treatment, storage, disposal, generation, transportation, handling, distribution, manufacture, processing, use, import, export, labeling, recycling, registration, investigation or remediation of Materials of Environmental Concern or documentation related to the foregoing; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the release, threatened release, or accidental release into the environment, the workplace or other areas of Materials of Environmental Concern, including emissions, discharges, injections, spills, escapes or dumping of Materials of Environmental Concern; (v) transfer of interests in or control of real property which may be contaminated; (vi) community or worker right-to-know disclosures with respect to Materials of Environmental Concern; (vii) the protection of wild life, marine life and wetlands, and endangered and threatened species; (viii) storage tanks, vessels, containers, abandoned or discarded barrels and other closed receptacles; and (ix) health and safety of employees and other persons. As used above, the term “release” shall have the meaning set forth in CERCLA.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” shall mean any entity which is, or within the past six (6) years was, a member of (1) a controlled group of corporations (as defined in Section 414(b) of the Code), (2) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (3) an affiliated service group (as defined under Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes or included the Company or a Subsidiary.

“Escrow Agreement” shall mean the Escrow Agreement attached hereto as Exhibit C, pursuant to which $13,500,000 of the Merger Consideration for the Indemnity Escrow Amount shall be deposited and shall be held, until disbursed in accordance with the terms thereof and ARTICLE VII hereof but in no event, except as provided in the Escrow Agreement, shall the Indemnity Escrow Amount be held beyond the date that is twelve (12) months after the Closing Date.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

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“Expected Claim Notice” shall mean a notice that, as a result of a legal proceeding instituted by or written claim made by a third party, an Indemnified Party reasonably expects to incur Damages for which it is entitled to indemnification under ARTICLE VII.

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Buyer from three Federal funds brokers of recognized standing selected by it.

“Final Determination” shall mean (a) a decision, judgment, decree or other order by any court of competent jurisdiction, which decision, judgment, decree or other order has become final after all allowable appeals by either party to the action have been exhausted or the time for filing such appeals has expired and is not subject to further review or modification, (b) a closing agreement entered into under Section 7121 of the Code or any other settlement or other agreement entered into in connection with an administrative or judicial proceeding, (c) execution of an Internal Revenue Service Form 870-AD, or (d) the expiration of the time for instituting suit with respect to a claimed deficiency.

“Financial Statements” shall mean:

(a) the audited consolidated balance sheets and statements of income, changes in stockholders’ equity and cash flows of the Company as of December 31 for each of the last three (3) fiscal years, prepared in accordance with GAAP consistently applied, and

(b) the Most Recent Balance Sheet and the unaudited consolidated statements of income, changes in stockholders’ equity and cash flows for the eight (8) months ended as of the Most Recent Balance Sheet Date, prepared in accordance with GAAP consistently applied.

“Foreign Plan” shall mean: (i) any plan, program, policy, practice, Contract or other arrangement mandated by a Governmental Entity other than the United States under which the Company or any Subsidiary could have liability; (ii) any Company Plan maintained or contributed to by the Company or any Company Plan maintained by the Company under which the Company or any Subsidiary could have liability and that is not subject to United States Law; and (iii) any Company Plan that covers employees whose services are performed primarily outside of the United States.

“GAAP” shall mean United States generally accepted accounting principles.

“Governmental Entity” shall mean any court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority or agency.

“Grossed-Up Basis” shall mean, when used to describe the basis on which the payment of a specified sum is to be made, a basis such that the amount of such payment, after being reduced by the amount of all Taxes imposed on the recipient of such payment as a result of the receipt or accrual of such payment, will equal the specified sum.

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“Holder” shall mean each record holder as of the Effective Time of (i) an outstanding certificate or certificates that immediately prior to the Effective Time represented shares of Company Stock or (ii) an outstanding Company Option that immediately prior to the Effective Time entitled such holder to acquire shares of Company Stock.

“Indebtedness” shall mean any of the following: (a) any indebtedness for borrowed money, (b) any obligations evidenced by bonds, debentures, notes or other similar instruments, (c) any obligations to pay the deferred purchase price of property or services, except trade accounts payable and other current liabilities arising in the ordinary course of business, (d) any obligations as lessee under capitalized leases, (e) any indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property, (f) any obligations, contingent or otherwise, under acceptance credit, letters of credit or similar facilities (except if fully cash collateralized), and (g) any guaranty of any of the foregoing.

“Indemnified Party” shall mean a party entitled, or seeking to assert rights, to indemnification under ARTICLE VII.

“Indemnifying Party” shall mean the party from whom indemnification is sought by the Indemnified Party.

“Indemnifying Stockholders” shall mean the Company Stockholders receiving the Merger Consideration pursuant to ARTICLE II.

“Indemnity Escrow Amount” shall mean $13,500,000.

“Insider” means (i) a shareholder, officer, director or employee of the Company, (ii) any Member of the Immediate Family of any shareholder, officer, director or employee of the Company or (iii) any entity in which any of the persons described in clause (i) or (ii) owns any beneficial interest (other than less than one percent of the stock of any publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market).

“Intangible” shall mean any name, corporate name, domain name, fictitious name, trademark, trademark registration, trademark application, service mark, service mark registration, service mark application, trade name, brand name, product name, symbol, slogan, trade dress, trade secret, know-how, patent, patent application, copyright, copyright registration, copyright application, website, design, logo, formula, invention, product idea, concept, method, process, discovery, Software, technology, written work, visual work, audio work, multimedia work, database, information or data created or maintained in any database, or other intangible asset of any nature, whether in use, held under development or design, inactive, owned, sold, distributed, marketed, maintained, supported, licensed by, or licensed to or with respect to which rights are granted to, a Person, whether arising under statutory or common law in any jurisdiction or otherwise, and includes the goodwill of the business symbolized by and associated with such name, corporate name, domain name, fictitious name, trademark, service mark, trade name, brand name, product name, symbol, logo, slogan, or trade dress, and any and all Intellectual Property Rights in, to, and under the foregoing.

“Intellectual Property Rights” shall mean any and all intellectual property rights and industrial property rights (throughout the universe, in all media, now existing or created in the

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future, and for the entire duration of such rights) arising under statutory or common law, contract, or otherwise, and whether or not perfected, including all (a) patents, reissues and reexamined patents, and patent applications, whenever filed and wherever issued, and all priority rights resulting from such applications; (b) rights associated with works of authorship including, but not limited to, copyrights, moral rights, copyright applications, copyright registrations, and rights to prepare derivative works; (c) rights relating to the protection of trade secrets and confidential information; (d) rights in trademarks, service marks, trade names, logos, symbols, and the like and applications therefor and registrations thereof; (e) rights analogous to those set forth in this definition and any and all other proprietary rights relating to intangible property; (f) divisions, continuations, continuations-in-part, substitutes, renewals, reissues and extensions of the foregoing (as and to the extent applicable) now existing, hereafter filed, issued, or acquired; and (g) rights to sue for past, present, and future infringement of any and all such intellectual property rights and industrial property rights.

“Judgment” shall mean any order, writ, injunction, citation, award, decree or other judgment of any nature of any Governmental Entity.

“Key Employees” shall mean Jaswinder Chadha and Navdeep Chadha.

“Key Management Stockholders” shall mean Jaswinder Chadha, Navdeep Chadha, David Wood and Patrick Brundage.

“Law” shall mean any statute, law, ordinance, rule or regulation of any Governmental Entity.

“Lease” shall mean any lease or sublease pursuant to which the Company or a Subsidiary leases or subleases from another party any real property.

“Legal Proceeding” shall mean any action, suit, proceeding, claim, arbitration or investigation before any Governmental Entity or before any arbitrator.

“marketRx India” shall mean marketRx India Private Limited, an Indian company registered under the Companies Act, 1956, and majority-owned subsidiary of the Company.

“Material Contract” shall mean each Contract required to be listed in Section 3.14 of the Disclosure Schedule.

“Materials of Environmental Concern” shall mean any: pollutants, contaminants or hazardous substances (as such terms are defined under CERCLA), pesticides (as such term is defined under the Federal Insecticide, Fungicide and Rodenticide Act), solid wastes and hazardous wastes (as such terms are defined under the Resource Conservation and Recovery Act), other hazardous, radioactive or toxic materials, oil, petroleum and petroleum products (and fractions thereof), or any other chemical material (or article containing such chemical material) listed or subject to regulation under any law, statute, rule, regulation, order, Permit, or directive due to its potential, directly or indirectly, to harm the environment or the health of humans or other living beings.

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“Member of the Immediate Family” of a Person means a spouse, parent, child or sibling of such Person.

“Merger Compensation Payments” shall mean the portion of the Merger Consideration payable to the Holders of Vested Company Options and Restricted Company Stock that were originally issued as compensation for services in an employee, independent contractor, or other capacity.

“Most Recent Balance Sheet” shall mean the unaudited consolidated balance sheet of the Company as of the Most Recent Balance Sheet Date.

“Most Recent Balance Sheet Date” shall mean August 31, 2007.

“Net Assets” shall mean the total current assets, excluding current deferred income taxes, of the Company minus the total liabilities of the Company, each as determined in accordance with GAAP. Net Assets shall expressly exclude capitalized intangibles and Software assets and transaction costs and expenses liabilities subject to Section 2.1(b) hereof, and in all events be determined subject to Section 2.1(c)(v) hereof.

“Net Assets Statement” shall mean the form of statement attached hereto as Exhibit B, which includes all categories of assets and liabilities to be used to calculate Estimated Net Assets and Final Net Assets.

“Non-controlling Party” shall mean the party not controlling the defense of any Third Party Action.

“Order” shall mean any award, injunction, judgment, decree, order, ruling, subpoena or verdict or other decision issued, promulgated or entered by or with any Governmental Entity of competent jurisdiction.

“Ordinary Course of Business” shall mean the ordinary course of business consistent with past custom and practice (including with respect to frequency and amount).

“Other Antitrust Laws” shall mean the antitrust and competition Laws of all jurisdictions other than those of the United States.

“Owned Real Property” shall mean each item of real property owned by the Company or a Subsidiary.

“Parties” shall mean the Buyer, the Buyer Subsidiary and the Company.

“Permits” shall mean all permits, licenses, registrations, certificates, orders, approvals, franchises, variances and similar rights issued by or obtained from any Governmental Entity (including those issued or required under Environmental Laws and those relating to the occupancy or use of owned or leased real property).

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“Person” shall mean an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, a Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body.

“Preferred Stock” shall mean, collectively, the Series A Preferred Stock, the Series B Preferred Stock and Series C Preferred Stock.

“Reasonable Best Efforts” shall mean best efforts, to the extent commercially reasonable.

“Requisite Stockholder Approval” shall mean the adoption of this Agreement and the approval of the Merger by the Company Stockholders pursuant to its Charter Documents.

“Response” shall mean a written response containing the information provided for in Section 7.3(c).

“Restricted Company Stock” shall mean shares of Common Stock that were originally issued as compensation to employees of the Company or its Subsidiaries.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Security Interest” shall mean any mortgage, pledge, security interest, encumbrance, charge or other lien (whether arising by contract or by operation of law), other than (i) mechanic’s, materialmen’s, and similar liens for amounts not yet due and payable or which are being contested in good faith by appropriate proceedings and for which the Company maintains adequate reserves, (ii) liens arising under worker’s compensation, unemployment insurance, social security, retirement, and similar legislation, (iii) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the Ordinary Course of Business of the Company and not material to the Company, (iv) liens imposed by Law and incurred in the Ordinary Course of Business of the Company, (v) liens for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings and liens identified on the Disclosure Schedule, (vi) liens for Taxes not yet due and payable with respect to which the Company maintains adequate reserves, (vii) liens voluntarily created in the Ordinary Course of Business of the Company, and (viii) other liens which, individually or in the aggregate, do not interfere in any material respect with, and are not violated in any material respect by, the consummation of the transactions contemplated by this Agreement and the Transaction Documents and do not impair in any material respect the existing use of or the property affected by such liens.

“Series A Preferred Stock” shall mean the shares of Series A Redeemable Convertible Preferred Stock, $0.01 par value per share, of the Company.

“Series B Preferred Stock” shall mean the shares of Series B Redeemable Convertible Preferred Stock, $0.01 par value per share, of the Company.

“Series C Preferred Stock” shall mean the shares of Series C Redeemable Convertible Preferred Stock, $0.01 par value per share, of the Company.

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“Series C Preferred Warrant” means each warrant to purchase or acquire Series C Preferred Stock.

“Software” shall mean any and all computer programs, operating systems, applications, firmware, middleware, or software of any nature, whether operational, under development or inactive including all object code, source code, comment code, algorithms, menu structures and arrangements, icons, operational instructions, scripts, commands, syntax, screen designs, reports, designs, concepts, technical manuals, test scripts, user manuals and other documentation therefor, whether in machine-readable form, programming language or any other language or symbols, and whether stored, encoded, recorded or written on disk, tape, film, memory device, paper or other media of any nature and all databases necessary or appropriate to operate any such computer programs, operating systems, applications, firmware, middleware, or software.

“Stock Purchase Agreement” shall mean the stock purchase agreement between Hemkunt Inc. and CSS Investment LLC, dated prior to or as of the Closing Date.

“Stockholder Representative Escrow Amount” shall mean $135,000.

“Subsidiaries” shall mean, collectively, marketRx India, market Rx (UK) Ltd., an United Kingdom private limited company and wholly-owned subsidiary of the Company, and marketRx Pty Limited, an Australian company registered under the Corporations Act 2001 and wholly-owned subsidiary of the Company.

“Tax Claim” shall mean any written claim with respect to Taxes made by any Taxing Authority or other Person that, if pursued successfully, could serve as the basis for a claim for indemnification of a Tax Indemnitee or the Stockholder Representative under this Agreement.

“Tax Indemnitee” shall mean the Buyer and the Subsidiaries and Affiliates (including, following the Closing, the Company).

“Tax Returns” shall mean all reports, returns (including information returns and amended returns), declarations, claims for refund, estimated Taxes, statements or other information required to be supplied to a Taxing Authority in connection with Taxes.

“Taxes” shall mean all taxes, charges, fees, levies or other similar assessments or liabilities, including income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, unclaimed property, sales, use, transfer, withholding, employment, unemployment, insurance, social security, business license, business organization, environmental, workers compensation, payroll, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof and including any liability for the payment of the foregoing obligations of another Person as a result of (a) being or having been a member of an affiliated, consolidated, combined, unitary or aggregate group of corporations; (b) being or having been a party to any tax sharing agreement or any express or implied obligation to indemnify any Person; and (c) being or having been a transferee, successor, or otherwise assuming the obligations of another Person to pay the foregoing amounts.

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“Taxing Authority” shall mean any Governmental Entity having jurisdiction with respect to any Tax.

“Third Party Action” shall mean any suit or proceeding by a Person other than a Party for which indemnification may be sought by a Party under ARTICLE VII.

“Transaction Documents” shall mean, collectively, this Agreement and each other agreement, certificate, document and instrument to be executed in accordance herewith.

“Unbilled Receivable” shall mean the right to bill and receive payment for products shipped or delivered and services performed but unbilled or unpaid as of the Closing Date.

9.2 Other Defined Terms. The following terms have the meanings assigned to such terms in the Sections of the Agreement set forth below:

280G Approval	5.3(b)
Acceptance Notice	2.1(c)(ii)
Agreement	Preamble
Buyer	Preamble
Buyer Common Stock	2.3(c)
Buyer Subsidiary	Preamble
Cancellation Acknowledgement	2.5(a)
Certificates	2.5(a)
Closing	1.2
Closing Date	1.2
Company	Preamble
Company Employees	3.20(a)
Company Indemnified Parties	7.2
Core Representations	7.4
CPA Firm	2.1(c)(iii)
DGCL	1.1
Dissenting Shares	2.8
DOJ	5.2(a)
D&O Six-Year Tail Coverage	6.2(w)
Effective Time	1.2
Election Notice	7.8(b)
Escrow Agent	2.4(a)(i)
Estimated Net Assets	2.1(a)
Exchange Agent	2.4(c)
Exchange Agreement	2.4(c)
Exchange Fund	2.4(c)
Final Net Assets	2.1(c)(iii)
FTC	5.2(a)
Hart-Scott-Rodino Act	3.4(a)

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Holder Documents	2.5(a)
Indemnity Escrow Fund	2.4(a)(i)
Initial Deficiency	2.1(a)
Initial Surplus	2.1(a)
Key Employee Noncompetition Agreement	5.10
Losses	7.7(a)
Major Investors	Recitals
Merger	1.1
Merger Consideration	2.1(b)
Net Assets Dispute Notice	2.1(c)(i)
Participating Common Convertible Holder	2.5(d)
Participating Common Holder	2.5(c)
Participating Preferred Holder	2.5(b)
Policies	3.17
Post-Closing Period	5.11(d)(ii)
Pre-Closing Period	5.11(d)(ii)
Review Period	2.1(c)(i)
Standard Proprietary Information Agreement	3.20(c)
Stockholder Consent	Recitals
Stockholder Representative	Preamble
Stockholder Representative Escrow Funds	2.4(a)(ii)
Surviving Corporation	1.1
Transmittal Letter	2.5(a)
Unvested Company Option	2.3(c)
Vested Company Option	2.3(a)

ARTICLE X

MISCELLANEOUS

10.1 Press Releases and Announcements. No Party shall issue any press release or public announcement relating to the subject matter of this Agreement without the prior written approval of the other Parties; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law, regulation or stock market rule (in which case the disclosing Party shall use reasonable efforts to advise the other Parties and provide them with a copy of the proposed disclosure prior to making the disclosure).

10.2 No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns; provided, however, that the provisions in ARTICLE II concerning payment of the Merger Consideration.

10.3 Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements or representations by or among the Parties, written or oral, with respect to the subject matter hereof.

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10.4 Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign any of its rights or delegate any of its performance obligations hereunder without the prior written approval of the other Parties; provided that the Buyer Subsidiary may assign its rights, interests and obligations hereunder to an Affiliate of the Buyer. Any purported assignment of rights or delegation of performance obligations in violation of this Section 10.4 is void.

10.5 Counterparts and Facsimile Signature. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile signature.

10.6 Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

10.7 Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four (4) Business Days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one (1) Business Day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below:

If to the Buyer or the Buyer Subsidiary, to:

Cognizant Technology Solutions Corporation

Glenpointe Centre West

500 Frank W. Burr Blvd.

Teaneck, New Jersey 07666

Attention: Steven E. Schwartz, Esq.

Facsimile: (201) 801-0243

With a required copy to:

Morgan, Lewis & Bockius, LLP

502 Carnegie Center

Princeton, New Jersey 08540

Attention: Andrew P. Gilbert, Esq.

Facsimile: (609) 919-6701

If to the Company or the Subsidiaries, to:

marketRx, Inc.

1200 U.S. Route 22 East

Bridgewater, New Jersey 08807

Attention: Jaswinder S. Chadha, President & CEO

Facsimile: (908) 541-1595

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With a required copy to:

DLA Piper US LLP

33 Arch Street, 26th floor

Boston, Massachusetts 02110

Attention: Francis J. Feeney, Jr., Esq.

Facsimile: (617) 406-6163

If to the Stockholder Representative, to:

marketRx, Inc.

1200 U.S. Route 22 East

Bridgewater, New Jersey 08807

Attention: Jaswinder S. Chadha, President & CEO

Facsimile: (908) 541-1595

With a required copy to:

DLA Piper US LLP

33 Arch Street, 26th floor

Boston, Massachusetts 02110

Attention: Francis J. Feeney, Jr., Esq.

Facsimile: (617) 406-6163

Any Party may give any notice, request, demand, claim or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

10.8 Governing Law. All matters arising out of or relating to this Agreement and the transactions contemplated hereby (including without limitation its interpretation, construction, performance and enforcement) shall be governed by and construed in accordance with the internal laws of the State of New Jersey without giving effect to any choice or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of New Jersey.

10.9 Amendments and Waivers. The Parties may mutually amend any provision of this Agreement at any time prior to the Closing; provided, however, that any amendment effected subsequent to the Requisite Stockholder Approval shall be subject to any restrictions contained in the DGCL. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the Parties. No waiver of any right or remedy hereunder shall be valid unless the same shall be in writing and signed by the Party giving such waiver. No waiver by any Party with respect to any default, misrepresentation or

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breach of warranty or covenant hereunder shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

10.10 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified.

10.11 Submission to Jurisdiction. Each Party (a) submits to the jurisdiction of any state or federal court sitting in New Jersey in any action or proceeding arising out of or relating to this Agreement, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, (c) waives any claim of inconvenient forum or other challenge to venue in such court, (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court and (e) waives any right it may have to a trial by jury with respect to any action or proceeding arising out of or relating to this Agreement. Each Party agrees to accept service of any summons, complaint or other initial pleading made in the manner provided for the giving of notices in Section 10.7, provided that nothing in this Section 10.11 shall affect the right of any Party to serve such summons, complaint or other initial pleading in any other manner permitted by law.

10.12 Construction.

(a) The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.

(b) Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.

(c) Any reference herein to “including” shall be interpreted as “including without limitation”.

(d) Any reference to any Article, Section or paragraph shall be deemed to refer to an Article, Section or paragraph of this Agreement, unless the context clearly indicates otherwise.

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IN WITNESS WHEREOF, the Buyer, the Buyer Subsidiary, the Company and the Stockholder Representative have caused this Agreement to be signed by their respective officers thereunto, duly authorized as of the date first written above.

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
By:	/s/ Steven Schwartz
Name:	Steven Schwartz
Title:	SVP
COGNIZANT TECHNOLOGY CORPORATION
By:	/s/ Steven Schwartz
Name:	Steven Schwartz
Title:	Secretary
MARKETRX, INC.
By:	/s/ Jaswinder S. Chadha
Name:	Jaswinder S. Chadha
Title:	President & CEO
STOCKHOLDER REPRESENTATIVE
/s/ Jaswinder S. Chadha
Jaswinder S. Chadha

EX-21.1

EXHIBIT 21.1

Name	Jurisdiction
Cognizant Technology Solutions U.S. Corporation	Delaware
Cognizant Technology Solutions Canada, Inc.	Canada
Cognizant Technology Solutions s.r.o	Czech Republic
Cognizant Technology Solutions Asia Pacific Pte Ltd.	Singapore
Cognizant Technology Solutions GmbH	Germany
Cognizant Technology Solutions Australia Pty Ltd.	Australia
Cognizant Technology Solutions Ireland Limited	Ireland
Cognizant Technology Solutions India Pvt. Limited	India
Cognizant Technology Solutions Ltd.	Mauritius
Cognizant (Mauritius) Development Limited	Mauritius
Cognizant Technology Solutions A.G.	Switzerland
Cognizant Technology Solutions Development Corporation	Delaware
CSS Investment LLC	Delaware
Cognizant Technology Solutions Overseas Corporation	Delaware
ACES International, Inc.	Utah
Cognizant Technology Solutions (Netherlands) B.V.	The Netherlands
Cognizant Technology Solutions Benelux B.V.	The Netherlands
Cognizant Technology Solutions B.V.	The Netherlands
Cognizant Technology Solutions Italia, S.p.A.	Italy
Cognizant Technology Solutions (Shanghai) Co., Ltd.	China
Cognizant Technology Solutions France S.A.	France
Ygyan Consulting Private Ltd.	India
Ygyan Consulting Private SDN BHD	Malaysia
Cognizant Technology Solutions Belgium S.A.	Belgium
Cognizant Technology Solutions Norway A.S.	Norway
Cognizant Technology Solutions Sweden AB	Sweden
Cognizant Technology Solutions Hong Kong Ltd.	Hong Kong
Cognizant Technology Solutions (Cayman) Ltd.	Cayman Islands
Cognizant Serviços de Tecnologia e Software do Brasil S/A.	Brazil
Cognizant Technology Solutions de Mexico SA.	Mexico
Aimnet Solutions, Inc.	Delaware
Cognizant Technology Solutions Argentina S.R.L.	Argentina
Cognizant Technology Solutions Denmark ApS	Denmark
Cognizant Technology Solutions Philippines, Inc.	Philippines
Cognizant Technology Solutions South Africa (Pty) Ltd.	South Africa

Name	Jurisdiction
marketRx, Inc.	Delaware
marketRx, India Private Limited	India
marketRx, Pty Limited	Australia
marketRx, Inc. (UK) Limited	England

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 333-59439, 333-86909, 333-43402, 333-68772, 333-114464, 333-127308, 333-144125) of Cognizant Technology Solutions Corporation of our report dated February 28, 2008 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Florham Park, NJ

February 28, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Francisco D’Souza, certify that:

1. I have reviewed this Annual Report on Form 10-K of Cognizant Technology Solutions Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 28, 2008
	/s/ Francisco D’Souza
	Francisco D’Souza
	President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Gordon Coburn, certify that:

1. I have reviewed this Annual Report on Form 10-K of Cognizant Technology Solutions Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 28, 2008
	/s/ Gordon Coburn
	Gordon Coburn
	Chief Financial and Operating
	Officer and Treasurer (Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-K of Cognizant Technology Solutions Corporation (the “Company”) for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Francisco D’Souza, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 28, 2008
	/s/ Francisco D’Souza *
	Francisco D’Souza
	President and Chief Executive Officer (Principal Executive Officer)

* A signed original of this written statement required by Section 906 has been provided to Cognizant Technology Solutions Corporation and will be retained by Cognizant Technology Solutions Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-K of Cognizant Technology Solutions Corporation (the “Company”) for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Gordon Coburn, Chief Financial and Operating Officer, Treasurer and Secretary of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 28, 2008
	/s/ Gordon Coburn *
	Gordon Coburn,
	Chief Financial and Operating Officer and Treasurer (Principal Financial and Accounting Officer)

* A signed original of this written statement required by Section 906 has been provided to Cognizant Technology Solutions Corporation and will be retained by Cognizant Technology Solutions Corporation and furnished to the Securities and Exchange Commission or its staff upon request.