10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ 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

o 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: 0-24699

BRIGHT HORIZONS FAMILY SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	62-1742957
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

200 Talcott Avenue South
Watertown, MA 02472
(Address of principal executive offices and zip code)

(617) 673-8000
(Registrant’s telephone number, including area code)

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

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

Securities registered pursuant to Section 12(g) of the Act: None

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

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 o No þ

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. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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. o

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

As of June 30, 2007, the aggregate market value of the shares of common stock held by non-affiliates of the registrant (excluding directors and executive officers of the registrant) was approximately $1,000,430,068 (based on the closing price for the common stock as reported on The NASDAQ Global Select Market on June 30, 2007).

As of February 25, 2008, there were 26,291,492 outstanding shares of the registrant’s common stock, $0.01 par value per share, which is the only outstanding capital stock of the registrant.

BRIGHT HORIZONS FAMILY SOLUTIONS, INC.

FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

Cautionary Statement About Forward-Looking Information	3
PART I
Item 1. Business	4
Item 1A. Risk Factors	14
Item 1B. Unresolved Staff Comments	18
Item 2. Properties	18
Item 3. Legal Proceedings	19
Item 4. Submission of Matters to a Vote of Security Holders	20
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6. Selected Financial Data	22
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	34
Item 8. Financial Statements and Supplementary Data	35
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	62
Item 9A. Controls and Procedures	62
Item 9B. Other Information	64
PART III
Item 10. Directors, Executive Officers and Corporate Governance	65
Item 11. Executive Compensation	68
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	83
Item 13. Certain Relationships and Related Transactions, and Director Independence	84
Item 14. Principal Accounting Fees and Services	85
PART IV
Item 15. Exhibits and Financial Statement Schedules	86
Signatures	88
Index of Exhibits	89
EX-10.21 FIRST AMENDED AND RESTATED CREDIT AGREEMENT
EX-10.22 SEVERANCE AGREEMENT FOR DANROY T. HENRY
EX-21 SUBSIDIARIES OF THE COMPANY
EX-23.1 CONSENT OF DELOITTE & TOUCHE LLP
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

Cautionary Statement About Forward-Looking Information

The Company has made statements in this report that constitute forward-looking statements as that term is defined in the federal securities laws. Forward-looking statements generally are identified by the words “believes”, “expects”, “anticipates”, “plans”, “estimates”, “projects”, or similar expressions. These forward-looking statements concern the Company’s operations, economic performance and financial condition, and include, among others, statements regarding: the proposed transaction with Bain Capital Partners, LLC; opportunities for growth; the number of early care and education centers expected to be added in future years; the profitability of newly opened early care and education centers; capital expenditure levels; the ability to incur additional indebtedness; strategic acquisitions, investments, and other transactions; changes in operating systems or policies and their intended results; our expectations and goals for increasing center revenue and improving our operational efficiencies; and, our projected operating cash flows.

Although we believe that the forward-looking statements that we make in this report are based on reasonable assumptions, expected results may not be achieved and actual results may differ materially from the Company’s expectations. Forward-looking statements are subject to various known and unknown risks, uncertainties and other factors, including but not limited to the factors discussed in the section entitled “Risk Factors” in Item 1A of this Annual Report on Form 10-K. We caution you that these risks may not be exhaustive. We operate in a continually changing business environment and new risks emerge from time to time. You should not rely upon forward-looking statements except as statements of our present intentions and of our present expectations that may or may not occur. You should read these cautionary statements as being applicable to all forward-looking statements wherever they appear. We assume no obligation to update or revise the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

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PART I

ITEM 1. Business

OVERVIEW

Bright Horizons Family Solutions, Inc. (generally referred to herein as “Bright Horizons”, the “Company”, “we”, “our” or “us”), is a Delaware corporation with its headquarters in Watertown, Massachussetts. Bright Horizons is a leading provider of workplace services for employers and families. Workplace services include center-based child care, education and enrichment programs, elementary school education, back-up care (for children and elders), before and after school care, summer camps, vacation care, college preparation and admissions counseling (“College Coach”), and other family support services. As of December 31, 2007, the Company operated 641 early care and education centers for more than 700 clients and had the capacity to serve approximately 71,000 children in 43 states, the District of Columbia, Puerto Rico, Canada, Ireland, and the United Kingdom. Our workplace services cater primarily to working families and provide a number of services designed to meet the business objectives of employers and the family needs of their employees. Our services are designed to (i) address employers’ ever-changing workplace needs, (ii) enhance employee productivity, (iii) improve recruitment and retention of employees, (iv) reduce absenteeism, and (v) help employers become the employer of choice within their industry.

Bright Horizons serves many leading corporations, including more than 95 Fortune 500 companies and 75 of Working Mother Magazine’s “100 Best Companies for Working Mothers”. Our employer clients include Abbott Laboratories, Alston & Bird, Amgen, Bank of America, Boeing, Bristol-Myers Squibb, British Petroleum, Citigroup, Eli Lilly, GlaxoSmithKline PLC, IBM, Johnson & Johnson, JP Morgan Chase, LandRover, Microsoft, Motorola, Pfizer, Royal Bank of Scotland, Starbucks, Target, Timberland, Toyota, Union Pacific, Universal Studios, and Wachovia. We also provide services for well-known institutions such as Duke University, the European Commission, the Federal Deposit Insurance Corporation (FDIC), JFK Medical Center, Johns Hopkins University, Massachusetts Institute of Technology, Memorial Sloan-Kettering Cancer Center, and the Professional Golfers Association (PGA) and Ladies Professional Golf Association (LPGA) Tours. Bright Horizons operates multiple early care and education centers for 57 of its employer clients.

PROPOSED TRANSACTION WITH AFFILIATES OF BAIN CAPITAL PARTNERS, LLC

On January 14, 2008, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with affiliates of Bain Capital Partners, LLC (“Bain”), pursuant to which a wholly owned subsidiary of Bain will be merged with and into the Company, and as a result the Company will continue as the surviving corporation and a wholly owned subsidiary of Bain (the “Merger”). Both the Board of Directors of the Company and a Special Committee of the Board of Directors of the Company, comprised solely of independent and disinterested directors (the “Special Committee”), have approved the Merger Agreement and the Merger and recommended that the stockholders of Bright Horizons vote to adopt the Merger Agreement. The Company is working toward completing the Merger as quickly as possible, and currently anticipates that the Merger will be completed in the second quarter of 2008.

Pursuant to the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of common stock of the Company will be canceled and will be automatically converted into the right to receive $48.25 in cash, without interest. All outstanding equity-based awards of the Company will continue to vest until the closing of the Merger in accordance with their respective terms. Generally, at the closing of the Merger, all outstanding and unvested equity awards will fully vest, at which time these awards will be cancelled and converted into the right to receive the difference between $48.25 in cash and the exercise price of such award, if applicable, without interest and less any applicable withholding taxes.

Notwithstanding the foregoing, subject to Bain’s sole discretion, certain of our directors and officers may enter into agreements to convert their options or Bright Horizons common stock into, or otherwise invest in, the equity securities of the surviving corporation or one of Bain’s other affiliates following the closing; however, no such discussions regarding any such investments have occurred as of the date of the filing of this Annual Report on Form 10-K.

The Merger Agreement contains a “go-shop” provision wherein, until March 15, 2008, the Company, under the direction of the Special Committee, is permitted to initiate, solicit, facilitate and encourage acquisition proposals from third parties other than Bain and enter into and maintain or continue discussions or negotiations concerning any such acquisition proposals. After the expiration of the go-shop period, the Company is generally not permitted to (1) solicit, knowingly facilitate, knowingly encourage or initiate any inquiries or the implementation or submission of any acquisition

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proposal, (2) withdraw or modify, in a manner adverse to Bain, the recommendation of the Company’s Board of Directors in favor of the Merger or the Merger Agreement, or (3) enter into or recommend any letter of intent, acquisition agreement or similar agreement with respect to any such acquisition proposal. Notwithstanding the foregoing, the provisions of the Merger Agreement provide for a customary “fiduciary-out” provision which allows the Company’s Board of Directors or a committee thereof under certain circumstances to participate in discussions with third parties with respect to unsolicited acquisition proposals and to terminate the Merger Agreement and enter into an acquisition agreement with respect to a superior proposal, provided that the Company complies with certain terms of the Merger Agreement, including, if required, paying a termination fee as described below.

If the Merger Agreement is terminated by the Company, under certain circumstances, the Company will be obligated to pay the expenses of Bain up to $10.0 million and will be obligated to pay a termination fee of $39.0 million (or $19.5 million in the event that the Merger Agreement is terminated in favor of a superior acquisition proposal that arises during the go-shop period), less the amount of any reimbursement of expenses of Bain. Additionally, under certain circumstances, should the purchasing Bain entities terminate the Merger Agreement, Bain would be required to pay the Company a termination fee of $39.0 million, plus, in certain circumstances, indemnification for up to an additional $27.0 million of the Company’s damages. The recovery of such amounts would be the Company’s exclusive remedy for failure of Bain and its affiliates to complete the Merger.

Although the purchasing Bain entities’ obligations to complete the Merger are not conditioned upon their receipt of financing, the purchasing Bain entities have obtained equity and debt financing commitments (including from other Bain affiliates) for the transactions contemplated by the Merger Agreement. In the event that any portion of the financing under the commitments becomes unavailable on the terms contemplated in the agreements in respect thereof, the purchasing Bain entities are obligated to use their reasonable best efforts to arrange alternative financing in an amount sufficient to consummate the Merger.

Consummation of the Merger is subject to customary conditions to closing, including the approval of the Company’s stockholders and receipt of requisite antitrust and competition law approvals. On February 11, 2008, the Company received notice from the Federal Trade Commission and the Antitrust Division of the Department of Justice granting early termination of the waiting period under the Hart-Scott-Rodino Act. On February 19, 2008, the Company filed with the Securities and Exchange Commission the preliminary proxy statement with respect to approval of the Merger by the Company’s stockholders.

Purported class action litigation has been filed since January 14, 2008 by Bright Horizons stockholders against the Company, its current directors, and Bain. See Item 3, “Legal Proceedings”, and Note 14, “Commitments and Contingencies – Litigation”, of the Consolidated Financial Statements and Notes thereto included in Item 8, “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K for a further discussion of these actions.

BUSINESS STRATEGY

Bright Horizons is recognized as a leading quality service provider in our field by employers and working families. The Company is well positioned to serve its clients due to its quality programming, innovative approach to work/life strategies, extensive service offerings, and track record of serving employer sponsors and families. The principal elements of the Company’s business strategy are to be the partner of choice, provider of choice and employer of choice.

Partner of Choice. Bright Horizons seeks to partner with a wide variety of employers to offer unique high quality workplace benefits and solutions. We partner with employers across a wide spectrum of industries, including manufacturing, healthcare and pharmaceutical operations, financial services, universities, and a range of government agencies. Some of the key principles in this business strategy are:

• Provider of Workplace Services. Due to the demographics of today’s workforce and the prevalence of dual career families, a growing number of employers are creating family benefits to attract and retain employees and support them as parents. By making investments in work-site child care, early education and back-up care, employers create a partnership between themselves, their employees (as parents), and Bright Horizons. These services address the critical human resources challenges of recruitment, retention, productivity, and reputation as an employer of choice. By creating the partnership with parents, Bright Horizons and the employer can simultaneously address the three most important criteria used by parents to evaluate and select an early care and education provider: quality of care, site convenience, and cost. In addition, the partnership with Bright Horizons gives parents access to high quality programs where there may be an undersupply of quality child care and may give employees access to a national back-up care network . Bright Horizons’ employer-sponsored facilities are conveniently located at or near the parents’ place of employment, and generally conform their hours of operation to

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	the work schedule of the employer sponsor. Work-site early care and education centers allow parents to spend more time with their children, both while commuting and during the workday, and to participate in and monitor their child’s ongoing care and education.
•	Employer Sponsorship. Sponsorship helps reduce the Company’s start-up and operating costs and enables the Company to concentrate its investment in those areas that directly translate into high quality care, including teacher compensation, teacher-child ratios, curricula, continuing teacher education, facilities, and equipment. Additionally, the Company is able to offer parents high quality early care and education services at competitive tuition levels. Some employers offer subsidized tuition to their employees as part of their sponsorship and overall benefits package, further contributing to the offering of competitive tuition levels.
•	Leading Market Presence. Bright Horizons’ strategy has been to gain a leading market presence by leveraging the Company’s reputation and the visibility of its client relationships to enhance its marketing and market reach. In addition, the Company believes that clustering its early care and education centers in selected metropolitan and geographic areas provides operating advantages, such as local management and oversight, local recruiting networks, and efficient systems to deploy and train teachers. We believe that regional clustering serves as a competitive advantage in developing our reputation within geographic regions and securing new employer sponsorships in those areas.

Provider of Choice. The critical elements of the Company’s focus on quality leadership and on being the provider of choice include:

•	Highly Qualified Center Directors and Teachers. We believe our teachers’ education and experience are superior to the industry average, and that our employee turnover rates are less than those experienced in the industry. Our typical early care and education center director has significant child care experience and a college degree in an education-related field, with many early care and education center directors holding advanced degrees. The Company has developed a training program that establishes minimum standards for its teachers. Teacher training is conducted in each early care and education center and includes orientation and ongoing training, including training related to child development and education, health, safety, and emergency procedures. Management training is provided on an ongoing basis to all early care and education center directors and includes human resource management, risk management, financial management, customer service, and program implementation. Additionally, because we consider ongoing training essential to maintaining high quality service, early care and education centers have training budgets for their faculty that provide for in-center training, attendance at selected outside conferences and seminars, and partial tuition reimbursement for continuing education.
•	Proprietary Innovative Curricula. Bright Horizons’ developmentally appropriate, proprietary curricula are based on well established international research and theory and are recognized as high quality in the realm of early care and education in the United States and Europe. The Company is committed to excellence in the early education experience by creating a dynamic and carefully planned interactive environment designed for individualized active learning and personalized care. The Company’s educational program “The World at Their Fingertips: Education for Bright Horizons” (“World”) is a comprehensive program that includes Language Works, Math Counts, Science Rocks, Our World, Projections, and ArtSmart, the goals of which are to prepare children for academic excellence and build the foundations for success in life, while providing a rich and rewarding childhood. World provides a pedagogical framework that can incorporate accepted best practices in the United Kingdom, Ireland, and all the regions of the United States. Teachers seek to foster a rich learning environment appropriate to their center that provides large and small group experiences and extended projects that are all designed to enrich the children’s learning and development. Teachers strive to create experiences appropriate for each child that provide both stimulation and challenge, which in turn help children find new answers and opportunities. Themes and directions emerge from the interests and experiences of the children, families, and teachers, which are incorporated into the children’s learning.
	The key concepts of the World curriculum include: high expectations for every child; prime times: the importance of adult-child interactions; planned child choice learning environments; emergent curriculum; developmentally appropriate instruction; learning made visible through documentation and display; full parent partnerships; and 21st century technology. The development of language, mathematical reasoning, and scientific thought are emphasized throughout all the learning centers. The Company uses learning centers, outdoor environments, projects and activities, all of which are designed to allow children to independently explore, discover, and learn through their experiences. The Company’s early childhood educational services are provided based on the standards established

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	in the United States by the National Academy of Early Childhood Programs, a division of the National Association for the Education of Young Children (“NAEYC”), the accreditation standards of the National Child Nursery Association (“NCNA”) in Ireland, and the Office of Standards in Education (“OFSTED”) in the United Kingdom.
•	Intensive Teacher-Child Ratios. Intensive teacher-child ratios are a critical factor in providing quality early education, facilitating more focused care and enabling teachers to forge relationships with children and their parents. Each child’s caregiver is responsible for monitoring the child’s developmental progress and tailoring programs to meet the child’s individual needs, while engaging parents in establishing and achieving goals. Many other center-based child care providers conform only to the minimum teacher-child ratios mandated by applicable government regulations, which are often less intensive than Bright Horizons’ early care and education centers and vary widely from state to state.
•	Quality Standards. Bright Horizons operates its early care and education centers to meet very high quality standards. In the United States, centers are operated based on the accreditation standards set forth by NAEYC, a national organization dedicated to improving the quality of care and developmental education provided for young children. The Company’s United Kingdom and Ireland early care and education centers are operated to achieve a similar high degree of quality, and are operated based on the accreditation standards set by OFSTED and NCNA. The Company believes that its commitment to following accreditation standards offers a competitive advantage in employer sponsorship opportunities, as the Company has experienced an increasing number of potential and existing employer sponsors that are requiring adherence to accreditation criteria. Accreditation criteria generally are more stringent than state regulatory requirements, and cover a wide range of quantitative and qualitative factors including, among others, educational qualifications and development of teachers, staffing ratios, health and safety, and the physical environment. Achieving accreditation is a long and challenging process.
•	Parent Support Mechanisms. Bright Horizons’ approach goes beyond the traditional scope of child care and early education and provides rich content and support mechanisms for parents. Through focus groups, parenting seminars, presentations, speaking engagements, e-family news (an electronically distributed parent newsletter), and periodicals, the Company provides resources for parents to support many aspects of parenthood and family issues. The Company’s college preparation and admissions counseling services also offer parents additional assistance including workshops which include topics such as Saving for College, Homework and Study Skills, Selecting the Right College, and Paying for College, as well as one on one support with the preparation of college applications.
•	Family-Friendly Facilities. Bright Horizons believes that warm, nurturing, and family-friendly facilities are an important element in fostering high quality learning environments for children. Our early care and education centers are generally custom-built and designed to be state of the art facilities that serve the children, families and teachers, and create a community of caring. Typical early care and education center design incorporates natural light, openness and direct access from the early care and education center to a landscaped playground with the objective of creating an environment that allows for the children to learn indoors and outdoors. The Company devotes considerable effort to equipping its early care and education centers with child-sized amenities and indoor and outdoor play areas with age-appropriate materials and design, while taking full advantage of technology for both administrative and classroom use. Facilities are designed to be cost-effective and fit specific sites, budgets and clients’ needs.

Employer of Choice. Bright Horizons focuses on maintaining its reputation as a premier employer in the early childhood education market and has been named as one of Fortune’s “100 Best Companies to Work for in America” for the eighth consecutive year. The Company believes that its above-average compensation, comprehensive and affordable benefits package, and opportunities for internal career advancement enable the Company to attract and retain highly qualified, well-educated, experienced and committed early care and education center directors and teachers. As part of the Company’s philosophy of being an employer of choice, the Company developed the Bright Horizons University (“BHU”), an online portal of training sessions, resources, and tools that helps employees develop and reinforce skills and knowledge. In addition, BHU allows for recognized teacher certification.

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GROWTH STRATEGY

The key elements of Bright Horizons’ global growth strategy are as follows:

Open Centers for New Employer Sponsors. Bright Horizons’ sales force, as well as senior management, actively pursues potential new employer sponsors. Bright Horizons believes that its geographic reach, resources, quality leadership and track record of serving employer sponsors give it a competitive advantage in securing new employer sponsorship relationships. As a result of the Company’s visibility as a high quality provider of early care and education and family support services, prospective sponsors regularly contact Bright Horizons requesting proposals for operating an early care and education center.

Expand Relationships with Existing Employer Sponsors. Bright Horizons aims to expand its business relationships from its existing employer sponsor relationships by developing new early care and education centers for sponsors who have multiple sites, expanding existing early care and education centers to serve additional capacity, and offering additional services at its existing early care and education centers. Our experience has been that employer sponsors are more inclined to employ the Company on a multi-site basis following the successful operation of an initial early care and education center. At December 31, 2007, the Company operated 221 early care and education centers for 57 multi-site sponsors.

The Company seeks opportunities to expand and broaden its service offerings in addition to child care. In 2006, the Company acquired College Coach, a college preparation and admissions counseling company, which offers admissions counseling, as well as educational programs that include workshops such as Paying for College and Homework Skills. In addition, the Company developed the Back-Up Care Advantage Program (“BUCA”) as an additional service offering to allow existing clients to offer a national network of services to employees who may not be able to take advantage of traditional child care offerings. Memberships to BUCA allow employees access to a variety of back-up services including center-based back-up care, in-home back-up care, mildly ill care, in-home elder/adult care, and priority access to full or part-time child care. Center-based back-up care is offered at full-service and back-up early care and education centers operated by Bright Horizons, or at high quality child care centers from an exclusive national network of child care providers.

Pursue Strategic Acquisitions. Bright Horizons seeks to acquire high quality early care and education centers and schools to expand quickly and efficiently into new markets, and increase its presence in existing geographic clusters. The fragmented nature of the child care, early education and family support services market continues to provide acquisition opportunities. The Company believes that many of the smaller regional chains and individual providers seek liquidity and/or lack the professional management and financial resources that are often necessary for continued growth. In addition, we pursue acquisitions of correlated businesses to expand service offerings to employers and working families.

Assume Management of High Quality Child Care Centers. The Company has assumed the management of a number of child care centers previously self-managed by employer sponsors as they outsource ancillary services, or from other child care providers. Assuming the management of existing centers enables Bright Horizons to develop new client relationships with little start-up investment.

Geographic Expansion. Bright Horizons seeks to target areas with similar demographic and demand profiles. By targeting areas with a concentration of potential and existing employer sponsors, the Company can offer a more comprehensive solution to an employer sponsor’s needs by serving multiple locations. We may choose to enter new markets by either acquiring or building new early care and education centers.

Develop and Market Additional Services. Bright Horizons develops and markets additional workplace and family support services, including seasonal services (extending hours at existing early care and education centers to serve sponsors with highly seasonal work schedules), school vacation clubs, summer camps, elementary school programs, before and after school care, vacation care, special event child care, and college preparation and admissions counseling services. Additionally, the Company often works with its sponsors to offer unique solutions and provide additional services, such as care during weather-related emergencies, which allows Bright Horizons’ clients to offer child care services to their employees in alternate locations during extended period crisis events which disrupt usual business operations.

The Company seeks to leverage existing centers by utilizing existing capacity to offer clients the ability to purchase back-up care, which serves the employees of the client when their primary child care options are unavailable. The Company also offers memberships to BUCA, which allows clients to offer employees access to a variety of back-up services on a national level.

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Expand and Relocate Existing Early Care and Education Centers. In areas where Bright Horizons has been successful in operating an early care and education facility, it seeks to expand existing facilities to accommodate demand and enhance its market presence. The Company also relocates successful programs to new locations to take advantage of new facilities and/or additional space. At December 31, 2007, the Company had over 60 early care and education centers under development and scheduled to open over the next 12 to 24 months.

BUSINESS MODELS

The Company has two reporting segments consisting of center-based care and ancillary services. Center-based care includes the traditional center-based child care, back-up care, and elementary education. Ancillary services consist of college preparation and admissions counseling and work/life consulting services. The Company uses various business models for the operation of these segments.

Center-Based Care. Although the specifics of Bright Horizons’ contractual arrangements in the center-based care segment vary widely, they generally can be classified into two categories: (i) the management or cost plus (“Cost Plus”) model, where Bright Horizons manages a work-site early care and education center under a cost-plus arrangement with an employer sponsor, and (ii) the profit and loss (“P&L”) model, where the Company assumes the financial risk of the early care and education center’s operations. The P&L model may be operated under either a sponsored or lease model as more fully described below. Under each model type the Company retains responsibility for all aspects of operating the early care and education center, including the hiring and paying of employees, contracting with vendors, purchasing supplies and collecting tuition and related accounts receivable.

The Management (Cost Plus) Model. Early care and education centers operating under the Cost Plus model represent approximately 35% of our early care and education centers. Under the Cost Plus model, the Company receives a management fee from an employer sponsor and an operating subsidy within an agreed upon budget to supplement tuition received from parents. The sponsor typically provides for the facility, pre-opening and start-up costs, capital equipment and facility maintenance. The Cost Plus model enables the employer sponsor to have a greater degree of control with respect to budgeting, spending and operations. Cost Plus contracts have terms that generally range from three to five years. The Company is responsible for maintenance of quality standards, recruitment of early care and education center directors and teachers, implementation of curricula and programs, and interaction with parents.

The Profit and Loss Model. Early care and education centers operating under the P&L model represent approximately 65% of our early care and education centers. Bright Horizons retains financial risk for P&L early care and education centers and is therefore subject to variability in financial performance due to fluctuating enrollment levels. As noted above, the P&L model can be classified into two subcategories: (i) sponsored model, where Bright Horizons provides early care and educational services on a priority enrollment basis for employees of an employer sponsor, and (ii) lease model, where the Company provides priority early care and education to the employees of multiple employers located within a real estate developer’s property or the community at large.

• Sponsored Model. The sponsored model is typically characterized by a single employer (corporation, hospital, government agency or university), but may involve a consortium of employers, entering into a contract with the Company to provide early care and education at a facility located in or near the sponsor’s offices. The sponsor generally provides for the facilities or construction of the early care and education center, pre-opening expenses and assistance with start-up costs as well as capital equipment and initial supplies and, on an ongoing basis, may pay for maintenance and repairs. In some cases, the sponsor may also provide various subsidies, which may take the form of a fixed financial subsidy, tuition assistance to the employees, or minimum enrollment guarantees to the Company. Children of the sponsor’s employees typically are granted priority enrollment at the early care and education center. Operating contracts have terms that generally range from three to five years.

• Lease Model. A lease model early care and education center is typically located in an office building or office park. The early care and education center serves as an amenity to the real estate developer’s tenants, giving the developer an advantage in attracting quality tenants to their site. In addition, the Company may establish an early care and education center in circumstances where it has been unable to cultivate sponsorship, or where sponsorship opportunities do not currently exist. In these instances, the Company will typically lease space in locations where experience and demographics indicate that demand for the Company’s services exists. While the facility is open to general enrollment from the nearby community, the Company may also receive additional sponsorship from employers who purchase full service child care or back-up care benefits for their employees. Bright Horizons typically negotiates lease terms of 10 to 15 years, with renewal options.

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Ancillary Services. The Company’s ancillary services segment is composed of businesses that are designed to support work/life initiatives but are not directly related to the care and education of children. Contractual arrangements for ancillary services vary widely. College Coach offers corporate clients college preparation and admissions counseling services that include worksite and online workshops for employees on various subjects, as well as one on one counseling with employees during the college application process. College preparation and admissions counseling services are offered to the community at various retail locations located primarily in metropolitan areas. Other consulting services related to work/life initiatives are also offered to corporate clients.

OPERATIONS

General. Bright Horizons’ center-based care segment is organized into thirteen operational divisions, organized largely along line-of-business and geographic lines. Each child care and early education division is managed by a Divisional Vice President, and is further divided into regions. Each region is headed by a Regional Manager who oversees the operational performance of approximately six to eight early care and education centers and is responsible for supervising the program quality, financial performance, and client relationships. A typical early care and education center is managed by a small administrative team, under the leadership of a center director. A center director has day-to-day operating responsibility for the early care and education center, including training, management of teachers, licensing compliance, implementation of curriculum, conducting child assessments, and marketing. Bright Horizons’ corporate offices provide centralized administrative support consisting of most accounting, finance, information systems, legal, payroll, risk management, and human resources functions.

Center hours of operation are designed to match the schedules of the sponsor or sponsors. Most early care and education centers are open ten to twelve hours a day with typical hours of operation from 7:00 a.m. to 6:00 p.m., Monday through Friday. Bright Horizons offers a variety of enrollment options, ranging from full-time to part-day and part-week options. In addition, children from the community attend our early care and education centers, where such enrollment is permitted under the terms of the contract.

Tuition depends upon the age of the child, the teacher-child ratio, the geographic location and the extent to which an employer sponsor subsidizes tuition. Based on a representative sample of the Company’s early care and education centers, the average tuition rate in the United States was $1,400 per month for infants, $1,300 per month for toddlers, and $1,050 per month for preschoolers. Tuition at most of our early care and education centers is payable in advance and is due either monthly or weekly. In some cases, parents can pay tuition through payroll deductions or through automated clearing house (“ACH”) withdrawals.

College Coach is a provider of educational advising, offering employers and families a comprehensive solution to maximize each student’s chances of academic success. Services include college planning, college selection and college admissions counseling. College Coach has 16 locations throughout the United States focused primarily in metropolitan areas where the demand for these services is the greatest. These offices serve both individual families and corporate clients, and are typically staffed by one to three members of the education team. The education team professionals are typically former senior admissions and financial aid officers from the nation’s top colleges who the Company feels are best qualified to assist families and their school-age children through stressful and time-consuming academic challenges. In addition to serving families, the company partners with organizations to offer its services as a benefit to employees. Services for corporate clients include web-based and onsite workshops, access to a help desk, and individual counseling with employees on topics related to career interests and study skill development, the college admissions process, and college financing.  College Coach serves more than 60 organizations worldwide, sharing many clients who utilize the Company’s early care and education services.

Seasonality. The Company’s business is subject to seasonal and quarterly fluctuations. Demand for early care and education and elementary school services has historically decreased during the summer months, at which time families are often on vacation or have alternative child care arrangements, or school is not in session. In addition, enrollment declines as older children transition to elementary schools. Demand for the Company’s services generally increases in September and October to normal enrollment levels upon the beginning of the new school year and remains relatively stable throughout the rest of the school year.

Segments. Bright Horizons offers workplace services comprised mainly of center-based child care, back-up care, elementary education, college preparation and admissions counseling, and consulting services. The Company operates under two segments consisting of center-based care and ancillary services. Center-based care includes center-based child care, back-up care, and elementary education. The Company’s ancillary services consist primarily of college preparation and admissions counseling and work/life consulting services. For certain historical financial information regarding our

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segments, as well as financial information by geographic area, see Note 17 “Segment and Geographic Information” of the Consolidated Financial Statements and Notes thereto included in Item 8, “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K.

Facilities. The Company’s early care and education centers are primarily operated at work-site locations and vary in design and capacity in accordance with sponsor needs and state and federal regulatory requirements. The Company’s North American early care and education centers typically range from 6,000 to 12,000 square feet and have an average capacity of 122 children. The Company’s European locations average a capacity of 59 children. As of December 31, 2007, the Company’s early care and education centers had a total licensed capacity of approximately 71,000 children, with the smallest center having a capacity of 12 children and the largest having a capacity of 572 children.

Bright Horizons believes that attractive, spacious and child-friendly facilities with a warm, nurturing and welcoming atmosphere are an important element in fostering a high quality learning environment for children. The Company’s early care and education centers are designed to be open and bright and to maximize visibility throughout the early care and education center. The Company devotes considerable resources to equipping its early care and education centers with child-sized amenities, indoor and outdoor play areas of age-appropriate materials and design, family hospitality areas and computer centers. Commercial kitchens are typically present in those early care and education centers where regulations require that hot meals be prepared on site.

Health and Safety. The safety and well-being of the children and Bright Horizons employees are paramount for the Company. The Company employs a variety of security measures at its early care and education centers, which typically include electronic access systems and sign-out procedures for children, among other site-specific procedures. In addition, Bright Horizons’ trained teachers and open center design help ensure the health and safety of children. Our early care and education centers are designed to minimize the risk of injury to children by incorporating such features as child-sized amenities, rounded corners on furniture and fixtures, age-appropriate toys and equipment, and cushioned fall-zones surrounding play structures.

Each center is further guided by a policies and procedures manual and a Center Management Guide, which addresses protocols for safe and appropriate care of children and center administration. These guidelines establish center protocols in areas ranging from the safe handling of medications, managing child illness or health emergencies, and a variety of other critical aspects of care, to ensure that centers meet or exceed all mandated licensing standards. The Center Management Guide is reviewed and updated continuously by a team of internal experts, and center personnel are trained on center practices using this tool.

MARKETING

Bright Horizons markets its services to both employer sponsors and parents. The Company’s sales force and senior management maintain relationships with larger clients and actively pursue potential new employer sponsors across a wide variety of industry sectors. The Company’s sales force is organized on both a national and regional basis, and is responsible for identifying potential employer sponsors, targeting real estate developers, identifying potential acquisitions and managing the overall sales process. As a result of Bright Horizons’ visibility as a high quality child care provider, potential sponsors regularly contact the Company requesting proposals. Bright Horizons competes for most employer-sponsorship opportunities via a request for proposal process. In addition, the Company’s Board of Directors, senior officers and Advisory Board members are involved at the national level with education, work/life and children’s advocacy, and their prominence and involvement in such issues plays a key role in attracting new clients and developing additional services and products for existing clients.

The Company has a parent marketing department that supports parent enrollment efforts through the development of marketing programs, including the preparation of promotional materials. New enrollment is generated by word of mouth, reputation, print advertising, direct mail campaigns, web-based advertising, parent referral programs, and business outreach. Our early care and education center directors may receive assistance from employer sponsors, who often provide access to channels of internal communication such as e-mail, websites, intranets, mailing lists, and internal publications. In addition, many sponsors promote the early care and education center as an important employee benefit.

COMPETITION

The market for early care and education services is highly fragmented and competitive, and Bright Horizons experiences competition for enrollment and for sponsorship of its early care and education centers from many sources. Bright Horizons believes that the key factors in the competition for enrollment are quality of care, site convenience and cost. The Company

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competes for enrollment with nannies, relatives, family child care (operated out of the care-giver’s home) and center-based child care providers, including for-profit, not-for-profit and government-based providers. Employer sponsor support enables us to limit our start-up and operating costs and concentrate the investment in those areas that directly translate into high quality early education—specifically, teacher compensation, teacher-child ratios, curricula, continuing teacher education, facilities and equipment. We believe that many center-based child care providers are able to offer care at a lower price than Bright Horizons by utilizing less intensive teacher-child ratios, and offering their staff lower pay and limited or unaffordable benefits. While our tuition levels are generally above those of our competitors, we believe we are able to compete effectively by offering the convenience of a work-site location and a higher level quality of care and education.

Many residential center-based child care chains either have divisions that compete for employer sponsorship opportunities, or are larger than the Company and may compete successfully against the Company for employer sponsors. We believe there are fewer than ten companies that currently operate child care centers across the United States and two companies that operate in the United States and abroad that fall into this category.

The Company’s main competitors include a variety of regional providers, such as New Horizons Child Development Centers, and the employer-sponsored child care divisions of large child care chains that primarily operate residential child care centers such as Knowledge Learning Corporation and Learning Care Group, Inc. (a subsidiary of ABC Learning Centres, Ltd.) in the United States, and Kids Unlimited and Child Base in Europe. Management believes that the Company is distinguished from its competitors by its primary focus on employer clients and track record for achieving and maintaining high quality standards. Bright Horizons believes it is well-positioned to attract sponsors who wish to outsource the management of new or existing work-site early care and education centers due to the Company’s extensive service offerings, established reputation, position as a quality leader, and track record of serving major employer sponsors. Additionally, the Company believes that it offers the highest quality multi-national solution for major employer sponsors.

EMPLOYEES

As of December 31, 2007, Bright Horizons employed approximately 18,400 employees (including part-time and substitute teachers), of whom approximately 650 were employed at the Company’s corporate, divisional and regional offices and the remainder of whom were employed at the Company’s service locations. Early care and education center employees include teachers and support personnel. The total number of employees includes approximately 2,000 employees in Europe. The Company believes that its relationship with its employees is generally good.

The Company has an agreement with a labor union that represents approximately 50 employees at one of the Company’s early care and education centers operated under an arrangement with the United Auto Workers and General Motors Corporation. The Company believes that it has a good relationship with the union and its representatives and with these employees.

REGULATION

Child care centers are subject to numerous regulations and licensing requirements. Although these regulations vary from jurisdiction to jurisdiction, government agencies generally review, among other things, the adequacy of buildings and equipment, licensed capacity, the ratio of teachers to children, educational qualifications and training of teachers, record keeping, the dietary program, the daily curriculum, hiring practices, and compliance with health and safety standards. In most jurisdictions, these agencies conduct scheduled and unscheduled inspections of centers, and licenses must be renewed periodically. Regulations have been enacted in most jurisdictions that establish requirements for employee background checks or other clearance procedures for employees of child care facilities. In addition to the mandated background checks, new employees and regular visitors must also undergo the Company’s more extensive background check. Early care and education center directors and regional managers are responsible for monitoring each early care and education center’s compliance with such regulations. Repeated failures by an early care and education center to comply with applicable regulations can subject it to sanctions, which can include fines, corrective orders, being placed on probation or, in more serious cases, suspension or revocation of the early care and education center’s license to operate, and could require significant expenditures by the Company to bring its early care and education centers into compliance. In addition, state and local licensing regulations generally provide that licenses held may not be transferred. As a result, any transferee of a family services business (primarily child care) must apply to the applicable administrative bodies for new licenses. There can be no assurance that the Company would not have to incur material expenditures to re-license early care and education centers it may acquire in the future. Management believes the Company is in substantial compliance with all material regulations applicable to its business.

There are certain tax incentives in the United States for parents utilizing child care programs. Section 21 of the Internal Revenue Code provides a federal income tax credit ranging from 20% to 35% of certain child care expenses for “qualifying

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individuals” (as defined therein). The Company believes the fees paid to Bright Horizons for child care services by eligible taxpayers qualify for the tax credit, subject to the limitations of Section 21. The amount of the qualifying child care expenses is limited to $3,000 for one child and $6,000 for two or more children, and, therefore, the maximum credit ranges from $1,050 for one child to $2,100 for two or more children.

TRADEMARKS AND SERVICE MARKS

The Company believes that its name and logo are important to its operations. The Company owns and uses various registered and unregistered trademarks and service marks covering the name Bright Horizons Family Solutions, our logo and a number of other names, slogans and designs. A federal registration in the United States is effective for 10 years and may be renewed for additional periods, subject only to required filings based on continued use of the mark by the registrant. The Company seeks to protect its trademarks and service marks by registering the marks in a variety of countries and geographic areas, including Asia, Europe, Australia, and North America. These registrations are subject to varying lives and renewal options.

INSURANCE

Bright Horizons currently maintains the following major types of commercial insurance policies: workers’ compensation, commercial general liability (including coverage for sexual and physical abuse), professional liability, automobile liability, excess “umbrella” liability, commercial property coverage, student accident coverage, employment practices liability, and directors’ and officers’ liability. These policies provide for a variety of coverages and are subject to various limitations, exclusions and deductibles. Management believes that the Company’s current insurance coverages are adequate to meet its needs.

Bright Horizons has not experienced difficulty in obtaining insurance coverage, but there can be no assurance that adequate insurance coverage, particularly coverage for sexual and physical abuse, will be available in the future, or that the Company’s current coverage will protect it against all possible claims.

EXECUTIVE OFFICERS OF THE COMPANY

Set forth below is certain information regarding the executive officers of the Company:

Linda A. Mason, 53 – Chair. Ms. Mason has served as a director of the Company since its inception in 1998. Ms. Mason co-founded Bright Horizons, Inc. in 1986, and served as President of Bright Horizons, Inc. until the merger with CorporateFamily Solutions, Inc. in July 1998. Prior to this, Ms. Mason was co-director of the Save the Children relief and development effort in Sudan and worked as a program officer with CARE in Thailand. Ms. Mason is currently also a director of Horizons for Homeless Children, a non-profit organization that provides support for homeless children and their families, and the Advisory Board of the Yale University School of Management. Ms. Mason is the wife of Roger H. Brown, who is Vice Chair of the Board of Directors.

David H. Lissy, 42 – Chief Executive Officer. Mr. Lissy has served as a director of the Company since November 2001 and has also served as Chief Executive Officer of the Company since January 2002. Mr. Lissy served as Chief Development Officer of the Company from 1998 until January 2002. He also served as Executive Vice President from June 2000 to January 2002. Mr. Lissy joined Bright Horizons, Inc. in September 1997 and served as Vice President of Development until the merger with CorporateFamily Solutions, Inc. in July 1998. Prior to joining Bright Horizons, Inc., Mr. Lissy served as Senior Vice President/General Manager at Aetna U.S. Healthcare, of the employee benefits division of Aetna, Inc., in the New England region. Prior to that role, Mr. Lissy was Vice President of Sales and Marketing for U.S. Healthcare and had been with U.S. Healthcare in various sales and management roles since 1987.

Mary Ann Tocio, 59 – President and Chief Operating Officer. Ms. Tocio has served as a director of the Company since November 2001 and has also served as Chief Operating Officer of the Company since its inception in 1998. Ms. Tocio was appointed President in June 2000. Ms. Tocio joined Bright Horizons, Inc. in 1992 as Vice President and General Manager of Child Care Operations, and served as Chief Operating Officer from November 1993 until the merger with CorporateFamily Solutions, Inc. in July 1998. From 1983 to 1992, prior to joining Bright Horizons, Inc., Ms. Tocio held several positions with Wellesley Medical Management, Inc., including Senior Vice President of Operations, where she managed more than 100 ambulatory care centers nationwide. Ms. Tocio is currently also a member of the board of directors of Harvard Pilgrim Health Care, a health benefits and insurance organization, and Mac-Gray Corporation, a provider of laundry facilities management services.

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Elizabeth J. Boland, 48 – Chief Financial Officer and Treasurer. Ms. Boland has served as Chief Financial Officer and Treasurer of the Company since June 1999. Ms. Boland joined Bright Horizons, Inc. in 1997 as Chief Financial Officer and, subsequent to the merger between Bright Horizons, Inc. and CorporateFamily Solutions, Inc. in July 1998, served as Senior Vice President of Finance for the Company until June 1999. From 1994 to 1997, prior to joining Bright Horizons, Inc., Ms. Boland was Chief Financial Officer of The Visionaries, Inc., an independent television production company. From 1990 to 1994, Ms. Boland served as Vice President of Finance for The Olsten Corporation, a publicly traded provider of home-health care and temporary staffing services. Prior to that role, from 1981 to 1990, she worked on the audit staff at Price Waterhouse LLP in Boston, completing her tenure as a senior audit manager.

Stephen I. Dreier, 65 – Chief Administrative Officer and Secretary. Mr. Dreier has served as Chief Administrative Officer and Secretary of the Company since its inception in 1998. He joined Bright Horizons, Inc. in 1988 as Vice President and Chief Financial Officer. He later became its Secretary in November 1988 and Treasurer in September 1994. Mr. Dreier served as Bright Horizons, Inc.’s Chief Financial Officer and Treasurer until September 1997, at which time he was appointed to the position of Chief Administrative Officer. He served as Chief Administrative Officer from 1997 until the merger with CorporateFamily Solutions, Inc. in July 1998. From 1976 to 1988, prior to joining Bright Horizons, Inc., Mr. Dreier was Senior Vice President of Finance and Administration for the John S. Cheever/Paperama Company.

Danroy T. Henry, 41 – Chief Human Resources Officer.  Mr. Henry has served as the Chief Human Resources Officer since December 2007. Mr. Henry joined Bright Horizons in May 2004 as the Senior Vice President of Global Human Resources.  From 2001 to 2004, Mr. Henry was the Executive Vice President for FleetBoston Financial where he had responsibility for the metropolitan Boston consumer banking market. From 1999 to 2001, Mr. Henry served as the Chief People Officer for retailer Blinds To Go Superstores. From 1994 to 1999, Mr. Henry worked in a variety of senior Human Resources and operational roles for Staples, Inc., completing his tenure as Vice President of Contract Customer Service where he managed the call center operations for the business to business division. From 1988 to 1993, Mr. Henry served in a variety of Human Resources roles for Pepsi Cola Company, including Area Manager of Employee and Labor relations. Mr. Henry is the Chairman of the board of directors for the Northeast Human Resources Association (NEHRA) and is a member of the board of directors of the Society of Human Resource Management Foundation (SHRM).

AVAILABLE INFORMATION

The Company’s website address is www.brighthorizons.com. The annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on the Company’s website as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). The Company’s SEC filings are also available over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 to obtain information on the operation of the public reference room. Please note that information provided on the Company’s website is not part of this report, and is therefore not incorporated by reference unless such information is otherwise specifically referenced elsewhere in this report.

ITEM 1A. Risk Factors

Each of the following risks, individually or as a group, could have a material adverse affect on the Company’s business, results of operations, financial condition or cash flows.

RISKS RELATING TO THE MERGER

The consummation of the proposed merger of the Company with affiliates of Bain Capital Partners, LLC is not certain and its delay or failure could adversely affect our operating results or the price of our common stock. On January 14, 2008, Bright Horizons announced an agreement to be acquired through the Merger of the Company with an entity controlled by affiliates of Bain Capital Partners, LLC. The Company cannot provide any assurance that the proposed Merger will be consummated. If consummated, it is currently anticipated to be completed in the second quarter of 2008. However, the Company cannot assure you of the timing of the closing.

Consummation of the proposed Merger is subject to the satisfaction of various conditions, including adoption of the Merger by a vote of a majority of the outstanding shares of the Company’s common stock and other customary closing conditions described in the Merger Agreement. The Company cannot guarantee that these closing conditions will be satisfied, that the Company will receive the required approvals or that the proposed Merger will be successfully completed. Many of these conditions are out of the Company’s control. In the event that the proposed Merger is not completed or is delayed:

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• management’s and employees’ attention to the Company’s day-to-day business may be diverted because matters related to the proposed Merger may require substantial commitments of their time and resources;

• the Company could lose key employees;

• the Company’s relationships with customers, suppliers and parents may be substantially disrupted as a result of uncertainties with regard to our business and prospects;

• under certain circumstances, if the proposed Merger is not completed, the Company may be required to pay the expenses of Bain of up to $10.0 million as well as a termination (break-up) fee of up to $39.0 million (against which the amount of the expense payment would be credited);

• under certain circumstances, if the proposed Merger is not completed, affiliates of Bain Capital Partners, LLC may be required to pay the Company a termination fee plus indemnification for damages of up to $66.0 million, and such amounts would be the Company’s only source of recovery, regardless of the total amount of the actual damages the Company may suffer as a result of the delay in or failure of the proposed Merger’s consummation; and

• the market price of shares of the Company’s common stock may decline to the extent that the current market price of those shares reflects a market assumption that the proposed Merger will be completed.

Any of these events could have a material negative impact on the Company’s results of operations and financial condition and could adversely affect the price of the Company’s common stock.

We are subject to pending litigation that could delay or prevent the consummation of the proposed merger. As of the date of this Annual Report on Form 10-K, the Company, its directors and Bain Capital Partners, LLC have been named as defendants in putative class action litigation filed in Massachusetts state court in connection with the proposed Merger. The plaintiffs in this litigation seek, among other things, injunctive relief to prevent the consummation of the Merger and monetary relief. While the Company believes the claims made in this litigation are without merit and intends to defend any such claims vigorously, there can be no assurance that the Company will prevail in its defense. Moreover, it is possible that additional claims beyond those that have already been filed will be brought by the current plaintiffs or by others in an effort to enjoin the proposed Merger or seek monetary relief from the Company. An unfavorable resolution of any such litigation surrounding the proposed Merger could delay or prevent the consummation of the proposed Merger.

We have incurred, and will continue to incur, substantial costs in connection with the proposed merger. The Company has incurred, and will continue to incur, substantial costs in connection with the proposed Merger. These costs are primarily associated with the fees of attorneys, accountants and financial advisors of the Company, our Board of Directors, and the Special Committee of our Board of Directors. In addition, the Company has diverted significant management resources in an effort to complete the proposed Merger, and we are subject to restrictions contained in the Merger Agreement on the conduct of our business until the closing of the proposed Merger. If the proposed Merger is not completed, the Company will have incurred significant costs, including the diversion of management resources, for which we will have received little or no benefit.

RISKS RELATING TO OUR BUSINESS

Changes in economic conditions could negatively affect our operating results. The Company’s operations are subject to general economic conditions. A significant portion of the Company’s revenue is derived from employer sponsors who have historically reduced their expenditures for work-site family services during economic downturns. Should the economy experience prolonged weakness, employer clients may reduce or eliminate their sponsorship of work and family services, and prospective clients may not commit resources to such services. In addition, a reduction in the size of an employer’s workforce could negatively impact the demand for our services. The Company’s revenues depend, in part, on the number of dual income families and working single parents who require child care services. A deterioration of general economic conditions may adversely impact the Company’s operations and the need for its services because out-of-work parents may diminish or discontinue the use of child care services. Additionally, we may not be able to increase tuition at a rate consistent with increases in operating costs.

The growth of our business may be adversely affected if we do not implement our growth strategies successfully. The Company’s ability to grow in the future will depend upon a number of factors, including the ability to develop and expand new and existing client relationships, to expand the services and programs offered by the Company, to maintain high

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quality services and programs, and to hire and train qualified personnel. Achieving and sustaining growth increases the demands on the Company’s resources, which may require the implementation of enhancements to operational and financial systems, and will be dependant on the Company’s ability to expand its sales and marketing force. There can be no assurance that the Company will be able to manage its expanding operations effectively or that it will be able to maintain or accelerate its growth.

Acquisitions may disrupt our operations or expose us to additional risk. Acquisitions are an integral part of the Company’s growth strategy. Acquisitions involve numerous risks, including potential difficulties in the integration of acquired operations, not meeting financial objectives, increased costs, undisclosed liabilities not covered by insurance or terms of acquisition, diversion of management’s attention and resources in connection with an acquisition, and loss of key employees of the acquired operation. No assurance can be given as to the Company’s success in identifying, executing and integrating acquisitions in the future.

Changes in our relationships with employer sponsors may affect our operating results. A significant portion of the Company’s business is derived from early care and education centers associated with employer sponsors for whom the Company provides work-site family services for single or multiple sites pursuant to contractual arrangements. While the Company has a history of consistent contract renewals, there can be no assurance that future renewals will be secured. The termination or non-renewal of a significant number of contracts or the termination of a multiple-site client relationship could have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows.

Significant competition in our industry could adversely affect our results of operations. The Company competes for enrollment and sponsorship of its early care and education centers in a highly fragmented market. For enrollment, the Company competes with family child care (operated out of the caregiver’s home) and center-based child care (such as residential and work-site child care centers, full and part-time nursery schools, private and public elementary schools, and church-affiliated and other not-for-profit providers). In addition, substitutes for organized child care, such as relatives and nannies caring for a child, can represent lower cost alternatives to our services. Management believes the Company’s ability to compete successfully depends on a number of factors, including quality of care, site convenience, and cost. The Company is often at a price disadvantage to its competition, who may have access to greater financial resources than the Company, have greater name recognition, or have lower operating costs. In addition, competitors may be able to operate with little or no rental expense and generally do not comply or are not required to comply with the same health, safety, insurance, and operational regulations as the Company. Therefore, there can be no assurance that the Company will be able to compete successfully against current and future competitors.

The Company competes with other organizations that vary in size, scope, business objectives, and financial resources. Increased competition for employer relationships on a national or local basis could result in increased pricing pressure and/or loss of market share, as well as impact the Company’s ability to attract and retain qualified early care and education center personnel and its ability to pursue its growth strategy successfully.

The Company depends on key management and key employees to manage our business. The success of the Company is highly dependent on the efforts, abilities, and continued services of its executive officers and other key employees. The Company believes that its future success will depend upon its ability to continue to attract, motivate and retain highly-skilled managerial, sales and marketing, divisional, regional, and early care and education center director personnel.

Our business depends largely on our ability to hire and retain qualified teachers. The Company may experience difficulty in attracting, hiring, and retaining qualified teachers in various markets, which may require us to offer increased salaries and enhanced benefits in more competitive markets. Difficulties in hiring and retaining qualified personnel may affect the Company’s ability to meet growth objectives and to take advantage of additional enrollment opportunities at its early care and education centers. In addition, employee organization efforts could affect the Company.

Our operating results are subject to seasonal fluctuations. The Company’s revenue and results of operations fluctuate with the seasonal demands for child care. Revenue in our early care and education centers that have mature operating levels typically declines during the third quarter as a result of decreased enrollments over the summer months as parents withdraw their children for vacations, as well as older children transition into elementary schools. The Company’s schools are also not in session during the third quarter which contributes to the decrease in revenue. In addition, usage for the Company’s back-up services, including BUCA, tends to be higher when school is not in session and during holiday periods, which can increase the operating costs of the program which impact results of operations. There can be no assurance that the Company will be able to adjust its expenses on a short-term basis to minimize the effect of these fluctuations in revenue. The Company’s quarterly results of operations may also fluctuate based upon the number and timing of early care and education center openings and/or closings, acquisitions, the performance of new and existing early care and education centers, the

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contractual arrangements under which early care and education centers are operated, the change in the mix of such contractual arrangements, competitive factors, and general economic conditions. The inability of existing early care and education centers to maintain their current enrollment levels and profitability, the failure of newly opened early care and education centers to contribute to profitability, and the failure to maintain and grow the ancillary services could result in additional fluctuations in future operating results of the Company on a quarterly or annual basis.

The Company may not be able to obtain and maintain adequate insurance at a reasonable cost. The Company currently maintains the following major types of commercial insurance policies: workers’ compensation, commercial general liability (including coverage for sexual and physical abuse), professional liability, automobile liability, excess “umbrella” liability, commercial property coverage, student accident coverage, employment practices liability, and directors’ and officers’ liability. These policies provide for a variety of coverages and are subject to various limitations, exclusions and deductibles. To date, Bright Horizons has been able to obtain insurance in amounts it believes to be appropriate. There can be no assurance that such insurance, particularly coverage for sexual and physical abuse, will continue to be readily available to the Company in the form or amounts the Company has been able to obtain in the past or that the Company’s insurance premiums will not materially increase in the future as a consequence of conditions in the insurance business or in the child care industry.

Adverse publicity could impact the demand for our services. Adverse publicity concerning reported incidents of child abuse at any early care and education center, whether or not directly relating to or involving Bright Horizons, could result in decreased enrollment at the Company’s early care and education centers, termination of existing corporate relationships or inability to attract new corporate relationships, or increased insurance costs, all of which could adversely affect the Company’s operations.

Changes in the demand for work and family services may affect the Company’s operating results. The Company’s business strategy depends on employers and working families recognizing the value in providing employees with workplace services. There can be no assurance that there will be continued growth in the number of employers that view work-site family services as cost-effective or beneficial to their work forces. There can be no assurance that demographic trends, including the number of dual-income families in the work force, will continue to lead to increased market share.

We may become subject to litigation proceedings that may adversely affect our business. Because of the nature of our business, the Company may be subject to claims and litigation alleging negligence, inadequate supervision or other grounds for liability arising from injuries or other harm to the people we serve, primarily children. In addition, claimants may seek damages from Bright Horizons for child abuse, sexual abuse and other acts allegedly committed by Company employees. There can be no assurance that additional lawsuits will not be filed, that the Company’s insurance will be adequate to cover liabilities resulting from any claim, or that any such claim or the publicity resulting from it will not have a material adverse effect on the Company’s business, results of operations, and financial condition including, without limitation, adverse effects caused by increased cost or decreased availability of insurance, and decreased demand for our services from employer sponsors and parents.

Changes in laws and regulations could impact the way we conduct business. The Company’s early care and education centers are subject to numerous national, state and local regulations and licensing requirements. Although these regulations vary greatly from jurisdiction to jurisdiction, government agencies generally review, among other things, the adequacy of buildings and equipment, licensed capacity, the ratio of teachers to children, educational qualifications and training of staff, record keeping, the dietary program, the daily curriculum, hiring practices, and compliance with health and safety standards. Failure of an early care or education center to comply with applicable regulations and requirements could subject it to governmental sanctions, which can include fines, corrective orders, being placed on probation, or, in more serious cases, suspension or revocation of the early care and education center’s license to operate, and could require significant expenditures by the Company to bring its early care and education centers into compliance. Although the Company expects to pay employees at rates above the minimum wage, increases in the statutory minimum wage could result in a corresponding increase in the wages paid to the Company’s employees.

Significant increases in the cost of insurance claims may negatively affect our profitability. The Company self-insures a portion of its medical insurance plans and has a high deductible workers’ compensation plan. Due to the nature of these liabilities, some of which may not fully manifest themselves for several years, the Company estimates the obligations for liabilities incurred but not yet reported or paid based on available data and experience. While we believe that the amounts accrued for these obligations are sufficient, any significant increase in the number of claims or costs associated with claims made under these plans could have a material adverse effect on the Company’s financial position, results of operations or cash flows.

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The market price of our common stock may be volatile. The prices at which the Company’s common stock trades is determined by the marketplace and is influenced by many factors, including fluctuations in our quarterly operating results, investor perception of the Company and of our industry, general economic market conditions and world events. Factors such as announcements of new services, new clients or acquisitions, by the Company, its competitors or third parties, as well as market conditions in our industry, could cause the market price of the Company’s common stock to fluctuate substantially. Volatility of the stock market and general movements in the prices of stocks may also affect the market price of our stock. In addition, awards under the Company’s stock incentive plan may cause dilution to existing stockholders.

Governmental universal child care benefit programs could reduce the demand for our services. National, state or local child care benefit programs comprised primarily of subsidies in the form of tax credits or other direct government financial aid provides the Company opportunities for expansion in additional markets. However, a universal benefit with governmentally mandated or provided child care could reduce the demand for early care services at the Company’s existing early care and education centers.

Breaches in data security could adversely affect the Company’s financial condition and operating results. For various operational needs, we receive certain personal information. While the Company has policies and practices that protect its data, a compromise of our systems that results in personal information being obtained by unauthorized persons could adversely affect our reputation, as well as our operations, results of operations, financial condition or cash flows, and could result in litigation against us or the imposition of penalties. In addition, a security breach could require us to expend significant additional resources related to the security of information systems and could result in a disruption of our operations.

Provisions in the Company’s certificate of incorporation and bylaws, as well as provisions of Delaware law, could delay or prevent a takeover. The Company’s certificate of incorporation and bylaws contain certain provisions that could make more difficult the acquisition of the Company by means of a tender offer, a proxy contest or otherwise. These provisions establish staggered terms for members of the Company’s Board of Directors and include advance notice procedures for stockholders to nominate candidates for election as directors of the Company and for stockholders to submit proposals for consideration at stockholders’ meetings. In addition, the Company is subject to Section 203 of the Delaware General Corporation Law (“DGCL”), which limits transactions between a publicly held company and “interested stockholders” (generally, those stockholders who, together with their affiliates and associates, own 15% or more of a company’s outstanding capital stock). This provision of the DGCL may have the effect of deterring certain potential acquisitions of Bright Horizons. The Company’s certificate of incorporation provides for 5,000,000 authorized but unissued shares of preferred stock, the rights, preferences, qualifications, limitations and restrictions of which may be fixed by the Company’s Board of Directors without any further action by stockholders.

A regional or global health pandemic could severely disrupt our business. A health pandemic is a disease that spreads rapidly and widely by infection and affects many individuals in an area or population at the same time. If a regional or global health pandemic were to occur, depending upon its duration and severity, the Company’s business could be severely affected. Enrollment in our centers could experience sharp declines as parents might avoid taking their children out in public in the event of a health pandemic, and local, regional or national governments might limit or ban public interactions to halt or delay the spread of disease causing business disruptions and the temporary closure of our centers. Additionally, a health pandemic could also impair our ability to hire and retain an adequate level of staff. The impact of a health pandemic on Bright Horizons might be disproportionately greater than on other companies that depend less on the interaction of people for the sale of their products and services.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

Bright Horizons leases approximately 56,000 square feet of office space for its corporate headquarters in Watertown, Massachusetts, under an operating lease that expires in 2010 with two five-year renewal options. The Company also leases office space for regional administrative offices located in Nashville, Tennessee; Morristown, New Jersey; Chicago, Illinois; El Segundo, California; Coppell, Texas; Gaithersburg, Maryland; Deerfield, Florida; Rushden, United Kingdom; and, Blanchardstown, Ireland.

As of December 31, 2007, Bright Horizons operated 641 early care and education centers in 43 states and the District of Columbia, Puerto Rico, Canada, Ireland, and the United Kingdom, of which 39 were owned, with the remaining centers

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being operated under leases or operating agreements. The leases typically have initial terms ranging from ten to fifteen years with various expiration dates, often with renewal options. Certain owned properties are subject to mortgages that secure our performance under the terms of operating agreements with client sponsors.

The following table summarizes the locations of our early care and education centers as of December 31, 2007:

Location	Number of centers
Alabama		3
Alaska		1
Arizona		4
California		54
Colorado		17
Connecticut		25
Delaware		9
District of Columbia		14
Florida		25
Georgia		16
Idaho		1
Illinois		36
Indiana		6
Iowa		5
Kansas		1
Kentucky		4
Louisiana		2
Maine		2
Maryland		8
Massachusetts		59
Michigan		11
Minnesota		7
Mississippi		1
Missouri		7
Montana		1
Nebraska		4
Nevada		5
New Hampshire		3
New Jersey		34
New Mexico		1
New York		36
North Carolina		22
Ohio		9
Oregon		1
Pennsylvania		18
Puerto Rico		1
Rhode Island		2
South Carolina		1
South Dakota		1
Tennessee		6
Texas		22
Utah		1
Virginia		11
Washington		20
Wisconsin		9
Canada		2
Ireland		12
United Kingdom		101

We believe that our properties are generally in good condition and that they are adequate for our operations.

ITEM 3. Legal Proceedings

Bright Horizons is, from time to time, subject to claims and suits arising in the ordinary course of its business. Such claims have, in the past, generally been covered by insurance. We believe the resolution of legal matters will not have a material effect on the Company’s financial condition, results of operations, or cash flows, although no assurance can be given with respect to the ultimate outcome of any such actions. Furthermore, there can be no assurance that the Company’s insurance will be adequate to cover all liabilities that may arise out of claims brought against the Company.

In connection with the proposed Merger between the Company and affiliates of Bain, the Company has been named as a defendant, along with the Company’s Board of Directors and Bain, in putative class action lawsuits filed in Massachusetts state court (Aaron Solomon, on behalf of himself and all others similarly situated v. Bright Horizons Family Solutions, Inc., et al., Middlesex County Superior Court, No. 08-0214 and William Smith, individually and on behalf of all other similarly situated shareholders, v. Bright Horizons Family Solutions, Inc., et al., Middlesex County Superior Court, No. 08-0467). On February 26, 2008, the Massachusetts state court consolidated these lawsuits into a single action. These lawsuits allege, among other things, that the Merger is the product of a flawed process and that the consideration to be paid to the Company’s stockholders is unfair and inadequate. The lawsuits further allege that the Company’s directors breached their fiduciary duties by, among other things, ignoring certain alleged conflicts of interest of one of the Special Committee’s financial advisors, taking steps to avoid a competitive bidding process, and improperly favoring a merger over other potential transactions. The lawsuits further allege that Bain aided and abetted the directors’ alleged breach of their fiduciary duties. The lawsuits seek, among other things, class certification, injunctive relief to prevent the consummation of the Merger, and monetary relief. Bright Horizons believes these claims are without merit and intends to defend any claims raised in the lawsuits vigorously.

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ITEM 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the Company’s stockholders during the fourth quarter of the year ended December 31, 2007.

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PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “BFAM”. The table below sets forth the high and low quarterly sales prices per share for the Company’s common stock as reported in published financial sources for each quarter during the last two years:

	Price Range of Common Stock
	2007				2006
	High		Low		High		Low
First Quarter	$	42.44	$	36.25	$	40.65	$	33.06
Second Quarter	$	43.78	$	36.83	$	40.28	$	34.68
Third Quarter	$	45.63	$	38.43	$	42.50	$	31.80
Fourth Quarter	$	47.75	$	33.66	$	44.98	$	35.80

PERFORMANCE CHART

The following graph compares the Company’s cumulative total stockholder return on our common stock from December 31, 2002 through December 31, 2007 with the cumulative total return of the Russell 2000 Index and a peer group that we selected in good faith, consisting of Nobel Learning Communities, Inc., Renaissance Learning, Inc. and The Princeton Review (the “Peer Group”).

The graph assumes that $100.00 was invested on December 31, 2002 in our common stock and the index and peer group noted above, and that all dividends, if any, were reinvested. No dividends were declared or paid on our common stock during this period.

Total Return Analysis	12/31/2002		12/31/2003		12/31/2004		12/31/2005		12/31/2006		12/31/2007
Bright Horizons Family Solutions	$	100.00	$	149.36	$	230.30	$	263.51	$	274.96	$	245.66
Peer Group	$	100.00	$	144.18	$	119.97	$	121.49	$	120.61	$	137.50
Russell 2000 Index	$	100.00	$	145.37	$	170.08	$	175.73	$	205.61	$	199.96

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STOCKHOLDERS AND DIVIDENDS

We had 109 stockholders of record of the Company’s common stock at February 25, 2008. This number does not include those stockholders who hold shares in street name accounts.

The Company has never declared or paid any cash dividends on its common stock. The Company currently intends to retain all earnings to support operations and to finance expansion of its business. Therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future decision concerning the payment of dividends on the Company’s common stock will be at the discretion of the Board of Directors and will depend upon, among other factors, the Company’s earnings, financial condition, and capital needs at the time payment is considered.

ISSUER PURCHASES OF EQUITY SECURITIES

The Company repurchases shares of its common stock as authorized by the Board of Directors. In June 2006, the Board of Directors approved a stock repurchase plan authorizing the Company to repurchase up to 3.0 million shares of the Company’s common stock in addition to amounts repurchased under previous plans. In the year ended December 31, 2007, the Company repurchased approximately 142,000 shares at a cost of $5.2 million under the 2006 plan. The Company did make any repurchases in the three months ended December 31, 2007. At December 31, 2007, total repurchases under the terms of the 2006 plan were 523,000 shares leaving approximately 2.5 million shares authorized for repurchase under the plan.

Share repurchases under the 2006 plan may be made from time to time in accordance with applicable securities regulations in open market or privately negotiated transactions. The actual number of shares purchased and cash used, as well as the timing of purchases and the prices paid, will depend on future market conditions.

ITEM 6. Selected Financial Data

The following financial information has been derived from the Company’s audited Consolidated Financial Statements. The information set forth below is not necessarily indicative of results of future operations and should be read in conjunction with Item 7, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’, and the Consolidated Financial Statements and Notes thereto included in Item 8, “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K.

	Years ended December 31,
	2007			2006			2005			2004		2003
				(In thousands, except per share amounts)
Consolidated statement of income data:
Revenue	$	774,601		$	697,865		$	625,259		$	551,763	$	472,756
Amortization		4,699			3,376			1,916			1,012		548
Income from operations (1) (2)		72,907			71,663			60,656			46,753		34,583
Income before taxes (1) (2)		72,137			71,267			61,942			47,096		34,645
Net income (1) (2)		39,134			41,723			36,701			27,328		20,014
Diluted earnings per share	$	1.45		$	1.52		$	1.29		$	0.98	$	0.75
Weighted average diluted shares outstanding		26,925			27,391			28,392			27,846		26,746
Financial position at year end:
Working capital (deficit) surplus	$	(54,796	)	$	(71,853	)	$	(25,016	)	$	11,819	$	(2,269	)
Total assets		454,513			409,370			353,699			296,605		247,065
Total long-term debt, including current maturities		145			4,453			1,312			2,099		2,661
Total stockholders’ equity		270,641			223,838			217,179			186,244		145,506
Dividends per common share		—			—			—			—		—
Operating data at year end:
Early care and education centers managed		641			642			616			560		509
Licensed capacity		71,000			69,000			66,350			61,950		59,250

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(1)

Financial statement amounts for 2007 and 2006 include incremental compensation expense of $3.2 million ($2.1 million after taxes) and $2.7 million ($2.0 million after taxes), respectively, related to the Company’s adoption of SFAS No. 123R, ‘‘Share-Based Payment’’ on January 1, 2006. In accordance with the modified prospective method, financial statement amounts for the prior periods presented have not been adjusted.

(2)

In 2007, the Company recognized $7.0 million ($6.9 million net of taxes) in transaction costs associated with a proposed agreement to merge with affiliates of Bain. These fees consist primarily of fees earned by financial advisors and attorneys as well as other costs directly attributable to this transaction.

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

EXECUTIVE SUMMARY AND GENERAL DISCUSSION

Bright Horizons is a leading provider of workplace services for employers and families. Workplace services include center-based child care, education and enrichment programs, elementary school education, back-up care (for children and elders), before and after school care, summer camps, vacation care, college preparation and admissions counseling, and other family support services.

As of December 31, 2007, the Company operated 641 early care and education centers, with more than 60 early care and education centers under development. The Company has the capacity to serve approximately 71,000 children in 43 states, the District of Columbia, Puerto Rico, Canada, Ireland and the United Kingdom, and has partnerships with many leading employers, including more than 95 Fortune 500 companies and 75 of Working Mother Magazine’s “100 Best Companies for Working Mothers”. The Company’s 528 North American centers average a capacity of 122 children per location or approximately 64,000 in total capacity, while the 113 early care and education centers in the United Kingdom and Ireland average a capacity of approximately 59 children per location or approximately 7,000 in total capacity. At December 31, 2007, approximately 65% of the Company’s centers were operated under profit and loss (“P&L”) arrangements and approximately 35% were operated under management (“Cost Plus”) models. The Company seeks to cluster centers in geographic areas to enhance operating efficiencies and to create a leading market presence.

The Company seeks to enhance its reputation as the provider of choice for a broad spectrum of work-life services. In 2006, the Company expanded its ancillary service offerings to clients with the acquisition of College Coach, a college preparation and admissions counseling company, which offers college admissions counseling, as well as educational programs that include workshops such as “Paying for College” and “Homework Skills”. In addition, the Company developed the Back-Up Care Advantage Program (“BUCA”) as an additional service offering to allow existing clients to offer a national network of services to employees who may not be able to take advantage of traditional child care offerings. Memberships to BUCA allow employees access to a variety of back-up services including center-based back-up care, in-home back-up care, mildly ill care, in-home elder/adult care, and priority access to full or part-time child care. Center-based back-up care is also offered at full-service and back-up early care and education centers operated by Bright Horizons, or at high quality child care centers from an exclusive national network of child care providers.

Bright Horizons operates centers for a diverse group of clients. At December 31, 2007, the Company’s early care and education centers were affiliated with the following industries:

Industry Classification	Percentage of Centers
Consumer		5	%
Financial Services		15	%
Government and Education		20	%
Healthcare and Pharmaceuticals		15	%
Industrial/Manufacturing		5	%
Office Park Consortiums		30	%
Professional Services and Other		5	%
Technology		5	%

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The principal elements of the Company’s business strategy are to be the partner of choice, provider of choice and employer of choice. This business strategy is centered on several key elements: identifying and executing on growth opportunities with new and existing clients; achieving sustainable operating margin improvement; maintaining our competitive advantage as the employer of choice in our field; and, continuing the high quality of our programs and customer satisfaction. The alignment of key demographic, social and workplace trends combined with an overall shortage of quality childcare options for working families continues to fuel strong interest in the Company’s services. General economic conditions and the business climate in which individual clients operate remain the largest variables in terms of future performance. These variables impact client capital and operating spending budgets, industry specific sales leads and the overall sales cycle, as well as labor markets and wage rates as competition for human capital fluctuates.

The Company achieved revenue growth of approximately 11% for the year ended December 31, 2007 as compared to 2006. The revenue growth was principally due to the 3% increase in overall capacity in the centers the Company operates, additional enrollment in ramping centers as well as in mature centers, price increases of 4-5% and expanded services for existing clients. The Company added 39 centers in 2007 through a combination of organic growth, acquisitions, and transitions of management of existing programs from other providers to the Company. Revenue growth was achieved despite the closing of 40 centers, which included 26 child care centers and family enrichment centers operated under a cost-plus arrangement with the United Auto Workers and the Ford Motor Company (“UAW-Ford”), which occurred in the second quarter of 2007.

Another key element of the Company’s growth strategy is expanding relationships with existing clients. In 2007, the Company added eight new locations for multi-site clients. The Company now serves a total of 57 multi-site clients at 221 locations. Lastly, the Company introduced enhanced service offerings such as BUCA and the aforementioned college preparation and admissions counseling services as a way to extend client relationships.

New Centers. In 2007, the Company added 39 early care and education centers with a total capacity of approximately 4,700 children. Of these center additions, four were added through acquisitions, eight through transition from previous management and 27 were new centers developed by Bright Horizons. The Company at December 31, 2007 had over 60 centers under development, scheduled to open over the next 12 to 24 months. The Company expects to add approximately 50 new centers in 2008, net of closings.

Business Economics. The Company’s revenue is principally derived from the operation of early care and education centers. Early care and education center revenues consist of tuition, which is comprised of amounts paid by parents, supplemented in some cases by payments from employer sponsors and, to a lesser extent, by payments from government agencies. Revenue also includes management fees and operating subsidies, paid by employer sponsors either in lieu of or to supplement parent tuition. Parent tuitions comprise the largest component of a center’s revenue and are billed on a monthly or weekly basis, generally payable in advance. The parent tuitions are typically comparable to or slightly higher than prevailing area market rates for tuition. Amounts due from employer sponsors are generally payable monthly and may be dependent on a number of factors such as enrollment, the extent to which the sponsor subsidizes parent tuitions, the quality enhancements a sponsor wishes to make in the operations of the center, and budgeted amounts. Management fees are generally fixed and payable monthly. Revenue is recognized as services are provided. Amounts paid in advance are recorded as deferred revenue and are recognized as they are earned.

Although the specifics of the Company’s contractual arrangements in the center-based care segment vary widely, they generally can be classified into two categories: (i) the Cost Plus model, where the Company manages a work-site early care and education center under a cost-plus arrangement with an employer sponsor, and (ii) the P&L model, where the Company assumes the financial risk of the early care and education center’s operations. A P&L model center may operated under either a sponsored or lease model as more fully described below. Under each model type Bright Horizons retains responsibility for all aspects of operating the early care and education center, including the hiring and paying of employees, contracting with vendors, purchasing supplies and collecting tuition and related accounts receivable.

The Management (Cost Plus) Model. Early care and education centers operating under the Cost Plus model currently represent approximately 35% of our early care and education centers, which represents an approximate 5% decrease from prior figures due to the termination of the management agreement with the UAW-Ford, which comprised 26 cost plus centers. Under the Cost Plus model, the Company receives a management fee from an employer sponsor and an operating subsidy within an agreed upon budget to supplement tuition received from parents. The sponsor typically provides for the facility, pre-opening and start-up costs, capital equipment and facility maintenance. The Cost Plus model enables the employer sponsor to have a greater degree of control with respect to budgeting, spending, and operations. Cost Plus contracts have terms that generally range from three to five years. The Company is responsible for maintenance of quality

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standards, recruitment of early care and education center directors and teachers, implementation of curricula and programs, and interaction with parents.

The Profit and Loss Model. Early care and education centers operating under the P&L model currently represent approximately 65% of our early care and education centers. Bright Horizons retains financial risk for P&L early care and education centers and is therefore subject to variability in financial performance due to fluctuating enrollment levels. The P&L model can be classified into two subcategories: (i) sponsored model, where Bright Horizons provides early care and educational services on a priority enrollment basis for employees of an employer sponsor, and (ii) lease model, where the Company provides priority early care and education to the employees of multiple employers located within a real estate developer’s property or the community at large.

• Sponsored Model. The sponsored model is typically characterized by a single employer (corporation, hospital, government agency or university), but may involve a consortium of employers, entering into a contract with the Company to provide early care and education at a facility located in or near the sponsor’s offices. The sponsor generally provides for the facilities or construction of the early care and education center, pre-opening expenses and assistance with start-up costs as well as capital equipment and initial supplies and, on an ongoing basis, may pay for maintenance and repairs. In some cases, the sponsor may also provide various subsidies, which may take the form of a fixed financial subsidy, tuition assistance to the employees, or minimum enrollment guarantees to Bright Horizons. Children of the sponsor’s employees typically are granted priority enrollment at the early care and education center. Operating contracts have terms that generally range from three to five years.

• Lease Model. A lease model early care and education center is typically located in an office building or office park. The early care and education center serves as an amenity to the real estate developer’s tenants, giving the developer an advantage in attracting quality tenants to their site. In addition, the Company may establish an early care and education center in circumstances where it has been unable to cultivate sponsorship, or where sponsorship opportunities do not currently exist. In these instances, the Company will typically lease space in locations where experience and demographics indicate that demand for the Company’s services exists. While the facility is open to general enrollment from the nearby community, the Company may also receive additional sponsorship from employers who purchase full service child care or back-up care benefits for their employees. Bright Horizons typically negotiates lease terms of 10 to 15 years, with renewal options.

Cost of services consists of direct expenses associated with the operation of early care and education centers, consisting primarily of staff salaries, taxes and benefits; food costs; program supplies and materials; parent marketing; and, occupancy costs. Personnel costs are the largest component of a center’s operating costs, and comprise approximately 80% of a center’s operating expenses. The Company is often responsible for additional costs in a P&L model center that are typically paid or provided directly by a client in centers operating under the Cost Plus model, such as occupancy costs. As a result, personnel costs in centers operating under the P&L models will often represent a smaller percentage of overall costs when compared to the centers operating under Cost Plus models.

In addition to revenue generated from the existing base of child care and early education centers, the Company receives revenue from a variety of ancillary services which complement the Company’s child care services. These fees are generated primarily from the Company’s consulting and college preparation and admissions counseling services. The payment arrangements vary based on the services performed and may be payable in advance or billed in arrears. The Company recognizes revenue from these arrangements as services are performed. Cost of services for the Company’s ancillary service offerings consist primarily of personnel and related costs.

Selling, general and administrative (“SG&A”) expenses are composed primarily of salaries, taxes and benefits for non-center personnel, including corporate, regional and business development personnel; accounting, legal and public reporting compliance fees; information technology; occupancy costs for corporate and regional personnel; and other general corporate expenses.

Seasonality. The Company’s revenue and results of operations fluctuate with the seasonal demands for child care. Revenue in our early care and education centers that have mature operating levels typically declines during the third quarter as a result of decreased enrollments over the summer months as parents withdraw their children for vacations or have alternative child care arrangements, as well as older children transitioning into elementary schools. The Company’s schools are also subject to the same cyclicality as the schools are not in session during the summer months, which contributes to the decrease in revenue. Demand for the Company’s child care and education services generally increases in September and October to normal enrollment levels upon the beginning of the new school year and remains relatively stable throughout the

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rest of the school year. In addition, usage for the Company’s back-up services, including BUCA, tends to be higher when school is not in session and during holiday periods, which can increase the operating costs of the program which impacts the results of operations. Results of operations may also fluctuate from quarter to quarter as a result of, among other things, the performance of existing centers that may include enrollment and staffing fluctuations, the number and timing of new center openings and/or acquisitions, the length of time required for new centers to achieve profitability, center closings, refurbishment or relocation, the contract model mix (P&L vs. Cost Plus) of new and existing centers, the timing and level of sponsorship payments, competitive factors, and general economic conditions.

PROPOSED TRANSACTION WITH AFFILIATES OF BAIN CAPITAL PARTNERS, LLC

On January 14, 2008, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with affiliates of Bain Capital Partners, LLC (“Bain”), pursuant to which a wholly owned subsidiary of Bain will be merged with and into the Company, and as a result the Company will continue as the surviving corporation and a wholly owned subsidiary of Bain (the “Merger”). Both the Board of Directors of the Company and a Special Committee of the Board of Directors of the Company, comprised solely of independent and disinterested directors (the “Special Committee”), have approved the Merger Agreement and the Merger and recommended that the stockholders of Bright Horizons vote to adopt the Merger Agreement. The Company is working toward completing the Merger as quickly as possible, and currently anticipates that the Merger will be completed in the second quarter of 2008.

Pursuant to the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of common stock of the Company will be canceled and will be automatically converted into the right to receive $48.25 in cash, without interest. All outstanding equity-based awards of the Company will continue to vest until the closing of the Merger in accordance with their respective terms. Generally, at the closing of the Merger, all outstanding and unvested equity awards will fully vest, at which time these awards will be cancelled and converted into the right to receive the difference between $48.25 in cash and the exercise price of such award, if applicable, without interest and less any applicable withholding taxes.

Notwithstanding the foregoing, subject to Bain’s sole discretion, certain of our directors and officers may enter into agreements to convert their options or Bright Horizons common stock into, or otherwise invest in, the equity securities of the surviving corporation or one of Bain’s other affiliates following the closing; however, no such discussions regarding any such investments have occurred as of the date of the filing of this Annual Report on Form 10-K.

The Merger Agreement contains a “go-shop” provision wherein, until March 15, 2008, the Company, under the direction of the Special Committee, is permitted to initiate, solicit, facilitate and encourage acquisition proposals from third parties other than Bain and enter into and maintain or continue discussions or negotiations concerning any such acquisition proposals. After the expiration of the go-shop period, the Company is generally not permitted to (1) solicit, knowingly facilitate, knowingly encourage or initiate any inquiries or the implementation or submission of any acquisition proposal, (2) withdraw or modify, in a manner adverse to Bain, the recommendation of the Company’s Board of Directors in favor of the Merger or the Merger Agreement, or (3) enter into or recommend any letter of intent, acquisition agreement or similar agreement with respect to any such acquisition proposal. Notwithstanding the foregoing, the provisions of the Merger Agreement provide for a customary “fiduciary-out” provision which allows the Company’s Board of Directors or a committee thereof under certain circumstances to participate in discussions with third parties with respect to unsolicited acquisition proposals and to terminate the Merger Agreement and enter into an acquisition agreement with respect to a superior proposal, provided that the Company complies with certain terms of the Merger Agreement, including, if required, paying a termination fee as described below.

If the Merger Agreement is terminated by the Company, under certain circumstances, the Company will be obligated to pay the expenses of Bain up to $10.0 million and will be obligated to pay a termination fee of up to $39.0 million (or $19.5 million in the event that the Merger Agreement is terminated in favor of a superior acquisition proposal that arises during the go-shop period), less the amount of any reimbursement of expenses of Bain. Additionally, under certain circumstances, should the purchasing Bain entities terminate the Merger Agreement, Bain would be required to pay the Company a termination fee of $39.0 million, plus, in certain circumstances, indemnification for up to an additional $27.0 million of the Company’s damages. The recovery of such amounts would be the Company’s exclusive remedy for failure of Bain and its affiliates to complete the Merger.

Although the purchasing Bain entities’ obligations to complete the Merger are not conditioned upon their receipt of financing, the purchasing Bain entities have obtained equity and debt financing commitments (including from other Bain affiliates) for the transactions contemplated by the Merger Agreement. In the event that any portion of the financing under

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the commitments becomes unavailable on the terms contemplated in the agreements in respect thereof, the purchasing Bain entities are obligated to use their reasonable best efforts to arrange alternative financing in an amount sufficient to consummate the Merger.

Consummation of the Merger is subject to customary conditions to closing, including the approval of the Company’s stockholders and receipt of requisite antitrust and competition law approvals. On February 11, 2008, the Company received notice from the Federal Trade Commission and the Antitrust Division of the Department of Justice granting early termination of the waiting period under the Hart-Scott-Rodino Act.

Purported class action litigation has been filed since January 14, 2008 by Bright Horizons stockholders against the Company, its current directors, and Bain. See Item 3, “Legal Proceedings”, and Note 14, “Commitments and Contingencies — Litigation”, of the Consolidated Financial Statements and Notes thereto included in Item 8, “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K for a further discussion of these actions.

In connection with this transaction the Company incurred costs of approximately $7.0 million in 2007 consisting primarily of fees earned by financial advisors and attorneys, and other costs directly associated with the transaction.

RESULTS OF OPERATIONS

The following table has been compiled from the Company’s audited Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K and sets forth statement of income data as a percentage of revenue for the years ended December 31, 2007, 2006, and 2005:

	2007			2006			2005
Revenue		100.0	%		100.0	%		100.0	%
Cost of services		79.8			80.2			81.6
Gross profit		20.2			19.8			18.4
Selling, general and administrative expenses		9.3			9.1			8.4
Amortization		0.6			0.4			0.3
Transaction costs		0.9			—			—
Income from operations		9.4			10.3			9.7
Interest income		0.1			0.0			0.2
Interest expense		(0.2	)		(0.1	)		—
Income before income taxes		9.3			10.2			9.9
Income tax expense		4.2			4.2			4.0
Net income		5.1	%		6.0	%		5.9	%

Comparison of results for the year ended December 31, 2007 to the year ended December 31, 2006

Revenue. Revenue increased $76.7 million, or 11.0%, to $774.6 million in 2007 from $697.9 million in 2006. Revenue growth is primarily attributable to modest growth in enrollment at existing centers, the ramp-up of a large number of centers developed organically in the past two years, and tuition increases of approximately 4-5%. At December 31, 2007, the Company operated 641 early care and education centers, as compared with 642 at December 31, 2006, a net decrease of one center, but representing a net increase of 2.9% in overall capacity. The increase in revenue is also attributable to acquisitions completed in 2007 and the full year impact of the Company’s acquisitions completed in 2006 which accounted for approximately $16.3 million of the overall increase in revenue. Lastly, the Company was able to increase revenue from its continued expansion of back up services, including BUCA, which increased by approximately $6.8 million or 12.7%, over 2006 levels.

The termination of the contract to operate 26 child care centers and family enrichment centers for the UAW-Ford had the effect of reducing revenue by approximately $12.0 million when compared to 2006, which was focused in the second half of 2007 after the termination of the contract in the second quarter of 2007. The termination of this contract will result in a further decrease of approximately $19.0 million in 2008 when compared to 2007.

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Revenue related to ancillary services increased $4.3 million primarily due to the full year impact of the acquisition of College Coach, which occurred in the third quarter of 2006, and the expansion of these services to our existing base of clients.

Gross Profit. Gross profit increased $18.5 million, or 13.4%, to $156.8 million in 2007 from $138.3 million in 2006. Gross profit as a percentage of revenue increased from 19.8% in 2006 to 20.2% in 2007. Major factors in the increase in gross profit margin include modest improvements in enrollment which drive operating efficiencies at the center level as the fixed costs are absorbed over a broader tuition base; contributions from Cost Plus centers opened during 2007; transitions of management and acquisitions, which enter the network of centers at mature operating levels; and, annual tuition rate increases ahead of wage increases coupled with careful cost management at existing programs. Operating margins continue to be positively impacted by favorable trends in personnel costs.

Gross profit was also modestly impacted by the full year results of College Coach, which was acquired in the third quarter of 2006 and has gross margins that are higher, on average, than those of the Company’s overall child care operations.

Offsetting these areas of improvement were several lease model centers which were either opened in 2007 or were still in the process of ramping up to mature operating levels. These centers typically incur losses in the initial year of operations and have gross margins below those of more mature centers until more fully enrolled.

The closings of the UAW-Ford child care and family enrichment centers referenced above had the effect of reducing gross profit by approximately $2.2 million in 2007 and are expected to reduce 2008 operating income by $2.8 million when compared to 2007.

Selling, General and Administrative Expenses. SG&A increased $9.0 million, or 14.1%, to $72.2 million in 2007 from $63.2 million in 2006. SG&A as a percentage of revenue increased from 9.1% in 2006 to 9.3% in 2007. The increase in SG&A from 2006 is related to investments in sales and support personnel necessary to support the operations of the Company and the full year impact of College Coach which requires proportionately higher overhead costs. Additionally, investments the Company has made in technology have contributed to the overall increase in SG&A. Lastly, stock-based compensation increased by approximately $1.0 million to $4.2 million in 2007 from $3.2 million for 2006.

In addition to the Company’s operational SG&A expenses, the Company incurred $7.0 million of costs directly associated with the proposed Merger with affiliates of Bain. These costs included fees to advisors and attorneys as well as other costs incurred by the Company that were directly attributable to this transaction. The Company expects to incur significant additional costs related to this transaction in the first two quarterly periods of 2008 pending completion.

Amortization. Amortization expense on intangible assets totaled $4.7 million in 2007 compared to $3.4 million in 2006. The increase relates to the addition of certain trade names, non-compete agreements, customer relationships and contract rights, arising from acquisitions the Company completed in 2007 and the full year effect of acquisitions completed in 2006, which are subject to amortization. Under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets (“SFAS 142”), the Company assessed its goodwill balances and intangible assets with indefinite lives and found no impairment at December 31, 2007 or 2006. The Company expects amortization to approximate $4.6 million in 2008, which includes the full year impact of acquisitions completed in 2007 and expected in 2008.

Income from Operations. Income from operations totaled $72.9 million in 2007 compared with income from operations of $71.7 million in 2006, an increase of $1.2 million, or 1.7%. Operating income as a percentage of revenue decreased to 9.4% in 2007 from 10.3% in 2006, due primarily to the transaction costs referenced above.

Interest Income. Interest income in 2007 totaled $393,000 compared to interest income of $452,000 in 2006. The decrease in interest income is largely due to lower average cash balances throughout 2007 as compared to 2006.

Interest Expense. Interest expense in 2007 totaled $1.2 million as compared to interest expense of $848,000 in 2006. The increase in interest expense is largely due to borrowings on the Company’s line of credit throughout 2007 whereas the Company commenced borrowing in the third quarter of 2006.

Income Tax Expense. The Company had an effective tax rate of 45.8% in 2007 and of 41.5% in 2006. The increase in the tax rate is primarily due to the non-deductible costs incurred associated with the proposed Merger with Bain. Excluding the effects of these costs, the Company’s tax rate would have approximated 41.8%.

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Comparison of results for the year ended December 31, 2006 to the year ended December 31, 2005

Revenue. Revenue increased $72.6 million, or 11.6%, to $697.9 million in 2006 from $625.3 million in 2005. Revenue growth is primarily attributable to the net addition of new early care and education centers, modest growth in enrollment at existing centers, and tuition increases of approximately 4-5%. At December 31, 2006, the Company operated 642 early care and education centers, as compared with 616 at December 31, 2005, a net increase of 26 centers and a net increase of 4.0% in overall capacity. The increase in revenue is also attributable to the Company’s recent acquisitions. The acquisition of child care centers in 2006, and the full year contributions of the ChildrenFirst network of back-up centers acquired in September 2005, collectively contributed approximately $30.0 million in revenue. Acquisitions and transitions of management typically do not have the ramp-up period associated with organic growth, and begin operating at more mature levels.

Revenue related to ancillary services increased $2.3 million primarily due to the acquisition of College Coach in the third quarter of 2006.

Gross Profit. Gross profit increased $23.0 million, or 19.9%, to $138.3 million in 2006 from $115.3 million in 2005. Gross profit as a percentage of revenue increased from 18.4% in 2005 to 19.8% in 2006. One of the key factors in the increase in gross profit margin is the contribution of the ChildrenFirst back-up centers whose margins are, on average, higher than the Company’s full service centers. In addition, gross profit increased due to modest improvements in enrollment which drive operating efficiencies at the center level as the fixed costs are absorbed over a broader tuition base; contributions from Cost Plus centers opened during the past twelve months, transitions of management and acquisitions, which enter the network of centers at mature operating levels; and, annual tuition rate increases ahead of wage increases coupled with careful cost management at existing programs. Operating margins were also positively impacted by favorable trends and expense reductions in employee benefits and workers compensation insurance. Gross profit was also modestly impacted by College Coach, whose profit margins are higher than those of the Company’s overall child care operations.

The increases in gross profit were offset in part by incremental compensation expense related to the adoption of SFAS No. 123R, Share-Based Payment (“SFAS 123R”), which resulted in approximately $400,000 of additional stock-based compensation in cost of services. In addition, the Company opened 12 lease model centers in 2006, which experienced losses during the pre-opening and ramp-up stages of their operations, and were in the pre-opening stage at additional locations.

Selling, General and Administrative Expenses. SG&A increased $10.5 million, or 20.0%, to $63.2 million in 2006 from $52.7 million in 2005. SG&A as a percentage of revenue increased from 8.4% in 2005 to 9.1% in 2006. The increase in SG&A from 2005 is related to the adoption of SFAS 123R, resulting in incremental SG&A expense of approximately $2.3 million. In addition, ChildrenFirst centers and College Coach, which were acquired in September 2005 and August 2006, respectively, require proportionately higher overhead support costs.

Amortization. Amortization expense on intangible assets totaled $3.4 million in 2006 compared to $1.9 million in 2005. The increase relates to the addition of certain trade names, non-compete agreements, customer relationships and contract rights, arising from acquisitions the Company completed in 2006 and the full year effect of acquisitions completed in 2005, which are subject to amortization. Under the provisions of SFAS 142, the Company assessed its goodwill balances and intangible assets with indefinite lives and found no impairment at December 31, 2006 or 2005.

Income from Operations. Income from operations totaled $71.7 million in 2006 compared with income from operations of $60.7 million in 2005, an increase of $11.0 million, or 18.1%. Operating income as a percentage of revenue increased to 10.3% in 2006 from 9.7% in 2005, due to the gross margin improvement.

Interest Income. Interest income in 2006 totaled $452,000 compared to interest income of $1.5 million in 2005. The decrease in interest income is largely due to lower cash balances resulting from payments for acquisitions and stock repurchases in 2006.

Interest Expense. Interest expense in 2006 totaled $848,000 as compared to interest expense of $191,000 in 2005. The increase in interest expense is largely due to borrowings from the line of credit in 2006.

Income Tax Expense. The Company had an effective tax rate of 41.5% in 2006 and of 40.7% in 2005. The increase in the tax rate is primarily due to the non-deductibility of certain options being expensed under SFAS 123R.

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LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary cash requirements are for the ongoing operations of its existing early care and education centers and the addition of new centers through development or acquisition. The Company’s primary sources of liquidity have been cash flow from operations and borrowings available under the Company’s $60.0 million line of credit. The Company utilized its line of credit facility throughout 2007, and had amounts outstanding ranging from zero to $35.0 million. Borrowings against the line of credit were $11.5 million at December 31, 2007 and $35.0 million at December 31, 2006. The Company had a working capital deficit of $54.8 million at December 31, 2007 and $71.9 million at December 31, 2006, arising primarily from long term investments in fixed assets and acquisitions, as well as purchases of the Company’s common stock, which primarily occurred in 2006. Bright Horizons anticipates that it will continue to generate positive cash flows from operating activities in 2008 and that the cash generated will be used principally to fund ongoing operations of its new and existing early care and education centers, as well as to repay amounts outstanding under its line of credit.

Cash provided by operating activities was $77.6 million for the year ended December 31, 2007 compared to $54.7 million, and $50.1 million for the years ended December 31, 2006 and 2005, respectively. The increase in cash provided from operations relates to increases in other non-cash expenses (primarily depreciation, amortization and stock-based compensation). In addition, increases in deferred revenue generated an increase of approximately $14.0 million over prior years and were the result of changes in the billing cycle of certain contractual agreements. These amounts were partially offset by increases in accounts receivable, which were primarily due to the timing and amount of payments and are of a normal and recurring nature.

Cash used in investing activities was $51.0 million for the year ended December 31, 2007 compared to $58.1 million and $64.9 million for the years ended December 31, 2006 and 2005, respectively. Fixed asset additions totaled $41.8 million in 2007 compared to $32.7 million in 2006 and $15.6 million in 2005. Approximately $26.8 million of fixed asset additions in 2007 related to new early care and education centers and the remainder being primarily related to the refurbishment of existing early care and education centers. Capital expenditures for new early care and education centers were approximately $21.0 million in 2006 and $8.6 million in 2005. Increases in capital expenditure levels in 2007 and 2006 on new centers are primarily due to a large number of lease model centers the Company has under development or has opened. Cash paid by the Company for acquisitions totaled $9.2 million in 2007 compared to $24.8 million in 2006 and $54.9 million in 2005.

Cash used in financing activities totaled $25.2 million for the year ended December 31, 2007, compared to $11.5 million in 2006 and $5.5 million in 2005. The increase in cash used in financing activities from 2006 is primarily related to the repayments of outstanding amounts under the Company’s line of credit facility that had been borrowed in 2006 and payments of long term debt. In 2007, the Company repurchased approximately 142,000 shares of the Company’s common stock (all during the first quarter of 2007) at a cost of $5.2 million. The Company had repurchases of its common stock of approximately 1.5 million shares in 2006, for a total of approximately $54.1 million, and 318,000 shares at a cost of approximately $11.2 million in 2005. In 2006, the use of cash for share repurchases was offset by net borrowings under the aforementioned line of credit of $35.0 million in 2006. Additionally, upon the adoption of SFAS 123R, the Company recorded an excess tax benefit related to the vesting or exercise of equity instruments of $1.7 million and $2.6 million in 2007 and 2006, respectively, which had been previously reported as cash flow from operating activities.

The Company repurchases shares of its common stock as authorized by the Board of Directors. In June 2006, the Board of Directors approved a stock repurchase plan authorizing the Company to repurchase up to 3.0 million shares of the Company’s common stock in addition to amounts repurchased under previous plans. At December 31, 2007, total repurchases under the terms of the existing plan were 523,000 shares leaving approximately 2.5 million shares authorized for repurchase under the plan. Share repurchases under the stock repurchase program may be made from time to time in accordance with applicable securities regulations in open market or privately negotiated transactions. The actual number of shares purchased and cash used, as well as the timing of purchases and the prices paid, will depend on future market conditions. Pursuant to the terms of the Merger Agreement, until the closing of the Merger or termination of the Merger Agreement, the Company may not make any repurchases of its outstanding common stock without the consent of Bain.

The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents consist primarily of institutional money market accounts. The carrying value of these instruments approximates market value due to their short term nature.

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Contractual Cash Flows. The Company has contractual obligations for payments under operating leases and debt agreements payable as follows:

	Payments due by period (in millions)
Contractual Obligations	Total		2008		2009		2010		2011		2012		Thereafter
Long-Term Debt, including interest	$	0.2	$	0.1	$	0.1	$	—	$	—	$	—	$	—
Operating Leases		281.2		36.4		35.0		31.9		26.7		24.3		126.9
Total	$	281.4	$	36.5	$	35.1	$	31.9	$	26.7	$	24.3	$	126.9

The Company also has contractual obligations for customer advances totaling $8.2 million as of December 31, 2007, which are repayable at the completion of the contractual arrangements. Because of renewal options, the repayment dates for such advances cannot be predicted.

In June 2004, the Company entered into service agreements to manage a group of family programs and amended an agreement to manage an existing child care and education center in exchange for the transfer of land and buildings. The Company recorded fixed assets and deferred revenue of $9.4 million in connection with the transactions. The deferred revenue will be earned over the terms of the arrangements of 6.5 and 12 years, respectively. In the event of default under the terms of the contingent notes payable associated with the service agreements, the Company would be required to tender a payment equal to the unrecognized portion of the deferred revenue or surrender the applicable property. The unrecognized portion of the deferred revenue related to these agreements was $4.9 million at December 31, 2007.

The Company has a five-year unsecured revolving credit facility in the amount of $60.0 million, which matures on July 22, 2010, with any amounts outstanding at that date payable in full. The revolving credit facility includes an accordion feature that allows the Company to increase the amount of the revolving credit facility by an additional $40.0 million, subject to lender commitments for the additional amounts. In addition, the revolving credit facility also includes a multicurrency feature with a sub-limit of $15.0 million that allows the Company to borrow and repay amounts in either Pounds Sterling (£) or Euros (€). Borrowings against the line of credit of $11.5 million were outstanding at December 31, 2007. In addition, a letter of credit has been issued under this facility to guarantee certain deductible reimbursements for up to $486,000, which reduced the amounts available for borrowing. No amounts have been drawn against this letter of credit. If the proposed Merger is consummated, the existing credit facility will be terminated and replaced in its entirety.

The Company’s subsidiaries in the United Kingdom maintain an overdraft facility with a U.K. bank that provides for maximum borrowings of £1.0 million (approximately $2.0 million as of December 31, 2007) to support local short-term working capital requirements. The overdraft facility is repayable upon the earlier of demand from the U.K. bank or, subject to an annual renewal provision, on July 31, 2008. The overdraft facility is secured by a cross guarantee by and among the Company’s subsidiaries in the United Kingdom and a right of offset against all accounts maintained by the Company at the lending bank. At December 31, 2007 approximately £900,000 ($1.8 million) was outstanding under the overdraft facility.

The Company has liabilities for uncertain tax positions, computed in accordance with Interpretation No. 48, Accounting for Uncertainty in Income Taxes—An interpretation of FASB Statement No. 109, Accounting for Income Taxes (“FIN 48”), totaling $2.7 million and related interest and penalties of $1.7 million for a total of $4.4 million. Due to the nature of these obligations the Company is not able to estimate if or when these obligations may be settled.

Commitments and Contingencies. The purchase agreements for two acquisitions, one completed in 2006 and one in 2007, provide for additional consideration if specific performance targets are met. In 2007, the Company paid $3.5 million in additional consideration to the previous shareholders of College Coach in accordance with the terms of the purchase agreement. Additional cash consideration may be payable over the next four years if additional performance targets are met. The purchase agreement for the school acquired in 2007 provides for additional consideration of up to $200,000 based on the performance of the school over the next year.

As of December 31, 2007 the Company had a commitment to purchase a property for $800,000. The purchase of the property was completed in January 2008.

In connection with the proposed Merger with Bain the Company is contingently liable for additional professional fees payable to financial advisors to the Special Committee of the Board of Directors upon successful approval and completion of the Merger.

Management believes that funds provided by operations, the Company’s existing cash and cash equivalent balances and borrowings available under its line of credit will be adequate to meet planned operating and capital expenditures for the

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next twelve months. However, if the Company were to make any significant acquisitions or investments in the purchase of facilities for new or existing early care and education centers, it may be necessary for the Company to obtain additional debt or equity financing. There can be no assurance that the Company would be able to obtain such financing on reasonable terms, if at all.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Bright Horizons prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States. The preparation of these statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the applicable reporting periods. Actual results could differ from these estimates, and such differences could affect the results of operations reported in future periods. The accounting policies we believe are critical in the preparation of the Company’s consolidated financial statements relate to revenue recognition, goodwill and other intangibles, liability for insurance obligations, stock-based compensation, and income taxes.
 

Revenue Recognition. The Company recognizes revenue in accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements, as modified by Emerging Issues Task Force (“EITF”) No. 00-21, Revenue Arrangements with Multiple Deliverables, and SAB No. 104, Revenue Recognition, which require that four basic criteria be met before recognizing revenue: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed and determinable, and collectibility is reasonably assured. In those circumstances where the Company enters into arrangements with a client that involve multiple revenue elements, the consideration is allocated to the elements based on fair value of the individual services and revenue recognition is considered separately for each individual element. Center-based care revenues consist primarily of tuition, which is comprised of amounts paid by parents, supplemented in some cases by payments from sponsors and, to a lesser extent, by payments from government agencies. Revenue may also include management fees, operating subsidies paid either in lieu of or to supplement parent tuition, and fees for other services. The Company recognizes revenue on a gross basis in accordance with EITF No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, as services are performed. In some instances, the Company receives revenue in advance of services being rendered, in which case, revenue is deferred until the services have been provided. Under all types of operating arrangements, the Company retains responsibility for all aspects of operating the early care and education centers, including the hiring and paying of employees, contracting with vendors, purchasing supplies, and collecting tuition and related accounts receivable.

Goodwill and Other Intangibles. The Company accounts for acquisitions in accordance with the provisions of SFAS No. 141, Accounting for Business Combinations. Accounting for acquisitions requires management to make estimates related to the fair value of the acquired assets and assumed liabilities, including the identification and valuation of intangible assets, with any residual balance being allocated to goodwill. Management also makes assessments concerning the estimated useful lives of the intangible assets.

In accordance with SFAS 142 goodwill and intangible assets with indefinite lives are not subject to amortization, but are monitored annually for impairment, or more frequently if there are indicators of impairment. Should it be determined that any of these assets have been impaired, the Company would be required to record an impairment charge in the period the impairment is identified. The Company was not required to record an impairment charge in 2007; however, there can be no assurance that such a charge will not be recorded in future periods. Intangible assets that are separable from goodwill and have determinable useful lives are valued separately and are amortized over the estimated period benefited.

Liability for Insurance Obligations. The Company self-insures a portion of its medical insurance plans and has a high deductible workers’ compensation plan. Due to the nature of these liabilities, some of which may not fully manifest themselves for several years, the Company estimates the obligations for liabilities incurred but not yet reported or paid based on available data and historical experience. While management believes that the amounts accrued for these obligations are sufficient, any significant increase in the number of claims or costs associated with claims made under these plans could have a material adverse effect on the Company’s financial results or cash flows.

Stock-Based Compensation. Effective January 1, 2006, the Company adopted the provisions of SFAS 123R and SAB No. 107, Share-Based Payment (“SAB 107”) to account for stock-based compensation. SFAS 123R was applied using the modified prospective method, which results in the provisions of SFAS 123R only being applicable to the consolidated financial statements on a prospective basis. Stock-based compensation cost is measured at grant date based on the value of

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the award and is recognized as expense over the requisite service period, which generally represents the vesting period, and includes an estimate of awards that will be forfeited. The Company calculates the fair value of stock options using the Black-Scholes option-pricing model and the fair value of restricted stock based on intrinsic value at grant date. Measurement under the Black-Scholes model requires management to make estimates related to expected stock price volatility, option life, turnover, and risk-free interest rate, which could impact the value and expense recognized.

Income Taxes. The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, Accounting for Income Taxes (“SFAS 109”). Accounting for income taxes requires management to estimate its income taxes in each jurisdiction in which it operates. The future tax effect of temporary differences that arise from differences in the recognition of items included in income for accounting and tax purposes, such as deferred revenue, depreciation and certain expenses, are recorded as deferred tax assets or liabilities. The Company estimates the likelihood of recovery of these assets, which are dependent on future levels of profitability and enacted tax rates. Should any amounts be determined not to be recoverable, or assumptions change, the Company would be required to record an expense, which could have a material effect on the Company’s financial position or results of operations.

In 2007, the Company adopted the provisions of FIN 48. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and accounting for income taxes in interim periods, and requires increased disclosures.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (“SFAS 141R”). SFAS 141R requires: the assets acquired and liabilities assumed to be measured at fair value as of the acquisition date; liabilities related to contingent consideration to be remeasured at fair value at each subsequent reporting period; and acquisition-related costs to be expensed as these are incurred. SFAS 141R also requires additional disclosures of information surrounding a business combination. The provisions of SFAS 141R are effective for fiscal years beginning on or after December 15, 2008 and apply to business combinations that are completed on or after the date of adoption. The Company has not yet adopted this pronouncement, but expects that it will have an impact on the consolidated financial statements when effective, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions the Company completes after the effective date.

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 159”). SFAS 159 allows entities to choose to measure certain financial assets and financial liabilities at fair value, with the related unrealized gains and losses reported in earnings at each reporting date. The provisions of SFAS 159 are effective for fiscal years beginning after November 15, 2007. The Company has not yet adopted this pronouncement and is evaluating the impact that this statement will have on its consolidated financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles in the United States. The provisions of SFAS 157 are effective for fiscal years beginning after November 15, 2007 and is to be applied prospectively. In February 2008, the FASB issued Staff Positions No. 157-1 and No. 157-2, which partially defer the effective date of SFAS 157 for one year for certain nonfinancial assets and liabilities and remove certain leasing transactions from its scope. The Company is evaluating the expected impact that the adoption of SFAS 157 will have, but does not expect SFAS 157 to have a material impact on its consolidated financial position and results of operations.

INFLATION

The Company does not believe that inflation has had a material effect on its results of operation. There can be no assurance, however, that the Company’s business will not be materially affected by inflation in the future.

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ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company holds no market risk sensitive instruments, for trading purposes or otherwise.

We have limited exposure to market risk due to the nature of our financial instruments. Our financial instruments at December 31, 2007 consisted of cash and equivalents and accounts receivable. The Company believes that the carrying value of its financial instruments at December 31, 2007 approximates their fair value. The Company’s primary market risk exposures relate to foreign currency exchange rate risk and interest rate risk.

Foreign Currency Risk. The Company’s exposure to fluctuations in foreign currency exchange rates is primarily the result of foreign subsidiaries domiciled in the United Kingdom, Ireland and Canada. The Company has not used financial derivative instruments to hedge foreign currency exchange rate risks associated with its foreign subsidiaries.

The assets and liabilities of the Company’s Canada, Ireland and United Kingdom subsidiaries, whose functional currencies are the Canadian dollar, Euro and British pound, respectively, are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period. The cumulative translation effects for subsidiaries using a functional currency other than the U.S. dollar are included as a cumulative translation adjustment in stockholders’ equity and as a component of comprehensive income. Management estimates that had the exchange rate in each country unfavorably changed by 10% relative to the U.S. dollar, the Company’s consolidated earnings before taxes in 2007 would have decreased by approximately $550,000.

Interest Rate Risk. Interest rate exposure relates primarily to the effect of interest rate changes on our investment portfolio, and borrowings outstanding under our line of credit and overdraft facility. As of December 31, 2007, the Company’s investment portfolio primarily consisted of institutional money market funds, which due to their short maturities are considered cash equivalents. The Company’s primary objective with its investment portfolio is to invest available cash while preserving principal and meeting liquidity needs. These investments approximated $3.0 million at December 31, 2007 and had an average interest rate of approximately 4.2% during the year. As a result of the short maturity and conservative nature of the investment portfolio, a sudden change in interest rates should not have a material effect on the value of the portfolio. Management estimates that had the average yield of the Company’s positions in these investments and its other interest bearing accounts decreased by 100 basis points in 2007, the Company’s interest income for the year would have decreased by less than $100,000. This estimate assumes that the decrease would have occurred on the first day of 2007 and reduced the yield of each investment instrument by 100 basis points. The impact on the Company’s future interest income as a result of future changes in investment yields will depend largely on the gross amount of the Company’s investments.

The Company had borrowings of $11.5 million at December 31, 2007 under its variable-rate line of credit that were subject to a weighted average interest rate of 6.0% during the period. Based on the outstanding borrowings under the line of credit during 2007, management estimates that had the average interest rate on the Company’s borrowings increased by 100 basis points in 2007, the Company’s interest expense for the year would have increased by approximately $150,000. This estimate assumes the interest rate of each borrowing is raised by 100 basis points. The impact on the Company’s future interest expense as a result of future changes in interest rates will depend largely on the gross amount of the Company’s borrowings.

The Company had borrowings of £900,000 ($1.8 million) at December 31, 2007 under its variable-rate overdraft facility that were subject to a weighted average interest rate of 8.5% during the period. Based on the outstanding borrowings under the overdraft facility during 2007, management estimates that had the average interest rate on the Company’s borrowings increased by 100 basis points in 2007, the Company’s interest expense for the year would have increased by less than $100,000. This estimate assumes the interest rate of each borrowing is raised by 100 basis points. The impact on the Company’s future interest expense as a result of future changes in interest rates will depend largely on the gross amount of the Company’s borrowings.

34

ITEM 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		36
Consolidated Balance Sheets as of December 31, 2007 and 2006		37
Consolidated Statements of Income for the Years Ended December 31, 2007, 2006 and 2005		38
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2007, 2006 and 2005		39
Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005		40
Notes to Consolidated Financial Statements		41

35

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Bright Horizons Family Solutions, Inc.
Watertown, Massachusetts

We have audited the accompanying consolidated balance sheets of Bright Horizons Family Solutions, Inc. and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007. Our audits also include the financial statement schedule listed in the Index at Item 15 (a) (2). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2007 and 2006, and the results of its operations and its 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. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Notes 10 and 11 to the financial statements, the Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”, effective January 1, 2007 and Statement of Financial Accounting Standards No. 123 (R), “Share-Based Payment,” effective January 1, 2006.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2008 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 29, 2008

36

Bright Horizons Family Solutions, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

	December 31,
	2007			2006
Assets
Current assets:
Cash and cash equivalents	$	8,954		$	7,115
Accounts receivable, net of allowance for doubtful accounts of $1,204 and $1,209 for 2007 and 2006, respectively		47,022			38,644
Prepaid expenses and other current assets		18,906			19,915
Current deferred income taxes		16,264			13,832
Total current assets		91,146			79,506
Fixed assets, net		164,892			137,312
Goodwill		152,397			145,070
Other intangibles, net		34,299			38,150
Noncurrent deferred income taxes		7,369			5,858
Other assets		4,410			3,474
Total assets	$	454,513		$	409,370
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	98		$	4,376
Line of credit payable		13,317			35,000
Accounts payable and accrued expenses		63,691			54,242
Deferred revenue		58,115			40,884
Income taxes payable		1,563			5,507
Other current liabilities		9,158			11,350
Total current liabilities		145,942			151,359
Long-term debt, net of current portion		47			77
Accrued rent and related obligations		13,113			10,651
Other long-term liabilities		12,587			7,296
Deferred revenue, net of current portion		10,016			13,467
Deferred income taxes		2,167			2,682
Total liabilities		183,872			185,532
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.01 par value: 5,000 shares authorized, none issued or outstanding
Common stock, $0.01 par value:
Authorized: 50,000 shares at December 31, 2007 and 2006
Issued: 28,270 and 27,942 shares at December 31, 2007 and 2006, respectively
Outstanding: 26,281 and 26,095 shares at December 31, 2007 and 2006, respectively		283			279
Additional paid-in capital		135,036			123,869
Treasury stock, at cost: 1,989 and 1,847 shares at December 31, 2007 and 2006, respectively		(70,479	)		(65,283	)
Cumulative translation adjustment		11,240			9,546
Retained earnings		194,561			155,427
Total stockholders’ equity		270,641			223,838
Total liabilities and stockholders’ equity	$	454,513		$	409,370

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

37

Bright Horizons Family Solutions, Inc.

Consolidated Statements of Income
(In thousands, except per share data)

	Years ended December 31,
	2007			2006			2005
Revenue	$	774,601		$	697,865		$	625,259
Cost of services		617,787			559,591			509,970
Gross profit		156,814			138,274			115,289
Selling, general and administrative expenses		72,178			63,235			52,717
Amortization		4,699			3,376			1,916
Transaction costs		7,030			—			—
Income from operations		72,907			71,663			60,656
Interest income		393			452			1,477
Interest expense		(1,163	)		(848	)		(191	)
Income before income taxes		72,137			71,267			61,942
Income tax expense		33,003			29,544			25,241
Net income	$	39,134		$	41,723		$	36,701
Earnings per share:
Basic	$	1.50		$	1.58		$	1.35
Diluted	$	1.45		$	1.52		$	1.29
Weighted average number of common shares outstanding:
Basic		26,044			26,338			27,123
Diluted		26,925			27,391			28,392

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

38

Bright Horizons Family Solutions, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(In thousands)

					Additional			Treasury			Cumulative								Total
	Common Stock				Paid In			Stock,			Translation			Retained		Deferred			Stockholders’			Comprehensive
	Shares		Amount		Capital			at cost			Adjustment			Earnings		Compensation			Equity			Income
Balance at January 1, 2005		26,870	$	268	$	101,584		$	—		$	8,474		$	77,003	$	(1,085	)	$	186,244
Exercise of stock options		537		6		5,664			—			—			—		—			5,670
Stock-based compensation		55		—		1,920			—			—			—		(146	)		1,774
Tax benefit on vested restricted stock		—		—		27			—			—			—		—			27
Tax benefit from the exercise of stock options		—		—		3,316			—			—			—		—			3,316
Purchase of treasury stock		—		—		—			(11,234	)		—			—		—			(11,234	)
Translation adjustment		—		—		—			—			(5,319	)		—		—			(5,319	)	$	(5,319	)
Net income		—		—		—			—			—			36,701		—			36,701			36,701
Comprehensive net income for the year ended December 31, 2005																						$	31,382
Balance at December 31, 2005		27,462	$	274	$	112,511		$	(11,234	)	$	3,155		$	113,704	$	(1,231	)	$	217,179
Reversal of deferred compensation upon FAS 123R adoption		—		—		(1,231	)		—			—			—		1,231			—
Exercise of stock options		439		4		5,117			—			—			—		—			5,121
Issuance of unvested restricted stock		41		1		480			—			—			—		—			481
Stock-based compensation		—		—		3,554			—			—			—		—			3,554
Tax benefit on vested restricted stock		—		—		45			—			—			—		—			45
Tax benefit from the exercise of stock options		—		—		3,393			—			—			—		—			3,393
Purchase of treasury stock		—		—		—			(54,049	)		—			—		—			(54,049	)
Translation adjustment		—		—		—			—			6,391			—		—			6,391		$	6,391
Net income		—		—		—			—			—			41,723		—			41,723			41,723
Comprehensive net income for the year ended December 31, 2006																						$	48,114
Balance at December 31, 2006		27,942	$	279	$	123,869		$	(65,283	)	$	9,546		$	155,427	$	—		$	223,838
Exercise of stock options		263		3		3,373			—			—			—		—			3,376
Issuance of unvested restricted stock		65		1		1,062			—			—			—		—			1,063
Stock-based compensation		—		—		4,492			—			—			—		—			4,492
Tax benefit on vested restricted stock		—		—		89			—			—			—		—			89
Tax benefit from the exercise of stock options		—		—		2,151			—			—			—		—			2,151
Purchase of treasury stock		—		—		—			(5,196	)		—			—		—			(5,196	)
Translation adjustment		—		—		—			—			1,694			—		—			1,694		$	1,694
Net income		—		—		—			—			—			39,134		—			39,134			39,134
Comprehensive net income for the year ended December 31, 2007																						$	40,828
Balance at December 31, 2007		28,270	$	283	$	135,036		$	(70,479	)	$	11,240		$	194,561	$	—		$	270,641

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

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Bright Horizons Family Solutions, Inc

Consolidated Statements of Cash Flows

(In thousands)

	Years ended December 31,
	2007			2006			2005
Cash flows from operating activities:
Net income	$	39,134		$	41,723		$	36,701
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,739			18,856			14,510
Non-cash revenue and other		(1,150	)		(1,012	)		(1,264	)
Asset write-downs and loss on disposal of fixed assets		48			99			266
Stock-based compensation		4,492			3,554			978
Deferred income taxes		(4,647	)		263			(5,253	)
Tax benefit realized from stock option exercises		—			—			3,343
Changes in assets and liabilities, net of acquired amounts:
Accounts receivable		(8,212	)		(9,074	)		(2,026	)
Prepaid expenses and other current assets		100			(5,131	)		(2,257	)
Income taxes		696			2,683			4,825
Accounts payable and accrued expenses		8,976			(1,528	)		1,579
Deferred revenue		14,346			352			3,980
Accrued rent and related obligations		2,436			3,199			213
Other assets		(1,436	)		112			(1,085	)
Other current and long-term liabilities		(888	)		568			(4,391	)
Net cash provided by operating activities		77,634			54,664			50,119
Cash flows from investing activities:
Purchases of fixed assets		(41,847	)		(32,715	)		(15,599	)
Proceeds from the disposal of fixed assets		42			244			5,605
Other assets		8			(890	)		—
Payments for acquisitions, net of cash acquired		(9,180	)		(24,771	)		(54,923	)
Net cash used in investing activities		(50,977	)		(58,132	)		(64,917	)
Cash flows from financing activities:
Proceeds from the issuance of common stock		4,439			5,602			6,466
Purchase of treasury stock		(5,196	)		(54,049	)		(11,234	)
Excess tax benefit from stock-based compensation		1,729			2,610			—
Principal payments of long-term debt		(4,468	)		(640	)		(778	)
(Repayments)/borrowings on line of credit, net		(21,687	)		35,000			—
Net cash used in financing activities		(25,183	)		(11,477	)		(5,546	)
Effect of exchange rates on cash and cash equivalents		365			410			(478	)
Net increase (decrease) in cash and cash equivalents		1,839			(14,535	)		(20,822	)
Cash and cash equivalents, beginning of year		7,115			21,650			42,472
Cash and cash equivalents, end of year	$	8,954		$	7,115		$	21,650

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

40

Bright Horizons Family Solutions, Inc.

Notes to Consolidated Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization — Bright Horizons Family Solutions, Inc. (“Bright Horizons” or the “Company”) provides workplace services for employers and families throughout the United States, Puerto Rico, Canada, Ireland, and the United Kingdom. Workplace services include center-based child care, education and enrichment programs, elementary school education, back-up care (for children and elders), before and after school care, summer camps, vacation care, college preparation and admissions counseling, and other family support services.

The Company has two reporting segments, consisting of center-based care and ancillary services. Center-based care includes the traditional center-based child care, back-up care, and elementary education. Ancillary services consist of college preparation and admissions counseling and work/life consulting services. The Company uses various business models for the operation of these segments.

The Company operates its early care and education centers under various types of arrangements, which generally can be classified into two categories: (i) the management or cost plus (“Cost Plus”) model, where Bright Horizons manages a work-site early care and education center under a cost-plus arrangement with an employer sponsor, and (ii) the profit and loss (“P&L”) model, where the Company assumes the financial risk of the early care and education center’s operations. The P&L model may be operated under either (a) sponsored, where Bright Horizons provides early care and educational services on a priority enrollment basis for employees of an employer sponsor, or (b) lease model, where the Company provides priority early care and education to the employees of multiple employers located within a real estate developer’s property or the community at large. Under each model type the Company retains responsibility for all aspects of operating the early care and education center, including the hiring and paying of employees, contracting with vendors, purchasing supplies and collecting tuition and related accounts receivable.

The Company’s ancillary services are composed of businesses designed to support work/life initiatives but are not directly related to the care and education of children. Contractual arrangements for ancillary services vary widely. The Company offers college preparation and admissions counseling services to corporate clients, that include worksite and online workshops for employees on various subjects, as well as one on one counseling during the college application process. College preparation and admissions counseling services are also offered to the community at various retail locations located primarily in metropolitan areas. Consulting services related to work/life initiatives are also offered to corporate clients.

Principles of Consolidation — The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. The primary estimates in the Company’s consolidated financial statements include, but are not limited to, allowance for doubtful accounts, goodwill and intangible assets, liability for insurance obligations, and income taxes. Actual results may differ from management’s estimates.

Foreign Operations — The functional currency of the Company’s foreign subsidiaries is their local currency. The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period. The cumulative translation effect for subsidiaries using a functional currency other than the U.S. dollar is included as a cumulative translation adjustment in stockholders’ equity and as a component of comprehensive income.

The Company’s intercompany accounts are typically denominated in the functional currency of the foreign subsidiary. Gains and losses resulting from the remeasurement of intercompany receivables that the Company considers to be of a long-term investment nature are recorded as a cumulative translation adjustment in stockholders’ equity and as a component of comprehensive income, while gains and losses resulting from the remeasurement of intercompany receivables from those foreign subsidiaries for which the Company anticipates settlement in the foreseeable future are recorded in the consolidated statements of operations. The net gains and losses recorded in the consolidated statements of operations were not significant for the periods presented.

41

Concentrations of Credit Risk and Fair Value of Financial Instruments — Financial instruments that potentially expose the Company to concentrations of credit risk consist mainly of cash and cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents in financial institutions of high credit standing. The Company’s accounts receivable, which are derived primarily from the services it provides, are dispersed across many clients in various industries with no single client accounting for more than 10% of the Company’s net sales or accounts receivable in 2007 or 2006. The Company believes that no significant credit risk exists at December 31, 2007 or 2006, and that the carrying amounts of the Company’s financial instruments approximate fair market value.

Cash Equivalents — The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents consist primarily of institutional money market accounts. The carrying value of these instruments approximates market value due to their short term nature.

Accounts Receivable — The Company generates accounts receivable from fees charged to parents and client sponsors and, to a lesser degree, government agencies. The Company monitors collections and payments from these customers and maintains a provision for estimated losses based on historical trends, in addition to provisions established for specific customer collection issues that have been identified. Accounts receivable is stated net of this allowance for doubtful accounts.

Fixed Assets — Property and equipment, including leasehold improvements, are carried at cost less accumulated depreciation or amortization. Depreciation is calculated on a 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 lease term or their estimated useful life. Expenditures for maintenance and repairs are expensed as incurred, whereas expenditures for improvements and replacements are capitalized. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the balance sheet and the resulting gain or loss is reflected in the consolidated statements of income.

Goodwill and Intangible Assets — Goodwill and other intangible assets principally consist of goodwill, various customer relationships and contract rights, non-compete agreements and trade names.

Bright Horizons accounts for acquisitions in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, Accounting for Business Combinations, which requires that the aggregate purchase price of acquired entities be allocated to the fair value of identifiable assets and liabilities with the residual amount being allocated to goodwill. The identifiable assets can include intangible assets such as trade names, customer relationships and non-compete agreements that are subject to valuation. Valuation methodologies use amongst other things: estimates of expected useful life; projected revenues, operating margins and cash flows; and weighted average cost of capital.

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”), goodwill and intangible assets with indefinite lives are not subject to amortization, but are monitored annually for impairment, or more frequently if there are indicators of impairment. The Company tests for impairment by comparing the fair value of each reporting unit, determined by estimating the present value of expected future cash flows, to its carrying value. In the fourth quarter of 2007 and 2006, the Company performed its annual impairment test and determined that no impairment loss should be recognized. However, there can be no assurance that such a charge will not be recorded in future periods. Intangible assets that are separable from goodwill and have determinable useful lives are valued separately and are amortized over the estimated period benefited, ranging from two to twenty-two years.

Impairment of Long-Lived Assets — The Company reviews long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Impairment is assessed by comparing the carrying amount of the asset to the estimated undiscounted future cash flows over the asset’s remaining life. If the estimated cash flows are less than the carrying amount of the asset, an impairment loss is recognized to reduce the carrying amount of the asset to its estimated fair value less any disposal costs.

Deferred Revenue — The Company records deferred revenue for prepaid tuitions and management fees, employer-sponsor advances and assets received from consulting or development projects in advance of services being performed. The Company is also party to agreements where the performance of services extends beyond the current operating cycle. In these circumstances, the Company records a long-term obligation and recognizes revenue over the period of the agreement as the services are rendered.

Leases and Accrued Rent — The Company leases space for its centers and corporate offices. Leases are evaluated and classified as operating or capital for financial reporting purposes. The Company recognizes rent expense from operating

42

leases with periods of free rent and scheduled rent increases on a straight-line basis over the applicable lease term. The difference between rents paid and straight-line rent expense is recorded as accrued rent.

Other Long-Term Liabilities — Other long-term liabilities consist primarily of amounts payable to clients pursuant to terms of operating agreements or for deposits held by the Company and obligations for uncertain tax positions.

Income Taxes — The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, Accounting for Income Taxes (“SFAS 109”). Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance to reduce the carrying amount of deferred tax assets if it is more likely than not that such asset will not be realized. Additional income tax expense is recognized as a result of valuation allowances. The Company does not recognize a tax benefit on losses in foreign operations where it does not have a history of profitability or on certain expenses, which only become deductible when paid, the timing of which is uncertain. The Company records penalties and interest on income tax related items as a component of tax expense.

Effective January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes-An interpretation of FASB Statement No. 109, Accounting for Income Taxes (“FIN 48”), which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and accounting for income taxes in interim periods, and requires increased disclosures.

Revenue Recognition — The Company recognizes revenue in accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements, as modified by Emerging Issues Task Force (“EITF”) No. 00-21, Revenue Arrangements with Multiple Deliverables, and SAB No. 104, Revenue Recognition, which require that four basic criteria be met before recognizing revenue: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed and determinable, and collectibility is reasonably assured. In those circumstances where the Company enters into arrangements with a client that involve multiple revenue elements, the consideration is allocated to the elements based on the fair value of the individual services and revenue recognition is considered separately for each individual element. Center-based care revenues consist primarily of tuition, which is comprised of amounts paid by parents, supplemented in some cases by payments from sponsors and, to a lesser extent, by payments from government agencies. Revenue may also include management fees, operating subsidies paid either in lieu of or to supplement parent tuition, and fees for other services. The Company recognizes revenue on a gross basis in accordance with EITF No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, as services are performed.

The Company enters into contracts with its employer sponsors to manage and operate their early care and education centers under various terms. The Company’s contracts to operate early care and education centers are generally three to five years in length with varying renewal options. The Company’s contracts for back-up arrangements are typically renewed on an annual basis.

Stock-Based Compensation — Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123R, Share-Based Payment (“SFAS 123R”), and SAB No. 107 (“SAB 107”) using the modified prospective method, which results in the provisions of SFAS 123R being applied to the consolidated financial statements on a prospective basis. Under the modified prospective recognition method, restatement of consolidated income from prior periods is not required, and accordingly, the Company has not provided such restatements. Under the modified prospective provisions of SFAS 123R, compensation expense is recorded for the unvested portion of previously granted awards that were outstanding on January 1, 2006 and all subsequent awards. SFAS 123R requires that all stock-based compensation expense be recognized in the financial statements based on the fair value of the awards. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which generally

43

represents the vesting period, and includes an estimate of awards that will be forfeited. The Company calculates the fair value of stock options using the Black-Scholes option-pricing model and the fair value of restricted stock based on intrinsic value at grant date.

Earnings Per Share — Earnings per share is measured in two ways: basic and diluted. Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding at the end of the year. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares, which includes the additional dilution related to preferred stock, restricted stock, options and warrants, if applicable.

Recent Accounting Pronouncements - In December 2007, the FASB issued SFAS No. 141R, Business Combinations (“SFAS 141R”). SFAS 141R requires: the assets acquired and liabilities assumed to be measured at fair value as of the acquisition date; liabilities related to contingent consideration to be remeasured at fair value at each subsequent reporting period; and acquisition-related costs to be expensed as these are incurred. SFAS 141R also requires additional disclosures of information surrounding a business combination. The provisions of SFAS 141R are effective for fiscal years beginning on or after December 15, 2008 and apply to business combinations that are completed on or after the date of adoption. The Company has not yet adopted this pronouncement, but expects that it will have an impact on the consolidated financial statements when effective, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions the Company completes after the effective date.

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 159”). SFAS 159 allows entities to choose to measure certain financial assets and financial liabilities at fair value, with the related unrealized gains and losses reported in earnings at each reporting date. The provisions of SFAS 159 are effective for fiscal years beginning after November 15, 2007. The Company has not yet adopted this pronouncement and is evaluating the impact that this statement will have on its consolidated financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles in the United States. The provisions of SFAS 157 are effective for fiscal years beginning after November 15, 2007 and is to be applied prospectively. In February 2008, the FASB issued Staff Positions No. 157-1 and No. 157-2, which partially defer the effective date of SFAS 157 for one year for certain nonfinancial assets and liabilities and remove certain leasing transactions from its scope. The Company is evaluating the expected impact that the adoption of SFAS 157 will have, but does not expect SFAS 157 to have a material impact on its consolidated financial position and results of operations.

2. ACQUISITIONS

In 2007, the Company acquired substantially all of the assets of a school in the United States and the outstanding stock of a group of three child care centers in the United Kingdom. The aggregate consideration for both acquisitions totaled $6.9 million, consisting of $6.7 million in cash and the assumption of certain liabilities. Additional cash consideration of up to $200,000 may be payable in 2008 based on the performance of the school acquired. Any additional payments related to this contingency will be accounted for as additional goodwill. The purchase prices for these acquisitions have been allocated based on the estimated fair value of the acquired assets and assumed liabilities at the dates of acquisition. The Company acquired total assets of $4.8 million, including cash of $940,000 and real estate of $3.0 million, and assumed liabilities of $720,000. In conjunction with the two acquisitions the Company recorded goodwill of $2.0 million, which has been allocated to the Company’s center-based care segment, and other intangible assets of $630,000 consisting of customer relationships, trade names, and non-compete agreements. The identified intangible assets will be amortized over periods of 3 — 14 years, except for $80,000 allocated to an acquired trade name, which has an indefinite life. The Company also recorded deferred tax liabilities of $120,000 related to intangible assets subject to amortization which will not be deductible for tax purposes. The Company estimates that the goodwill related to the 2007 acquisitions will be deductible for tax purposes.

In 2006, the Company completed the strategic acquisition of College Coach, a privately held provider of employer-sponsored college preparation and admissions counseling services with operations in the United States. Bright Horizons purchased substantially all of the assets of College Coach for initial consideration of $11.3 million. The purchase price has been allocated to the acquired assets and liabilities based on the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition. The Company acquired assets of $2.2 million, including cash of $1.4 million, and assumed liabilities of $1.5 million. The Company initially recorded goodwill of $2.2 million, trade name of $2.4 million and contractual relationships of $6.0 million related to this transaction. The trade name acquired was determined to have an

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indefinite life, not subject to amortization, but to annual impairment testing. The customer relationships will be amortized over its useful life of 11 years. In accordance with the terms of the purchase agreement, additional cash consideration of $3.5 million was paid in 2007, and has been accounted for as additional goodwill and has been allocated to the Company’s ancillary services segment. Additional amounts may be payable over the next four years, if specific performance targets are met by College Coach; any further payments related to this contingency will be accounted for as additional goodwill.

In 2006, the Company also acquired substantially all of the assets of a group of seven child care and education centers in the United States and of one single-site child care and education company in the United Kingdom. In addition, the Company acquired the outstanding stock of two multi-site child care and education companies in the United Kingdom. The aggregate consideration for the four acquisitions was $21.1 million, which included notes payable of $3.6 million that were issued in conjunction with one of the stock purchases in the United Kingdom. The purchase prices have been allocated based on the estimated fair value of the assets acquired and liabilities assumed at the dates of acquisition. The Company acquired assets of $4.6 million, including cash of $2.7 million, and assumed liabilities of $3.4 million. In conjunction with the four acquisitions the Company recorded goodwill of $17.2 million and other identified intangible assets of $3.3 million consisting of customer relationships, trade names and non-compete agreements. The identified intangible assets will be amortized over periods of 2 — 4 years, except for $430,000 allocated to an acquired trade name, which has an indefinite life. The Company also recorded deferred tax liabilities of $615,000 related to intangible assets subject to amortization which will not be deductible for tax purposes.

In 2005, the Company acquired ChildrenFirst, Inc., a privately held operator of 33 employer-sponsored back-up child care centers in the US and Canada. In addition, the Company acquired substantially all the assets of a domestic multi-site and a domestic single-site child care and early education companies. The aggregate cash paid by the Company for the three acquisitions was $66.0 million. The purchase prices have been allocated based on the estimated fair value of the assets and liabilities acquired at the date of acquisition, which included, among other items, cash of $11.1 million, fixed assets of $8.3 million, and net current liabilities of $17.8 million that were comprised primarily of deferred revenue. In conjunction with the acquisitions the Company recorded goodwill of $51.2 million and other identified intangible assets of $18.9 million consisting of customer relationships, trade names and non-compete agreements. The identified intangible assets are being amortized over periods of 3 — 14 years based on estimated lives. The Company also recorded deferred tax liabilities of $7.4 million related to intangible assets subject to amortization which will not be deductible for tax purposes.

The above transactions have been accounted for under the purchase method of accounting and the operating results of the acquired businesses have been included in the Company’s consolidated results of operations from the respective dates of acquisition. These acquisitions were not material to the Company’s consolidated financial position or results of operation, and therefore no pro forma information has been presented.

3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	December 31,
	2007		2006
	(In thousands)
Prepaid workers compensation insurance	$	8,017	$	7,960
Prepaid rent and other occupancy costs		4,250		4,041
Reimbursable costs		2,838		2,244
Prepaid insurance		861		719
Other prepaid expenses and current assets		2,940		4,951
	$	18,906	$	19,915

Under the terms of the Company’s workers compensation policy, the Company is required to make advances to its insurance carrier pertaining to anticipated claims for all open plan years.

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4. FIXED ASSETS

Fixed assets consist of the following:

			December 31,
	Estimated useful lives
	(years)		2007			2006
			(In thousands)
Buildings		20 — 40	$	75,572		$	62,363
Furniture and equipment		3 — 10		50,375			42,209
Leasehold improvements	Shorter of the lease term or the estimated useful life			107,757			87,222
Land		—		15,031			12,417
				248,735			204,211
Accumulated depreciation and amortization				(83,843	)		(66,899	)
Fixed assets, net			$	164,892		$	137,312

The Company recorded depreciation expense of $19.0 million, $15.5 million and $12.6 million in 2007, 2006 and 2005, respectively.

5. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the years ended December 31, 2007 and 2006 are as follows:

	2007
	Center-based		Other Ancillary
	Care		Services		Total
			(In thousands)
Beginning balance	$	142,884	$	2,186	$	145,070
Goodwill additions during the period		2,795		3,485		6,280
Effect of foreign currency translation		1,047		—		1,047
Ending balance	$	146,726	$	5,671	$	152,397

	2006
	Center-based		Other Ancillary
	Care		Services		Total
			(In thousands)
Beginning balance	$	120,507	$	—	$	120,507
Goodwill additions during the period		17,358		2,186		19,544
Effect of foreign currency translation		5,019		—		5,019
Ending balance	$	142,884	$	2,186	$	145,070

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The following tables reflect intangible assets that are subject to amortization.

	Weighted average			Accumulated		Net Carrying
	amortization period	Cost		Amortization		Amount
				(In thousands)
December 31, 2007:
Contractual rights and customer relationships	13.1 years	$	41,721	$	10,839	$	30,882
Trade names	3.7 years		752		665		87
Non compete agreements	3.2 years		171		96		75
		$	42,644	$	11,600	$	31,044
December 31, 2006:
Contractual rights and customer relationships	13.2 years	$	40,974	$	6,237	$	34,737
Trade names	2.9 years		726		586		140
Non compete agreements	3.5 years		422		306		116
		$	42,122	$	7,129	$	34,993

The Company has trade names with net carrying values of $3.3 million and $3.2 million at December 31, 2007 and 2006, respectively, which were determined to have indefinite useful lives and are not subject to amortization under the provisions of SFAS 142. On an annual basis, these trade names are subject to an evaluation of the remaining useful life with respect to having an indefinite life, as well as testing for impairment. No impairment losses were recorded in 2007, 2006 and 2005, in relation to trade names with indefinite useful lives. The change in carrying amount of these assets is due to assets acquired in acquisitions and to foreign currency translation.

The Company recorded amortization expense of $4.7 million, $3.4 million and $1.9 million in 2007, 2006 and 2005, respectively. The Company estimates that it will record amortization expense related to existing intangible assets as follows over the next 5 years:

	Estimated
	Amortization Expense
	(In millions)
2008	$	4.6
2009	$	3.8
2010	$	3.3
2011	$	3.0
2012	$	3.0

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

	December 31,
	2007		2006
	(In thousands)
Accounts payable	$	2,935	$	3,014
Accrued payroll and employee benefits		32,170		30,628
Accrued insurance		9,056		8,891
Accrued transaction costs		6,460		—
Accrued professional fees		1,265		1,163
Accrued occupancy costs		1,253		897
Accrued other expenses		10,552		9,649
	$	63,691	$	54,242

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7. OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

	December 31,
	2007		2006
	(In thousands)
Customer amounts on deposit	$	6,060	$	6,039
Employee payroll withholdings		221		671
Other miscellaneous liabilities		2,877		4,640
	$	9,158	$	11,350

8. LINES OF CREDIT AND SHORT-TERM DEBT

The Company has a credit agreement with two U.S. banks providing for a five-year unsecured revolving credit facility in the amount of $60 million, maturing July 22, 2010, with any amounts outstanding at that date payable in full. The revolving credit facility includes an accordion feature allowing the Company to increase the amount of the revolving credit facility by an additional $40 million, subject to lender commitments for the additional amounts. In October of 2007, the credit agreement was amended and restated to incorporate a multicurrency feature within the revolving facility that allows the Company to borrow and repay in either Pounds Sterling (£) or Euros (€), up to a U.S. dollar equivalent sub-limit of $15 million.

The Company may use the net proceeds of the borrowings under the revolving credit facility for general corporate purposes, including acquisitions. At the Company’s option, advances under the revolving credit facility will bear interest at either i) the greater of the Federal Funds Rate plus 0.5% or Prime, or ii) LIBOR plus a spread depending on the Company’s leverage ratio. Commitment fees on the unused portion of the line are payable at a rate ranging from 0.125% to 0.200% per annum depending on the Company’s leverage ratio. The credit agreement requires compliance with specified financial ratios and tests, including a maximum leverage ratio, a minimum debt service coverage ratio and a minimum shareholders’ equity requirement. The Company was in compliance with all covenants on its line of credit at December 31, 2007 and 2006. In 2007 and 2006, the Company had periodic borrowings and repayments under the revolving credit facility. The Company had borrowings outstanding of $11.5 million at December 31, 2007 and of $35.0 million at December 31, 2006. The interest rate on the Company’s outstanding borrowings at December 31, 2007 was 6.17% with a weighted average interest rate for the period of 6.0%. The interest rate on the Company’s outstanding borrowings under the line of credit at December 31, 2006 was 6.4%, which was approximately the same as the weighted average interest rate for the period.

The Company’s subsidiaries in the United Kingdom maintain an overdraft facility with a U.K. bank that provides for maximum borrowings of £1.0 million (approximately $2.0 million as of December 31, 2007) to support local short-term working capital requirements. The overdraft facility is repayable upon the earlier of demand from the U.K. bank or, subject to an annual renewal provision, on July 31, 2008. The overdraft facility is secured by a cross guarantee by and among the Company’s subsidiaries in the United Kingdom and a right of offset against all accounts maintained by the Company at the lending bank. The overdraft facility bears interest at the U.K. bank’s Base Rate plus 3.0%. At December 31, 2007 approximately £900,000 ($1.8 million) was outstanding under the overdraft facility with an interest rate of 8.5%, which was approximately the same as the weighted average interest rate for the period.

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9. LONG-TERM DEBT

Long-term debt consists of the following:

	December 31,
	2007			2006
	(In thousands)
Notes payable to individuals denominated in pounds sterling bearing interest at the Barclays Bank PLC Base Rate (5.0% at December 31, 2006) less 1.5%, with semi-annual payments of interest only. The notes were callable in whole or part by the individuals with 30 days notice and were fully payable August 2016. The notes were repaid in 2007.	$	—		$	3,746
Note payable to a client, with monthly payments of approximately $53,800 including interest of 5.75%, with final payment due January 2008. Note is secured by the Company’s leasehold interest in the center.		53			677
Note payable to a financial institution denominated in Euro’s, with monthly payments of approximately $700 including interest of 8.34%, with final payment due March 2012. Note is secured by related fixed asset.		31			—
Note payable to a financial institution denominated in Euro’s, with monthly payments of approximately $700 including interest of 7.30%, with final payment due August 2011. Note is secured by related fixed asset.		26			30
Note payable to a financial institution denominated in Euro’s, with quarterly payments of approximately $5,000 including interest of 5.90%, with final payment due March 2009. Note is secured by related fixed asset.		23			—
Capital lease with a financial company, with monthly payments of approximately $1,300 including interest of 5.99%, with final payment due June 2008. Note is secured by related fixed asset.		12			—
Total debt		145			4,453
Less current maturities		(98	)		(4,376	)
Long-term debt	$	47		$	77

10. INCOME TAXES

Earnings before income taxes for the years ended December 31, 2007, 2006 and 2005 consist of the following:

	2007			2006			2005
	(In thousands)
United States	$	75,617		$	73,744		$	64,403
Foreign		(3,480	)		(2,477	)		(2,461	)
Total	$	72,137		$	71,267		$	61,942

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Income tax expense for the years ended December 31, 2007, 2006 and 2005 consists of the following:

	2007			2006			2005
	(In thousands)
Current tax expense
Federal	$	28,280		$	22,177		$	23,376
State		6,617			5,708			6,627
Foreign		1,575			1,073			247
		36,472			28,958			30,250
Deferred tax (benefit) expense
Federal		(2,652	)		841			(4,254	)
State		(121	)		115			(968	)
Foreign		(696	)		(370	)		213
		(3,469	)		586			(5,009	)
Income tax expense	$	33,003		$	29,544		$	25,241

Following is a reconciliation of the U.S. Federal statutory rate to the effective rate for the years ended December 31, 2007, 2006, and 2005:

	2007			2006			2005
	(In thousands)
Federal tax computed at statutory rate	$	25,248		$	24,943		$	21,682
State taxes on income, net of federal tax benefit		4,222			3,785			3,267
Valuation allowance		1,961			1,340			1,262
Non-deductible transaction fees		2,356			—			—
Permanent difference and other, net		(784	)		(524	)		(970	)
Income tax expense	$	33,003		$	29,544		$	25,241

Significant components of the Company’s net deferred tax assets are as follows:

	2007			2006
	(In thousands)
Deferred tax assets
Net operating loss carryforwards	$	842		$	1,835
Reserve on assets		470			470
Liabilities not yet deductible		23,180			20,003
Deferred revenue		4,923			5,315
Depreciation		13,411			10,596
Amortization		126			129
Stock-based compensation		2,955			1,588
Other		138			223
Valuation allowance		(6,096	)		(4,505	)
		39,949			35,654
Deferred tax liabilities
Amortization		(15,860	)		(15,719	)
Depreciation		(2,623	)		(2,927	)
Net deferred tax assets	$	21,466		$	17,008

As of December 31, 2007, the Company has net operating losses in a number of states totaling approximately $1.0 million for which the Company has recorded a deferred tax asset of approximately $80,000, which may only be used to offset operating income of certain of the Company’s subsidiaries in those particular states. Management believes the Company will generate sufficient future taxable income to realize net deferred tax assets prior to the expiration of the net operating loss carryforwards recorded and that the realization of the net deferred tax asset is more likely than not. The Company has recorded valuation allowances on certain deferred tax assets related to losses in foreign operations where it does not have a history of profitability, as well as certain liabilities recorded which are subject to being settled in cash in order to be deductible, the timing of which is uncertain.

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The Company does not provide for U.S. income taxes on the portion of undistributed earnings of foreign subsidiaries that is intended to be permanently reinvested. These earnings may become taxable in the United States upon the sale or liquidation of these foreign subsidiaries or upon the remittance of dividends. It is not practicable to estimate the amount of deferred tax liability on such earnings.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes—An interpretation of FASB Statement No. 109, Accounting for Income Taxes (“FIN 48”). This interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and accounting for income taxes in interim periods, and requires increased disclosures.

The Company adopted the provisions of FIN 48 on January 1, 2007. The Company’s liability for uncertain tax positions at the date of adoption was $3.7 million, which included interest and penalties of $1.1 million, and had been previously recorded in accrued income taxes. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2007
	(In thousands)
Balance as of January 1,	$	3,732
Interest and penalties on prior year tax positions		642
Balance as of December 31,	$	4,374

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense, which is consistent with the recognition of these items in prior reporting periods. The Company’s current provision for income tax expense included approximately $640,000 of interest and penalties related to prior year tax positions. The liability for total interest and penalties at December 31, 2007 was approximately $1.7 million and is included in the liability for unrecognized tax benefits.

The total amount of unrecognized tax benefits that if recognized would affect the Company’s effective tax rate is approximately $3.2 million. The Company does not expect the liability for unrecognized tax benefits to change significantly in the next twelve months.

The Company and its domestic subsidiaries are subject to U.S. federal income tax as well as multiple state jurisdictions. The Company is also subject to corporate income tax at its subsidiaries located in the United Kingdom, Canada, Ireland, and Puerto Rico.

U.S. federal income tax returns are typically subject to examination over a three-year period. The Company’s 2005 and 2006 federal tax returns are subject to audit. An audit of the Company’s 2004 U.S. federal tax return by the Internal Revenue Service was completed in 2007 for which there were no material adjustments.

State income tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states.

The Company’s tax returns for its subsidiaries located in the United Kingdom, Canada, Ireland, and Puerto Rico are subject to examination for periods ranging from 4 to 6 years.

11. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

The Company has an incentive compensation plan under which it is authorized to grant both incentive stock options and non-qualified stock options to employees and directors, as well as other stock-based compensation. Under the terms of the 2006 Equity and Incentive Plan (the “Plan”), which was approved by shareholders in June 2006, approximately 1.8 million shares of the Company’s Common Stock are available for distribution upon exercise. As of December 31, 2007, there were approximately 1.4 million shares of Common Stock available for grant under the Plan.

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Effective January 1, 2006, the Company adopted the provisions of SFAS 123R and SAB 107 using the modified prospective method, which results in the provisions of SFAS 123R being applied to the consolidated financial statements on a prospective basis. Under the modified prospective recognition method, restatement of consolidated income from prior periods is not required, and accordingly, the Company has not provided such restatements. Under the modified prospective provisions of SFAS 123R, compensation expense is recorded for the unvested portion of previously granted awards that were outstanding on January 1, 2006 and all subsequent awards. SFAS 123R requires that all stock-based compensation expense be recognized in the financial statements based on the fair value of the awards. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which generally represents the vesting period, and includes an estimate of awards that will be forfeited. Consistent with the valuation method previously used for the disclosure-only pro-forma provisions of SFAS 123, the fair value of stock options is calculated using the Black-Scholes option-pricing model. As required under the new standards, compensation expense is based on the number of options expected to vest. Forfeitures estimated when recognizing compensation expense are adjusted when actual forfeitures differ from the estimate. The fair value of the Company’s grants of non-vested stock (“Restricted Stock”) and non-vested stock units (“Restricted Stock Units”) are based on intrinsic value. Restricted Stock and stock options granted under the plan typically vest over periods that range from three to five years. Stock options typically expire at the earlier of seven to ten years from date of grant or three months after termination of the holder’s employment with the Company, unless otherwise determined by the Compensation Committee of the Board of Directors.

Stock-Based Compensation

The Company recognized the impact of all stock-based compensation in its consolidated statements of income for the years ended December 31, 2007 and 2006, and did not capitalize any amounts on the consolidated balance sheets. The following table presents the stock-based compensation included in the Company’s consolidated statements of income and the effect on earnings per share:

	Years ended December 31,
	2007			2006
	(In thousands, except per share data)
Stock-based compensation expense:
Cost of services	$	341		$	354
Selling, general and administrative expenses		4,151			3,200
Stock-based compensation before tax		4,492			3,554
Income tax benefit		1,621			1,059
Net stock-based compensation expenses	$	2,871		$	2,495
Effect on earnings per share:
Basic earnings per share	$	(0.11	)	$	(0.09	)
Diluted earnings per share	$	(0.11	)	$	(0.09	)

The Company recorded excess tax benefits related to the vesting or exercise of equity instruments, which represent the excess of fair market value at the time of the transaction which exceed amounts previously recorded as compensation expense for book purposes. The Company recorded excess tax benefits of $1.7 million in the year ended December 31, 2007 and of $2.6 million in the year ended December 31, 2006 as cash flows from financing activities, which prior to the adoption of FAS 123R would have been reported as a cash flow from operating activities.

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Prior to the adoption of SFAS 123R and SAB 107, the Company followed APB 25, and compensation cost related to employee stock options was generally not recognized because options were granted with exercise prices equal to or greater than the fair market value at the date of grant. The Company accounted for options granted to non-employees using the fair value method, in accordance with the provisions of SFAS 123, as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. Had compensation cost for the stock option plans been determined based on the fair value at the grant date for awards in 1995 through December 31, 2005 consistent with the provisions of SFAS 123R, the Company’s net income and earnings per share would have been reduced to the following pro forma amounts:

	Year ended
	December 31, 2005
	(In thousands,
	except per share data)
Net income, as reported	$	36,701
Add: Stock-based compensation expense included in reported net income, net of related tax effects		621
Deduct: Total stock-based compensation expense determined under fair value method for all awards, net of related tax effects		(4,375	)
Pro forma net income	$	32,947
Earnings per share-Basic:
As reported	$	1.35
Pro forma	$	1.21
Earnings per share-Diluted:
As reported	$	1.29
Pro forma	$	1.16

There were no share-based liabilities paid during the years ended December 31, 2007, 2006, and 2005.

Stock Options

The fair value of each stock option granted was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions:

	Years ended December 31,
	2007			2006			2005
Expected dividend yield		0.0	%		0.0	%		0.0	%
Expected stock price volatility		36.20	%		40.7	%		45.3	%
Risk free interest rate		4.5	%		4.8	%		3.5	%
Expected life of options	5.6 years			5.9 years			6.2 years
Weighted-average fair value per share of options granted during the period	$	16.72		$	17.37		$	16.97

The expected stock price volatility is based upon the historical volatility of the Company’s stock price over the expected life of the option.

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The following table reflects stock option activity under the Company’s equity plans for the year ended December 31, 2007:

	Weighted Average
	Remaining					Weighted
	Contractual Life in		Number of			Average
	Years		Shares			Exercise Price
Outstanding at December 31, 2006		5.0		1,900,402		$	19.45
Granted				177,604			40.07
Exercised				(262,943	)		12.84
Forfeited or Expired				(22,454	)		30.76
Outstanding at December 31, 2007		4.3		1,792,609		$	22.32
Exercisable at December 31, 2007		3.7		1,099,355		$	14.89

The aggregate intrinsic value (pre-tax) was $21.9 million for the Company’s total outstanding options and was $21.6 million for the Company’s fully vested and exercisable options based on the closing price of the Company’s common stock of $34.54 at the end of 2007. The aggregate intrinsic value represents the net amount that would have been received by the option holders had they exercised all of their outstanding options and those which were fully vested on that date.

The following table summarizes the unvested stock option activity for the year ended December 31, 2007:

	Weighted Average
	Remaining					Weighted
	Contractual Life in		Number of			Average
	Years		Shares			Exercise Price
Outstanding at December 31, 2006		5.9		734,967		$	27.47
Granted				177,604			40.07
Vested				(200,667	)		15.06
Forfeited				(18,650	)		34.52
Unvested options outstanding at December 31, 2007		5.4		693,254		$	34.10

At December 31, 2007, the Company expects approximately 660,000 shares to vest, with a weighted average remaining contractual life of 5.3 years, weighted average exercise price of $34.20 and aggregate intrinsic value of $2.0 million.

The fair value (pre-tax) of options that vested during the years ended December 31, 2007, 2006, and 2005 were $1.6 million, $2.6 million, and $5.5 million, respectively. Aggregate intrinsic value of exercised options was $7.2 million, $11.8 million, and $14.6 million for the years ended December 31, 2007, 2006 and 2005, respectively.

As of December 31, 2007, there was $4.6 million of total unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Plan. That expense is expected to be recognized over the remaining contractual period, which has a weighted-average remaining contractual period of 1 year.

Cash received from the exercise of stock options for the years ended December 31, 2007, 2006, and 2005 was $3.4 million, $5.1 million, and $5.7 million, respectively. The actual tax benefit realized for the tax deductions from option exercises for the years ended December 31, 2007, 2006, and 2005 totaled $2.2 million, $3.4 million, and $3.3 million, respectively.

The Company realizes a tax deduction upon the exercise of non-qualified stock options and disqualifying dispositions of incentive stock options due to the recognition of compensation expense in the calculation of its taxable income. The amount of the compensation recognized for tax purposes is based on the difference between the market value of the common stock and the option price at the date the options are exercised. These tax benefits are credited to additional paid-in capital.

In June 2004, the Company’s Vice Chair of the Board of Directors resigned his employment with the Company as Executive Chairman. At the time of resignation, the terms for any unvested stock options were modified to allow for a continuation of vesting so long as the former employee continues in his capacity as an active member of the Board of

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Directors. The Company recognized approximately $17,000, $51,000, and $336,000 in compensation expense in the years ended December 31, 2007, 2006, and 2005, respectively. These stock options were fully vested as of December 31, 2007.

There were no modifications made to awards during the years ended December 31, 2007, 2006, and 2005.

Restricted Stock Awards

The Company grants shares of Restricted Stock to employees of the Company on either a no-cost or discounted basis. The fair value of grants of Restricted Stock is based on the intrinsic value of the shares at the grant date.

The following table summarizes the Restricted Stock activity for the year ended December 31, 2007:

				Weighted
	Number of			Average Fair
	Shares			Value
Outstanding at December 31, 2006		126,165		$	21.93
Granted		65,166			25.57
Vested		(15,600	)		23.74
Forfeited or Expired		—			—
Outstanding at December 31, 2007		175,731		$	23.12

The aggregate intrinsic value for unvested shares of Restricted Stock was $6.1 million at December 31, 2007 based on the closing price of the Company’s common stock of $34.54 at the end of 2007.

The fair value (pre-tax) of Restricted Stock that vested during the years ended December 31, 2007, 2006, and 2005 were $370,000, $180,000, and $180,000, respectively.

As of December 31, 2007, there was $1.7 million of unrecognized compensation costs related to unvested Restricted Stock. The cost is expected to be recognized over a weighted average period of 1.8 years.

The Company received proceeds of approximately $1.1 million, $500,000, and $800,000 related to discounted purchases of Restricted Stock for the years ended December 31, 2007, 2006, and 2005, respectively. The actual tax benefit realized for the tax deductions from restricted shares that vested totaled $240,000, $116,000, and $100,000 for the years ended December 31, 2007, 2006, and 2005, respectively.

In May 2007, the Company granted awards of Restricted Stock Units to members of the Board of Directors. The awards allow for the issuance of a share of the Company’s Common Stock for each vested unit upon the termination of service as a member of the Board of Directors. The Company issued approximately 1,300 units having a fair value of $38.10 per unit for a total of approximately $50,000. The units vested upon issuance and were fully recognized as compensation expense in the second quarter of 2007. In 2006, the Company issued approximately 1,300 units having a fair value of $34.99 per unit for a total of approximately $50,000. The aggregate intrinsic value of the outstanding awards was approximately $100,000 at December 31, 2007 based on the closing price of the Company’s common stock of $34.54 at the end of 2007.

There were no modifications made to awards during the years ended December 31, 2007, 2006 and 2005.

Treasury Stock

In June 2006, the Board of Directors approved a stock repurchase plan authorizing the Company to repurchase up to 3.0 million shares of the Company’s common stock in addition to amounts repurchased under previous plans. The Company repurchased approximately 142,000 shares at a cost of $5.2 million in 2007. At December 31, 2007, total repurchases under the terms of the existing plan were 523,000 shares leaving approximately 2.5 million shares authorized for repurchase under the plan. Share repurchases under the stock repurchase program may be made from time to time in accordance with applicable securities regulations in open market or privately negotiated transactions. The actual number of shares purchased and cash used, as well as the timing of purchases and the prices paid, will depend on future market conditions.

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12. EARNINGS PER SHARE

The computation of net earnings per share is based on the weighted average number of common shares and common equivalent shares outstanding during the period.

The following tables present information necessary to calculate earnings per share for the years ended December 31, 2007, 2006 and 2005:

	Year Ended December 31, 2007
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(In thousands except per share amounts)
Basic earnings per share
Income available to common stockholders	$	39,134		26,044	$	1.50
Effect of dilutive stock options and restricted stock		—		881
Diluted earnings per share	$	39,134		26,925	$	1.45

	Year Ended December 31, 2006
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(In thousands except per share amounts)
Basic earnings per share
Income available to common stockholders	$	41,723		26,338	$	1.58
Effect of dilutive stock options and restricted stock		—		1,053
Diluted earnings per share	$	41,723		27,391	$	1.52

	Year Ended December 31, 2005
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(In thousands except per share amounts)
Basic earnings per share
Income available to common stockholders	$	36,701		27,123	$	1.35
Effect of dilutive stock options		—		1,269
Diluted earnings per share	$	36,701		28,392	$	1.29

The weighted average number of stock options excluded from the above calculation of earnings per share was approximately 141,900 in 2007, 51,300 in 2006 and 25,200 in 2005, as they were anti-dilutive.

13. PROPOSED MERGER

On January 14, 2008, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with affiliates of Bain Capital Partners, LLC (“Bain”), pursuant to which a wholly owned subsidiary of Bain will be merged with and into the Company, and as a result the Company will continue as the surviving corporation and a wholly owned subsidiary of Bain (the “Merger”). Both the Board of Directors of the Company and a Special Committee of the Board of Directors of the Company, comprised solely of independent and disinterested directors (the “Special Committee”), have approved the Merger Agreement and the Merger and recommended that the shareholders of Bright Horizons vote to adopt the Merger Agreement.

Pursuant to the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of common stock of the Company will be canceled and will be automatically converted into the right to receive $48.25 in cash, without interest. All outstanding equity-based awards of the Company will continue to vest until the closing of the Merger in accordance with their respective terms. Generally, at the closing of the Merger, all outstanding and unvested equity awards will fully vest, at which time these awards will be cancelled and converted into the right to receive the difference between $48.25 in cash and the exercise price of such award, if applicable, without interest and less any applicable withholding taxes.

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Notwithstanding the foregoing, subject to Bain’s sole discretion, certain of our directors and officers may enter into agreements to convert their options or Bright Horizons common stock into, or otherwise invest in, the equity securities of the surviving corporation or one of Bain’s other affiliates following the closing; however, no such discussions regarding any such investments have occurred as of the date of the filing of this Annual Report on Form 10-K.

The Merger Agreement contains a “go-shop” provision wherein, until March 15, 2008, the Company, under the direction of the Special Committee, is permitted to initiate, solicit, facilitate and encourage acquisition proposals from third parties other than Bain and enter into and maintain or continue discussions or negotiations concerning any such acquisition proposals. After the expiration of the go-shop period, the Company is generally not permitted to (1) solicit, knowingly facilitate, knowingly encourage or initiate any inquiries or the implementation or submission of any acquisition proposal, (2) withdraw or modify, in a manner adverse to Bain, the recommendation of the Company’s Board of Directors in favor of the Merger or the Merger Agreement or (3) enter into or recommend any letter of intent, acquisition agreement or similar agreement with respect to any such acquisition proposal. Notwithstanding the foregoing, the provisions of the Merger Agreement provide for a customary “fiduciary-out” provision which allows the Company’s Board of Directors or a committee therof under certain circumstances to participate in discussions with third parties with respect to unsolicited acquisition proposals and to terminate the Merger Agreement and enter into an acquisition agreement with respect to a superior proposal, provided that the Company complies with certain terms of the Merger Agreement, including, if required, paying a termination fee as described below.

If the Merger Agreement is terminated by the Company, under certain circumstances, the Company will be obligated to pay the expenses of Bain up to $10.0 million and will be obligated to pay a termination fee of $39.0 million (or $19.5 million in the event that the Merger Agreement is terminated in favor of a superior acquisition proposal that arises during the go-shop period), less the amount of any reimbursement of expenses of Bain. Additionally, under certain circumstances, should the purchasing Bain entities terminate the Merger Agreement, Bain would be required to pay the Company a termination fee of $39.0 million, plus, in certain circumstances, indemnification for up to an additional $27.0 million of the Company’s damages. The recovery of such amounts would be the Company’s exclusive remedy for failure of Bain and its affiliates to complete the Merger.

Although the purchasing Bain entities’ obligations to complete the Merger are not conditioned upon their receipt of financing, the purchasing Bain entities have obtained equity and debt financing commitments (including from other Bain affiliates) for the transactions contemplated by the Merger Agreement. In the event that any portion of the financing under the commitments becomes unavailable on the terms contemplated in the agreements in respect thereof, the purchasing Bain entities are obligated to use their reasonable best efforts to arrange alternative financing in an amount sufficient to consummate the Merger.

In 2007, the Company incurred $7.0 million of costs directly associated with the Merger. These costs included fees to advisors and attorneys as well as other costs incurred directly attributable to the Merger. The Company is contingently liable for additional professional fees payable to financial advisors to the Special Committee of the Board of Directors upon successful approval and completion of the Merger.

Consummation of the Merger is subject to customary conditions to closing, including the approval of the Company’s stockholders and receipt of requisite antitrust and competition law approvals. On February 11, 2008, the Company received notice from the Federal Trade Commission and the Antitrust Division of the Department of Justice granting early termination of the waiting period under the Hart-Scott-Rodino Act.

Purported class action litigation has been filed since January 14, 2008 by Bright Horizons stockholders against the Company, its current directors, and Bain Capital Partners. See Item 3, “Legal Proceedings”, and Note 14, “Commitments and Contingencies — Litigation”, of the Consolidated Financial Statements and Notes thereto included in this Item 8, “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K for a further discussion of these actions.

14. COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases various office equipment, early care and education center facilities and office space under non-cancelable operating leases. Most of the leases expire within ten years and many contain renewal options for various periods. Certain leases contain provisions, which include additional payments based upon revenue performance, enrollment or the Consumer Price Index at a future date. Rent expense for 2007, 2006 and 2005 totaled approximately $34.9 million, $29.5 million and $23.6 million, respectively.

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Future minimum payments under non-cancelable operating leases are as follows for the years ending December 31, (in thousands):

2008	$	36,394
2009		35,019
2010		31,863
2011		26,756
2012		24,269
Thereafter		126,908
Total future minimum lease payments	$	281,209

Future minimum lease payments include approximately $600,000 of lease commitments, which are guaranteed by third parties pursuant to operating agreements for early care and education centers.

LETTERS OF CREDIT

The Company has a letter of credit outstanding used to guarantee certain rent payments for up to $50,000. In addition, the Company has a letter of credit guaranteeing certain premiums and deductible reimbursements for up to $486,000, which reduced the amounts available for borrowing under the Company’s credit facility by this amount at December 31, 2007, as fully described in Note 8 “Line of Credit and Short Term Debt”. No amounts have been drawn against these letters of credit.

EMPLOYMENT AND SEVERANCE AGREEMENTS

The Company has severance agreements with twenty executives that provide from 12 to 24 months of compensation upon the termination of employment following a change in control of the Company. The Company estimates that the maximum amount payable under these agreements in 2008 is approximately $7.7 million. Two of these executives also are entitled to payment for termination without a change in control event, which provides payment of 12 months of compensation.

The Company has authorized severance agreements for approximately forty additional executives that would provide for 6 months of compensation upon the termination of employment following a change in control of the Company. The maximum amount that would be payable under these agreements in 2008 is approximately $3.0 million.

The severance agreements prohibit the above-mentioned employees from competing with the Company during the severance period or divulging confidential information after their separation from the Company.

LITIGATION

The Company is a defendant in certain legal matters in the ordinary course of business. Management believes the resolution of such legal matters will not have a material effect on the Company’s financial condition, results of operations or cash flows.

In connection with the proposed Merger between the Company and affiliates of Bain Capital Partners LLC (“Bain”) the Company has been named as a defendant, along with the Company’s Board of Directors and Bain, in putative class action lawsuits filed in Massachusetts state court (Aaron Solomon, on behalf of himself and all others similarly situated v. Bright Horizons Family Solutions, Inc., et al., Middlesex County Superior Court, No. 08-0214 and William Smith, individually and on behalf of all other similarly situated shareholders, v. Bright Horizons Family Solutions, Inc., et al., Middlesex County Superior Court, No. 08-0467). On February 26, 2008, the Massachusetts state court consolidated these lawsuits into a single action. These lawsuits allege, among other things, that the Merger is the product of a flawed process and that the consideration to be paid to the Company’s stockholders is unfair and inadequate. The lawsuits further allege that the Company’s directors breached their fiduciary duties by, among other things, ignoring certain alleged conflicts of interest of one of the Special Committee’s financial advisors, taking steps to avoid a competitive bidding process, and improperly favoring a merger over other potential transactions. The lawsuits further allege that Bain aided and abetted the directors’ alleged breach of their fiduciary duties. The lawsuits seek, among other things, class certification, injunctive relief to prevent the consummation of the Merger, and monetary relief. Bright Horizons believes these claims are without merit and intends to defend any claims raised in the lawsuits vigorously.

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OTHER

As of December 31, 2007 the Company had a commitment to purchase a property for $800,000, which was completed in January 2008.

The Company self-insures a portion of its medical insurance plans and has a high deductible workers’ compensation plan. While management believes that the amounts accrued for these obligations are sufficient, any significant increase in the number of claims or costs associated with claims made under these plans could have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company’s early care and education centers are subject to numerous federal, state and local regulations and licensing requirements. Failure of a center to comply with applicable regulations can subject it to governmental sanctions, which could require expenditures by the Company to bring its early care and education centers into compliance.

15. EMPLOYEE BENEFIT PLANS

The Company maintains a 401(k) Retirement Savings Plan (the “Plan”) for all employees with more than 500 hours of credited service on a semi-annual basis and who have been with the Company six months or more. The Plan is funded by elective employee contributions of up to 50% of their compensation. Under the Plan, the Company matches 25% of employee contributions for each participant up to 8% of the employee’s compensation after one year of service. The Company also maintains a 401(k) Retirement Savings Plan (the “Union Plan”) for union employees at one of its child care centers with more than 1,000 hours of credited service on an annual basis and who have been with the Company for one year or more. The Union Plan is funded by elective employee contributions of up to 20% of their compensation. Under the Union Plan, the Company matches 100% of employee contributions for each participant up to 5% of the employee’s compensation. The Company had approximately 50 employees at December 31, 2007 under union agreements. Expense under the two plans, consisting of Company contributions and Plan administrative expenses paid by the Company, totaled approximately $2.0 million, $2.1 million and $2.0 million in 2007, 2006 and 2005, respectively.

16. STATEMENT OF CASH FLOWS SUPPLEMENTAL INFORMATION

The following table presents supplemental disclosure of cash flow information for the years ended December 31, 2007, 2006 and 2005:

	2007		2006		2005
	(In thousands)
Supplemental cash flow information:
Cash payments of interest	$	1,170	$	768	$	137
Cash payments of income taxes	$	35,300	$	24,103	$	23,925
Non cash investing and financing activities:
Issuance of notes payable for acquisition	$	—	$	3,574	$	—
Financing of assets purchased	$	69	$	807	$	—

In conjunction with the acquisitions, as discussed in Note 2, “Acquisitions”, the fair value of assets acquired are as follows:

	2007		2006		2005
	(In thousands)
Cash paid, net of cash acquired	$	9,184	$	24,771	$	54,923
Liabilities assumed		720		8,432		22,721
Fair value of assets acquired	$	9,904	$	33,203	$	77,644

In June 2004, the Company entered into service agreements to manage a group of family programs and amended an agreement to manage an existing child care and education center in exchange for the transfer of land and buildings. The Company recorded fixed assets and deferred revenue of $9.4 million in connection with the transactions. The deferred revenue will be earned over the terms of the arrangements of 6.5 and 12 years, respectively. The Company recognized revenue of $1.3 million in 2007, 2006 and 2005, under the terms of these arrangements. In the event of default under the terms of the contingent notes payable associated with the service agreements, the Company would be required to tender a payment equal to the unrecognized portion of the deferred revenue or surrender the applicable property. The unrecognized portion of the deferred revenue related to these agreements was $4.9 million at December 31, 2007.

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17. SEGMENT AND GEOGRAPHIC INFORMATION

Bright Horizons offers workplace services comprised mainly of center-based child care, back-up care, elementary education, college preparation and admissions counseling, and consulting services. The Company operates under two reporting segments consisting of center-based care and ancillary services. Center-based care includes center-based child care, back-up care, and elementary education, which have similar operating characteristics and meet the criteria for aggregation under SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. The Company’s ancillary services consist of college preparation and admissions counseling and consulting services, which do not meet the quantitative thresholds for separate disclosure and are not material for segment reporting individually or in the aggregate. The Company and its chief operating decision makers evaluate performance based on revenues and income from operations.

The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information is produced or included herein.

	Center-Based		Ancillary
	Care		Services			Total
	(In thousands)
Year ended December 31, 2007:
Revenue	$	766,842	$	7,759		$	774,601
Amortization		4,154		545			4,699
Income from operations		72,610		297			72,907
Year ended December 31, 2006:
Revenue	$	694,380	$	3,485		$	697,865
Amortization		3,194		182			3,376
Income (loss) from operations		71,788		(125	)		71,663
Year ended December 31, 2005:
Revenue	$	624,105	$	1,154		$	625,259
Amortization		1,916		—			1,916
Income (loss) from operations		60,920		(264	)		60,656

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Revenue and long-lived assets by geographic region for the years ended December 31, 2007, 2006, and 2005 are as follows:

	2007		2006		2005
	(In thousands)
Revenue:
United States and territories	$	688,848	$	631,770	$	567,037
Europe		82,797		63,090		56,986
Canada		2,956		3,005		1,236
Total foreign		85,753		66,095		58,222
Total revenue	$	774,601	$	697,865	$	625,259
Long-lived assets (property and equipment, net):
United States and territories	$	140,103	$	121,628	$	105,947
Europe		24,539		15,341		10,011
Canada		250		343		504
Total foreign		24,789		15,684		10,515
Total long-lived assets	$	164,892	$	137,312	$	116,462

The classification “United States and territories” is comprised of the Company’s United States and Puerto Rico operations and the classification “Europe” includes the Company’s United Kingdom and Ireland operations.

18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Financial results by quarter for the years ended December 31, 2007 and 2006 are summarized as follows:

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
	(In thousands except per share data)
2007:
Revenue	$	190,077	$	201,394	$	189,530	$	193,600
Gross profit		38,426		41,141		36,386		40,861
Amortization		1,180		1,136		1,189		1,194
Operating income (1)		19,543		21,823		17,829		13,712
Income before taxes (1)		19,272		21,626		17,631		13,608
Net income (1)		11,216		12,543		10,185		5,190
Basic earnings per share	$	0.43	$	0.48	$	0.39	$	0.20
Diluted earnings per share	$	0.42	$	0.47	$	0.38	$	0.19

(1) In 2007, the Company recognized $7.0 million ($6.9 million net of taxes) in transaction costs associated with a proposed agreement to merge with affiliates of Bain. These fees consist primarily of fees earned by financial advisors and attorneys as well as other costs directly attributable to this transaction.

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	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
	(In thousands except per share data)
2006:
Revenue	$	169,139	$	175,232	$	172,199	$	181,295
Gross profit		32,905		35,292		33,311		36,766
Amortization		610		751		857		1,158
Operating income		17,110		18,706		17,187		18,660
Income before taxes		17,228		18,785		17,030		18,224
Net income		9,990		10,875		9,899		10,959
Basic earnings per share	$	0.37	$	0.41	$	0.38	$	0.42
Diluted earnings per share	$	0.36	$	0.40	$	0.37	$	0.41

The Company’s revenue and results of operations fluctuate with the seasonal demands for child care. Revenue in our early care and education centers that have mature operating levels typically declines during the third quarter as a result of decreased enrollments over the summer months as parents withdraw their children for vacations or have alternative child care arrangements, as well as older children transitioning into elementary schools. The Company’s schools are also subject to the same cyclicality as the schools are not in session during the summer months, which contributes to the decrease in revenue. Demand for the Company’s child care and education services generally increases in September and October to normal enrollment levels upon the beginning of the new school year and remains relatively stable throughout the rest of the school year. In addition, usage for the Company’s back-up services, including BUCA, tends to be higher when school is not in session and during holiday periods, which can increase the operating costs of the program which impacts the results of operations. Results of operations may also fluctuate from quarter to quarter as a result of, among other things, the performance of existing centers that may include enrollment and staffing fluctuations, the number and timing of new center openings and/or acquisitions, the length of time required for new centers to achieve profitability, center closings, refurbishment or relocation, the contract model mix (P&L vs. Cost Plus) of new and existing centers, the timing and level of sponsorship payments, competitive factors, and general economic conditions.

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

None.

ITEM 9A. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Bright Horizons maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure.

Under the supervision of and with the participation of the Company’s Disclosure Committee and management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined under Rules 13a-15(b), promulgated under the Exchange Act. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective, as of December 31, 2007 (the end of the period covered by this Annual Report on Form 10-K).

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The 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 U.S. generally accepted accounting principles. The 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

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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 all 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.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007, using the framework specified in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on such assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2007.

Management has excluded from its assessment of internal control over financial reporting as of December 31, 2007 the two businesses acquired during fiscal year 2007 whose financial statements constitute less than 1% of net and total assets, revenues, and net income of the consolidated financial statement amounts as of and for the year ended December 31, 2007.

Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report on the Company’s internal control over financial reporting.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes to the Company’s internal control over financial reporting that occurred during the fourth quarter of 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Bright Horizons Family Solutions, Inc.
Watertown, Massachusetts

We have audited the internal control over financial reporting of Bright Horizons Family Solutions, Inc. and subsidiaries (the “Company”) 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. As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at two businesses acquired during fiscal year 2007 and whose financial statements constitute less than 1% of net and total assets, revenues, and net income of the consolidated financial statement amounts as of and for the year ended December 31, 2007.  Accordingly, our audit did not include the internal control over financial reporting at the two acquired businesses. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s 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.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions

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of the assets of the company; (2) 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 (3) 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 the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2007 of the Company and our report dated February 29, 2008 expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph relating to the adoption of Financial Accounting Standards Board Interpretation No. 48 “Accounting for Uncertainty in Income Taxes”, effective January 1, 2007.

/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 29, 2008

ITEM 9B. Other Information

None.

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PART III

ITEM 10. Directors, Executive Officers and Corporate Governance

Our Board of Directors is divided into three classes (Class I, Class II and Class III). At each annual meeting of stockholders, directors constituting one class are elected for a three-year term. Our Certificate of Incorporation provides that each class shall consist, as nearly as possible, of one-third of the total number of directors constituting the entire Board. The Company’s bylaws provide for a Board consisting of thirteen members. The positions held by each Director and Officer on December 31, 2007 are shown below. Pursuant to General Instruction G(3), certain information required with respect to persons who are or may be deemed to be executive officers of the Company is set forth in Part I, Item 1 of this Annual Report on Form 10-K under the caption “Executive Officers of the Company”. Roger H. Brown and Linda A. Mason are married to one another. There are no additional family relationships among the following persons.

The following is a description of the business experience during the past five years of each Director.

Directors Continuing in Office
CLASS I DIRECTORS
(Terms Expire in 2008)

Joshua Bekenstein Age 49

Joshua Bekenstein has served as a director of the Company since its inception in 1998. Mr. Bekenstein joined Bain Capital, LLC, a private investment firm, at its inception in 1984 and became a managing director in 1986. Mr. Bekenstein serves as a director of Waters Corporation, a manufacturer and distributor of high performance liquid chromatography instruments, and is a member of the Waters Compensation Committee. Mr. Bekenstein is also a director of Michaels Stores, Inc., the nation’s largest specialty retailer of arts and crafts materials, Toys “R” Us, the world’s leading dedicated toy and baby products retailer and Burlington Coat Factory, a national chain of retail apparel stores.

JoAnne Brandes Age 54

JoAnne Brandes has served as a director of the Company since its inception in 1998. Ms. Brandes served as Executive Vice President, Chief Administrative Officer and General Counsel for JohnsonDiversey, Inc. (formerly Johnson Wax Professional), a manufacturer and marketer of cleaning and sanitation products and services, from December 2002 until February 2007. From October 1997 until December 2002, Ms. Brandes served as Senior Vice President and General Counsel of S.C. Johnson Commercial Markets, Inc. Ms. Brandes serves as a director of Optique Funds Inc. (formerly JohnsonFamily Funds, Inc.), a mutual fund, and Andersen Corporation, a manufacturer of doors and windows, and is also a Regent Emeritus in the University of Wisconsin System Board of Regents.

Roger H. Brown Age 51

Roger H. Brown has served as a director of the Company since its inception in 1998 and has also served as Vice Chair of the Board since June 2004. Mr. Brown has served as President of Berklee College of Music since June 2004. Mr. Brown was Chief Executive Officer of the Company from June 1999 until December 2001, President of the Company from July 1998 until May 2000 and Executive Chairman of the Company from June 2000 until June 2004. Mr. Brown co-founded Bright Horizons and served as Chairman and Chief Executive Officer of Bright Horizons from its inception in 1986 until the merger with CorporateFamily Solutions in July 1998. Prior to 1986, he worked as a management consultant for Bain & Company, Inc. Mr. Brown currently serves as a director of Horizons for Homeless Children, a non-profit that provides support for children and their families, and StonyField Farm, Inc., an organic food company. Mr. Brown is the husband of Linda A. Mason.

Marguerite W. Kondracke Age 62

Marguerite W. Kondracke was elected as a director of the Company in December 2004. Ms. Kondracke previously served as director of the Company from 1998 to March 2003. Ms. Kondracke also served as Chief Executive Officer of the Company from 1998 until May 1999 and Co-Chair of the Board of the Company from May 1999 to December 2001. Ms. Kondracke has served as President and Chief Executive Officer of America’s Promise — The Alliance for Youth, since October 2004. From March 2003 until September 2004, Ms. Kondracke was Staff Director for the U.S. Senate Subcommittee on Children and Families. Ms. Kondracke served as President and Chief Executive Officer of The Brown Schools, Inc, a national provider of educational and treatment services, from August 2001 until March 2003. From July

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1999 until August 2001, Ms. Kondracke was the Chief Executive Officer of Frontline Group, Inc., a corporate training company. Ms. Kondracke was a founder of CorporateFamily Solutions, Inc., and served as President, Chief Executive Officer and a director of CorporateFamily Solutions from February 1987 until the merger with Bright Horizons, Inc. in July 1998. Ms. Kondracke is a member of the Board of Trustees of Duke University and is a director of Saks Incorporated, an owner and operator of department stores, and LifePoint Hospitals, Inc., an operator of community hospitals. Ms. Kondracke serves on the compensation committees of both Saks and LifePoint.

CLASS II DIRECTORS
(Terms Expire in 2009)

E. Townes Duncan Age 54

E. Townes Duncan has served as a director of the Company since its inception in 1998. Mr. Duncan has served as the President of Solidus Company, a private investment firm, since January 1997. From November 1993 to May 1997, Mr. Duncan served as Chairman of the Board and Chief Executive Officer of Comptronix Corporation, a provider of electronics contract manufacturing services. From May 1985 to November 1993, Mr. Duncan was a Vice President and principal of Massey Burch Investment Group, Inc., a venture capital corporation. Mr. Duncan is also a director of J. Alexander’s Corporation, an owner and operator of restaurants.

David Gergen Age 65

David Gergen has served as director of the Company since May 2004. Mr. Gergen has served as editor-at-large at U.S. News & World Report since 1986. He is a professor of public service and the director of the Center for Public Leadership at the Harvard University John F. Kennedy School of Government. Mr. Gergen also regularly serves as an analyst and commentator on various news shows, and he is a frequent lecturer at venues around the world. Mr. Gergen is a member of the Board of Trustees of Duke University and City Year.

Gabrielle E. Greene Age 47

Gabrielle E. Greene has served as a director of the Company since August 2006. Ms. Greene has served as a principal of Rustic Canyon/Fontis Partners, LP, a diversified investment fund, since its inception in October 2005. Ms. Greene was Chief Financial Officer of Gluecode Software, an open source application infrastructure company, from June 2004 to August 2006. From January 2001 to June 2004, Ms. Greene served as Chief Financial Officer of Villanueva Holdings Investments, a private holding company. Ms. Greene is also a director of Whole Foods Market, Inc., an owner and operator of natural and organic food supermarkets, and IndyMac Bank, F.S.B., the seventh-largest savings and loan in the United States.

Sara Lawrence-Lightfoot Age 63

Dr. Sara Lawrence-Lightfoot has served as a director of the Company since its inception in 1998. Since 1971, Dr. Lawrence-Lightfoot has been a professor of education at Harvard University. She is also a director and Chairman of the Board of the John D. and Catherine T. MacArthur Foundation, and a Trustee of the Berklee College of Music. Dr. Lawrence-Lightfoot has received honorary degrees from sixteen universities and colleges including Bank Street College and Wheelock College, two of the nation’s foremost schools of early childhood education.

David H. Lissy Age 42

This information is provided in Part I, Item 1 of this Annual Report on Form 10-K under the caption “Executive Officers of the Company”.

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CLASS III DIRECTORS
(Terms Expire in 2010)

Fred K. Foulkes Age 66

Professor Fred K. Foulkes has served as a director of the Company since its inception in 1998. Professor Foulkes has been a professor of organizational behavior and the Director of the Human Resources Policy Institute for Boston University School of Management since 1981, and has taught courses in human resource management and strategic management at Boston University since 1980. Professor Foulkes is a recipient of the Employment Management Association Award and the Fellow Award, the National Academy of Human Resources award of distinction for outstanding achievement in the human resource profession. Professor Foulkes is a director of Panera Bread Company, an owner and franchisor of bakeries and cafes, and Chair of the Panera Compensation Committee.

Linda A. Mason Age 53

This information is provided in Part I, Item 1 of this Annual Report Form on 10-K under the caption “Executive Officers of the Company”.

Ian M. Rolland Age 74

Ian M. Rolland has served as a director of the Company since September 1998. Mr. Rolland was Chairman and Chief Executive Officer of Lincoln National Corporation, a provider of life insurance and annuities, property-casualty insurance and related services through its subsidiary companies, from 1992 until July 1998. Mr. Rolland is a director and Chairman of the Board of NiSource, Inc., an energy and utility holding company.

Mary Ann Tocio Age 59

This information is provided in Part I, Item 1 of this Annual Report on Form 10-K under the caption “Executive Officers of the Company”.

Audit Committee and Audit Committee Financial Expert

The Company’s separately designated standing Audit Committee, established in accordance with Section 3(a)(58)(A) of the Exchange Act, is responsible for making recommendations to the Board concerning our financial statements and the appointment of our independent auditor, reviewing significant audit and accounting policies and practices, meeting with our independent auditor concerning, among other things, the scope of audits and reports, and reviewing the performance of our overall accounting and financial controls. The members of the Audit Committee are Ian M. Rolland (chair), JoAnne Brandes, E. Townes Duncan and Gabrielle E. Greene. The Board has determined that each member of the Audit Committee is “independent” as that term is used in SEC rules promulgated under applicable Exchange Act and Financial Industry Regulatory Authority (“FINRA”) rules. The Board has also determined that each of Mr. Rolland, Mr. Duncan and Ms. Greene qualifies as an “Audit Committee Financial Expert” as defined by Item 407(d)(5)(ii) of Regulation S-K under the Exchange Act.

Code of Ethics

The Company’s Board of Directors has adopted a Code of Conduct and Business Ethics applicable to the Company’s employees, officers (including the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer), and members of the Board of Directors. The Code of Conduct and Business Ethics is publicly available on the Company’s website at www.brighthorizons.com. We will also provide a copy of this document, without charge, upon request made by writing to Mr. Stephen Dreier, Secretary, Bright Horizons Family Solutions, Inc., 200 Talcott Avenue South, Watertown, Massachusetts 02472 or by calling us at (617) 673-8000. If the Company makes any substantive amendments to the Code of Conduct and Business Ethics or grants any waiver, including any implicit waiver, from a provision of the Code of Conduct and Business Ethics to the Company’s officers, including the Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer, the Company will disclose the nature of such amendment or waiver on that website or in a report on Form 8-K.

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Section 16(a) Beneficial Ownership Reporting Compliance

The federal securities laws require our directors and executive officers, and persons who own more than 10% of our capital stock, to file initial reports of ownership and reports of changes in ownership of any of our securities with the SEC, the NASDAQ and the Company.

Based solely upon a review of filings with the SEC and written representations that no other reports were required, we believe that all of our directors and executive officers complied during 2007 with their reporting requirements.

ITEM 11. Executive Compensation

Compensation Discussion and Analysis

Summary

• Our executive compensation program is designed to attract, retain and motivate high-quality leadership and to provide incentive and reward for contributions to the Company’s financial and operational performance by its leadership team.

• The elements of our executive compensation program are base salary, annual non-equity incentive compensation (cash bonuses), long-term equity incentive compensation and other compensation (perks).

• Our philosophical approach to executive compensation is to maintain a conservative level of base pay and cash incentive awards and other benefits, and to focus more emphasis upon longer-term equity incentive grants. We believe this approach helps to promote a longer-term view of our Company’s performance and is also more closely aligned with the interests of our shareholders.

• In December 2007, Danroy T. Henry was elected Chief Human Resources Officer and became an executive officer of the Company. As such, the Compensation Committee’s reviews, evaluations, recommendations and decisions during 2007 did not include the compensation of the Chief Human Resources Officer until that time.

• Based on our executive officers’ performance and the overall performance of the Company, for 2007 the Compensation Committee approved base salary increases for our executive officers ranging from 4% to 5.3% and awarded each executive officer their full targeted annual bonus. The Compensation Committee also awarded our Chief Executive Officer and President & Chief Operating Officer the full amount of their incremental bonus potential based on their performance, and awarded incremental bonuses to our Chief Financial Officer and our Chief Administrative Officer in recognition of high level of service during 2007.

• The Compensation Committee also approved long-term cash incentive awards based on 2007 performance in lieu of annual long-term equity awards in light of the proposed Merger with Bain and specific provisions within the Merger Agreement impacting on our ability to issue equity grants.

• Finally, the Compensation Committee approved annual salary increases for 2008 of 4% for all of our executive officers.

Objectives of Our Compensation Program

Our executive compensation program is designed to attract, retain and motivate high-quality leadership. Our compensation program is also designed to provide incentive and reward for contributions to the Company’s financial and operational performance, and to promote equity ownership among our executive officers in order to balance long-term organizational and stockholder interests and build stockholder value.

The Compensation Committee of our Board of Directors (the “Committee”) is responsible for establishing and reviewing the Company’s executive compensation and incentive policies and practices and determining the compensation levels for the executive officers. The Committee operates under a written charter, which is available on our website – www.brighthorizons.com - under “Corporate Information” in the Investor Relations section. No material revisions were made to the Committee’s charter during the last fiscal year.

In setting and reviewing compensation for the executive officers, the Committee considers several different factors designed to assure that compensation levels are properly aligned with the Company’s business strategy, corporate culture and operating performance. The major factors considered in developing our compensation program and making compensation decisions regarding our executive officers are:

• Pay for Performance - The Committee believes that compensation should be in part directly linked to operating performance. To achieve this link with regard to short-term performance, the Committee has

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	relied upon base salary adjustments, and upon cash incentive awards that have been determined on the basis of certain objective and subjective targets and goals for both Company and individual performance.
•	Equity Ownership - The Committee believes that an integral part of the executive compensation program at the Company is equity-based compensation plans which encourage and create ownership of the Company’s stock by its executives, thereby aligning more closely executives’ long-term interests with those of the stockholders. These long-term incentive programs are principally reflected in the Company’s stock-based incentive plans. The Committee believes that significant stock ownership is a major incentive in building stockholder value and reviews awards of equity-based incentives with that goal in mind.
•	Comparability - In order to maintain a competitive compensation package, the Committee considers the compensation packages of similarly situated executives at companies deemed to have similar operating or industry characteristics, including market capitalization, multi-site operations and/or retail and child care focus. At the time of the last comparison, this group of companies included Learning Care Group (formerly Childtime Learning Centers), KinderCare Learning Centers, Apollo Group, Career Education Corp., Education Management Corp., Corinthian Colleges, Laureate Education, Ceridian, Volume Services America, Pediatrix, Kforce, Cross Country Healthcare, BISYS, Comforce, Aeropostale and Yankee Candle. While the operating or industry characteristics of these companies provide meaningful comparisons for evaluating and comparing executive compensation, for the most part these companies are not considered to be peer companies within our industry. Therefore, this comparison group differs significantly from the peer group we use in our cumulative total stockholder return performance chart.
•	Qualitative Factors - In setting and reviewing executive compensation the Committee believes that, in addition to corporate performance and specific division performance, it is also appropriate to consider the personal contributions that a particular individual makes to the success of the corporate enterprise. Such qualitative factors as leadership skills, planning initiatives, development skills, public affairs and civic involvement have been deemed to be important qualitative factors to take into account in considering levels of compensation.

In connection with its work, the Committee has retained an independent compensation consulting firm, W.T. Haigh & Company, to assist in the evaluation of our practices and to provide advice in developing and implementing our executive compensation program.

What our Compensation Program is Designed to Reward

Our executive compensation program is designed to reward executive officers based upon the Company’s annual operating and financial performance and resulting longer-term increases in stockholder value. Our program is also designed to recognize and reward executive officers’ individual contributions to the Company’s overall performance. Our executive officers’ performance is evaluated based upon a series of goals and objectives set at the beginning of each year and formally evaluated after the end of each year. While the individual goals and objectives vary with the unique responsibilities of each executive officer, their goals and objectives are designed to provide an objective and subjective evaluation of the following leadership and business factors:

• Financial objectives and results

• Growth

• Leadership skills and strategic vision

• Strategic planning and execution

• Customer satisfaction

• Culture and employee satisfaction

• Innovation and change

• Succession planning

• Communications

• External relations, public affairs and civic involvement

• Board relations/presentations

• Ethics/values

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Elements of Compensation and Our Review Process

Elements of Compensation:

In structuring our compensation program, the Committee evaluates internal equity considerations, competitive practices and benchmarking against a comparison group of companies deemed to have similar operating or industry characteristics, and the requirements of the appropriate regulatory bodies. In addition, the Committee seeks to balance short-term performance incentives, such as salary and cash incentive awards, and long-term incentives, such as equity-based grants that vest over time, in order to arrive at a total compensation program that promotes the attainment of annual operating and financial goals as well as long-term strategic performance. The elements of our compensation program are base salary, annual non-equity incentive compensation, long-term equity incentive compensation and other compensation.

Base Salary. Base salaries for our executive officers are determined by the scope of each officer’s responsibilities along with their respective experience and the contributions, taking into account the competitive market compensation paid by other comparable companies for similar positions.

It is our philosophy to maintain a conservative level of base compensation in comparison to our peer comparison group, with more emphasis placed on variable, performance based elements of compensation. Base salaries are reviewed periodically and adjusted relative to market levels and individual performance. For 2007, base salaries for our executive officers were adjusted by 4% in line with increases awarded for the Company’s employees as a whole, with the exception of the salary of our Chief Financial Officer which was adjusted by 5.3%. In addition, the annual salary for the Chair is prorated each year based upon her part-time schedule as deemed appropriate to each year by the Committee.

Annual Non-Equity Incentive. Our annual non-equity, cash incentive plan provides for a cash incentive award based upon the level of achievement of targeted corporate goals along with each executive officer’s individual performance. Cash incentive awards are designed to motivate our executive officers in meeting or exceeding annual performance targets. Cash incentive awards are based upon a targeted percentage of each officer’s base salary and are established for each officer based upon their scope of responsibilities and their potential contributions to the obtainment of the corporate goals. Targeted award levels take into account the conservative level of base salaries and are designed to provide our officers the opportunity to significantly supplement their base salaries based upon their individual and collective performance.

For 2007 both the Chief Executive Officer and the President & Chief Operating Officer were assigned targeted cash incentive awards of 80% of base salary with an additional 40% of base salary (or 120% of base salary in total) for significant out-performance of financial targets and expectations, and an additional +/-20% discretionary adjustment to the total cash incentive payment based upon a qualitative assessment of their performance by the Compensation Committee. For 2007 the targeted cash incentive awards as a percentage of base salary were set at 60% for the Chief Financial Officer and 35% for the Chief Administrative Officer. After a review and evaluation of the Company’s results for 2007, these four executive officers received their full base bonus for 2007. In addition, the Chief Executive officer and the President & Chief Operating Officer also received the full incremental 40% bonus, and the Chief Financial Officer and the Chief Administrative Officer received incremental bonuses of $40,000 and $20,000 respectively based on their level of service during 2007.

The annual cash incentive payment for the Chair is prorated each year along with her salary based upon her part-time schedule appropriate to each year; thus, no targeted percentage of base salary is assigned in advance. For 2007, the Chair was awarded a bonus of $36,000, 50% of her salary, based on a qualitative review of her service and performance during the year.

Long-Term Equity Incentive Program. The largest single component of our executive compensation program is the granting of long-term, equity-based incentives to executive officers. This long-term equity incentive component approximates one-half of our executives’ annual compensation in keeping with the stated philosophy of maintaining a conservative level of base pay and cash incentive awards and focusing more emphasis upon variable, performance based elements of compensation.

In 2005 the Committee adopted an annual equity compensation plan (the “equity plan”) for the Chief Executive Officer, the President & Chief Operating Officer, the Chief Financial Officer and the Chief Administrative Officer. This equity plan was developed with the assistance of our outside, independent executive compensation consulting firm to align more closely the executive officers’ interests with the Company’s long-term strategic and operational results and the creation of stockholder value. Under the equity plan, the executive officers are offered a choice of three equity alternatives:

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(1)	non-qualified stock options granted with an exercise price equal to the market price of the underlying stock at the date of grant (“stock options”);
(2)	restricted stock granted with no purchase price (“restricted stock”); or
(3)	restricted stock with a purchase price equal to 50% of the market price of the underlying stock at the date of grant (“purchased restricted stock”).

Each of the three equity alternatives vests 100% at the end of a three-year term and the stock options expire at the end of seven years. There are no other future conditions or metrics associated with these long-term incentive grants outside of the required vesting periods. Each executive officer included in the plan may elect to choose one of the three equity alternatives or a combination of the equity alternatives by allocating a percentage among the three equity alternatives (up to 100%); provided, however, that no executive officer could allocate more than 50% of his or her award to restricted stock.

Under the equity plan, the Committee sets a targeted total dollar value for each executive officer’s long-term equity incentive based upon the officer’s overall performance for the previous year and expectations for future performance. Each share available under the three equity alternatives is assigned a weighted, risk-adjusted value and the Committee then sets a maximum number of shares available to each officer for each equity alternative designed to equal the targeted total dollar value for each officer. Within these guidelines, the officers then chose their own individual allocation within the maximum number of shares available under each alternative. By design, each executive officer’s selection will result in a total weighted average dollar value that equals the total weighted dollar value set by the committee for that executive officer. The “choice” aspect of the plan is designed to allow the Committee to set the targeted total dollar value for long-term equity incentive while allowing the officers to select the underlying equity components tailored to their individual financial and career-stage considerations.

In evaluating the equity plan awards for 2007 performance, the Committee considered the fact that the Company is currently restricted from granting equity awards by the previously disclosed Merger Agreement with affiliates of Bain. At a meeting in January 2008, in lieu of the annual equity plan awards normally granted under the choice plan, and because of the limitations placed on the Company in connection with the Merger, the Committee approved cash awards to certain of the Company’s executive officers in the amounts set forth below based on the Company’s 2007 operating and financial performance, along with each officer’s individual contributions:

Executive Officer	Amount
David H. Lissy	$	589,000
Mary Ann Tocio	$	589,000
Elizabeth J. Boland	$	253,000
Stephen I. Dreier	$	185,732

In keeping with the original intent of the equity plan, which is to foster a longer-term view and dedication to the company, these cash awards will not vest and become payable for a period of three years. The Committee further decided to make these awards contingent upon the closing of the Merger, or a merger with any other successful party during the “go-shop” period contemplated by the Merger Agreement. In the event that a merger transaction is not completed, the Committee will take the appropriate action to review the long term incentive awards to executives otherwise contemplated by the existing equity choice plan and this cash award in lieu of equity for the 2008 annual equity awards to executives.

Other Compensation. In keeping with our pay-for-performance philosophy, we provide modest benefits and perquisites for our executive officers. Most of these benefits and perquisites, such as our 401(k) match and basic medical/disability/life insurance coverage, are available to all employees. In addition, our Chief Executive Officer and President & Chief Operating Officer are granted a car allowance each year, while all executive officers, with the exception of the Chief Human Resources Officer, have supplemental disability insurance and, with the exception of the Chair, also have change in control and non-compete agreements with the Company. We believe that change of control arrangements provide an executive security that will likely reduce the reluctance of an executive to pursue a change in control transaction that could be in the best interests of our stockholders. We also believe that reasonable severance and change in control benefits are necessary in order to attract and retain executive officers. However, when assessing annual compensation the Committee typically does not consider the value of potential severance and change in control payments as these payouts are contingent and have primary purposes unrelated to ordinary compensation matters.

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Stock Ownership Guidelines. It is expected that certain executive officers will acquire and maintain a significant ownership in the Company’s stock, as measured by the market value of shares owned by them. We have adopted guidelines that outline the minimum expected stock ownership by the following executive officers:

Position	Multiple of Base Salary
Chief Executive Officer		3x
President & Chief Operating Officer		3x
Chief Financial Officer		2x
Chief Administrative Officer		2x

Each of the above officers currently owns shares valued in excess of the minimum ownership guidelines. For new executives hired into any of these positions, these guidelines are expected to be met by the end of their third year of employment with the Company.

Our Performance Review and Evaluation Process:

Determination and Timing of Awards. The cash incentive and equity incentive award components of the Company’s compensation plan are determined during the first quarter of each fiscal year. This timing allows the Committee and the Board to fully review and assess the previous calendar year’s performance of the executive team and to set targets and goals for the coming year. The exercise price of option awards and the purchase price of purchased stock awards are set by policy of the Committee as the closing price on the grant date of the award. The grant dates of awards are determined by the Committee and are set at either the date of the Committee meeting, or a future date depending on the amount of time the Committee believes is reasonable to allow the executive officers to elect their allocation decisions under the Company’s equity choice plan as previously discussed.

The granting of equity incentive awards are coordinated with the Company’s release of quarterly and annual financial results, and grant dates are set to allow for the release of material information prior to the grant dates of these option and stock awards. In 2007, the release date of the Company’s fourth quarter and full year financial results was February 15, 2007, and the grant date of the option and stock awards for the executive officers was February 20, 2007.

The size of equity awards granted to executive officers is not impacted by the timing of the grants. Rather, the Committee’s determination of the risk-adjusted value of each equity alternative and the maximum amount of each equity alternative available is based upon the previous year’s average share price and is made prior to the grant date of the options and stock awards.

Performance Review and Evaluation.

Chief Executive Officer and President & Chief Operating Officer: The Committee uses a multi-step process to formally review the performance of the Chief Executive Officer and the President & Chief Operating Officer. The first step in the process is a self-assessment completed by the officers and distributed to all directors, including the Chair and Vice Chair. The directors then undertake a review and evaluation of the officers and provide their assessment and feedback to the Compensation Committee. This written review and evaluation is based upon the leadership and business factors outlined previously and allows for both objective and subjective review and performance evaluation. Based upon these evaluations, the Committee then reviews and evaluates the performance of the officers, both with and without the officers present, and makes adjustments to base pay as deemed necessary and earned, and also decides the level of performance or out-performance for the officers and the corresponding level of cash incentive award earned and the dollar value of long-term equity incentive compensation.

Chair: The Committee reviews and evaluates the performance of the Chair. Based upon the outcome of this review and evaluation, the Committee makes adjustments to her base pay as deemed necessary and earned, and also decides the level of performance or out-performance and the corresponding level of cash incentive award earned and amount and form of long-term incentive compensation. Other than the cash award made for 2007 in light of the previously discussed proposed Merger, since 2005 the Chair’s long-term equity incentive compensation has been granted in the form of stock options.

Chief Financial Officer and Chief Administrative Officer: The Committee reviews and evaluates the performance of the Chief Financial Officer and the Chief Administrative Officer, and approves adjustments to their base pay as deemed necessary and earned. The Committee also approves the level of performance or out-performance for the officers and their

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corresponding level of cash incentive award earned and the weighted dollar value of their long-term incentive compensation. In exercising its authority, the Committee consults with the Chief Executive Officer.

Actions Taken in the First Quarter of 2008

Salaries: On January 24, 2008, after consideration of presentations and recommendations of management and independent compensation consultants, and such other matters and information as deemed appropriate, the Committee set the following salaries for 2008 for the following executive officers set forth in the table below, each representing a 4% increase over 2007 base compensation levels:

Executive Officer	Title	2008 Salary
David H. Lissy	Chief Executive Officer	$	322,400
Mary Ann Tocio	President & Chief Operating Officer	$	322,400
Elizabeth J. Boland	Chief Financial Officer	$	239,200
Stephen I. Dreier	Chief Administrative Officer	$	214,656
Linda A. Mason (1)	Chair	$	74,880

(1) Represents Ms. Mason’s estimated prorated annual salary based upon her expected part-time schedule for 2008.

Danroy T. Henry was appointed to his current position as Chief Human Resources Officer in December 2007, and his annual salary was set at $215,000 in connection with this promotion. The Compensation Committee took no action to modify this salary at the January 24, 2008 meeting.

Cash Incentive Plan. The Committee adopted a cash incentive plan for the following named executive officers for 2008 similar to the 2007 cash incentive plan. Pursuant to the cash incentive plan, each named executive officer is eligible for an annual target cash bonus award equal to the percentage of annual salary set forth in the table below (the “Base Bonus”). In addition to the Base Bonus, the Chief Executive Officer and President & Chief Operating Officer are eligible to receive up to 150% of the Base Bonus for significant overachievement of performance expectations (the “Incremental Bonus”), providing the Chief Executive Officer and President & Chief Operating Officer with a maximum bonus potential of up to 120% of their annual salary, with an additional +/-20% discretionary adjustment to the total cash incentive payment based upon a qualitative assessment of their performance by the Compensation Committee.

				Incremental
				Bonus
	Base Bonus			(% of 2008			Qualitative Bonus
Executive Officer	(% of 2008 Salary)			Salary)			(% of Total Bonus)
David H. Lissy		80	%		40	%		+/- 20	%
Mary Ann Tocio		80	%		40	%		+/- 20	%
Elizabeth J. Boland		60	%	Discretionary				N/A
Stephen I. Dreier		35	%	Discretionary				N/A
Danroy T. Henry		35	%	Discretionary				N/A

Impact of Accounting and Tax Treatment

Section 162(m) of the Internal Revenue Code of 1986, enacted as part of the Omnibus Budget Reconciliation Act in 1993, generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to the Company’s Chief Executive Officer and four other most highly compensated executive officers. Compensation paid to these officers in excess of $1,000,000 that is not performance-based cannot be claimed by the Company as a tax deduction. The Compensation Committee believes it is appropriate to take into account the $1,000,000 limit on the deductibility of executive compensation and to seek to qualify executive compensation awards as performance-based compensation excluded from the $1,000,000 limit. Stock options and certain other equity-based incentives granted under the Company’s stock incentive plans qualify as performance-based compensation. None of the executive officers received compensation in 2007 that would exceed the $1,000,000 limit on deductibility. The Committee has not determined whether it will approve any compensation arrangements that will cause the $1,000,000 limit to be exceeded in the future.

Compensation Committee Interlocks and Insider Participation

During fiscal 2007, the Compensation Committee of the Board of Directors was composed of Fred K. Foulkes (Chair), Joshua Bekenstein and E. Townes Duncan. None of these persons has at any time been an officer or employee of the Company or any of its subsidiaries. In addition, there are no relationships among our executive officers, members of the Compensation Committee or entities whose executives serve on the Board or the Compensation Committee that require disclosure under applicable SEC regulations.

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As previously discussed, in light of the previously announced Merger Agreement between the Company and affiliates of Bain, Joshua Bekenstein was recused from all discussions regarding the review and evaluation of our executive officers’ 2007 compensation and the resulting compensation decisions made by the Committee.

Compensation Committee Report

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Annual Report.

In recognition of the previously announced Merger Agreement between Bright Horizons and affiliates of Bain, Joshua Bekenstein, a member of the Compensation Committee, was recused from all discussions regarding the review and evaluation of our executive officers’ 2007 compensation and the resulting compensation decisions made by the Committee.

Fred K. Foulkes, Chair
Joshua Bekenstein
E. Townes Duncan

74

2007 Summary Compensation Table

The following table sets forth information concerning total compensation paid or earned by our named executive officers. Based on the dollar amount recognized for financial statement reporting purposes for equity incentives for the fiscal year ended December 31, 2007, “Salary” accounted for approximately 24% of the total compensation of the Named Executive Officers, “Non-Equity Incentive Compensation” accounted for approximately 23% of the total compensation of the Named Executive Officers, “Equity Incentive Compensation” accounted for approximately 52% of the total compensation of the Named Executive Officers and “All Other Compensation” accounted for approximately 1% of the total compensation of the Named Executive Officers.

													Change in
													Pension Value
													and Non-
											Non-Equity		Qualified
							Stock		Option		Incentive Plan		Deferred		All Other
							Awards		Awards		Compensation		Compensation		Compensation
			Salary ($)		Bonus		($)		($)		($)		Earnings		($)		Total
Name and Principal Position	Year		(1)		($)		(2)		(2)		(3)		($)		(4)		($)
David H. Lissy		2007	$	310,000		—	$	243,944	$	619,457	$	372,000		—	$	13,388	$	1,558,789
Chief Executive Officer		2006	$	298,000		—	$	204,661	$	495,157	$	400,000		—	$	13,262	$	1,411,080
Mary Ann Tocio		2007	$	310,000		—	$	332,749	$	419,708	$	372,000		—	$	15,955	$	1,450,412
President and Chief Operating Officer		2006	$	298,000		—	$	210,422	$	388,972	$	400,000		—	$	15,760	$	1,313,154
Elizabeth J. Boland		2007	$	230,000		—	$	227,593	$	171,919	$	178,000		—	$	5,335	$	812,847
Chief Financial Officer and Treasurer		2006	$	218,400		—	$	120,763	$	169,158	$	120,000		—	$	3,736	$	632,057
Stephen I. Dreier		2007	$	206,400		—	$	161,583	$	95,915	$	92,225		—	$	10,084	$	566,207
Chief Administrative Officer and Secretary		2006	$	198,432		—	$	112,452	$	68,506	$	70,000		—	$	7,750	$	457,140
Danroy T. Henry		2007	$	204,000			$	17,461	$	52,547	$	63,815		—		—	$	337,823
Chief Human Resources Officer
Linda A. Mason (5)		2007	$	72,000		—	$	8,496	$	114,179	$	36,000		—	$	1,853	$	232,528
Chair of the Board		2006	$	69,500		—	$	14,789	$	73,193	$	36,000		—	$	2,928	$	196,410

(1)	Salaries include amounts deferred by the named employee under our 401(k) plan.
(2)	Amounts shown reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007 and 2006 in accordance with Statement of Financial Accounting Standards (“SFAS”) 123R and according include the expense of awards granted in and prior to 2007. Assumptions used in the calculation of these amounts are included in Note 11. “Stockholders’ Equity and Stock-Based Compensation” to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
(3)	Reflects the cash amount paid to the named employee under our annual cash incentive plan as outlined in the Elements of Compensation section of the Compensation Discussion and Analysis.
(4)	Amounts shown include: a) matching contributions made to the 401(K) plan on behalf of the employee; b) a car allowance payment made to Mr. Lissy and Ms. Tocio; c) supplemental disability insurance premiums, d) the portion of health insurance premiums typically paid by an employee but which is paid by us on behalf of Mr. Dreier. The details of the payments are as follows:

							Supple.
			401(k)		Car		Disability		Health
Name	Year		Match		Allowance		Ins.		Ins.		Total
David H. Lissy		2007		3,875		7,200		2,313		—		13,388
		2006		3,750		7,200		2,312		—		13,262
Mary Ann Tocio		2007		4,601		7,200		4,154		—		15,955
		2006		4,406		7,200		4,154		—		15,760
Elizabeth J. Boland		2007		3,875		—		1,460		—		5,335
		2006		2,276		—		1,460		—		3,736
Stephen I. Dreier		2007		2,679		—		1,584		5,821		10,084
		2006		3,270		—		1,584		2,896		7,750
Danroy T. Henry		2007		—		—		—		—		—
Linda A. Mason		2007		1,853		—		—		—		1,853
		2006		2,928		—		—		—		2,928

(5) Although Ms. Mason is not a “named executive officer” as defined in Item 402(a)(3) of Regulation S-K and is a director of the Company, she receives compensation solely in her capacity as an executive officer rather than as a director. As such, the Company believes that the presentation of Ms. Mason’s compensation is more appropriately presented and readily understood along with that of the other executive officers rather than that of the non-executive members of the board of directors under “Director Compensation”.

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2007 Grants of Plan-Based Awards

The following table sets forth information regarding grants of plan-based awards in 2007.

																	All Other			All Other
																	Stock			Option				Grant Date
																	Awards:			Awards:		Exercise or		Fair Value
																	Number of			Number of		Base Price		of Stock and
					Estimated Possible Payouts Under						Estimated Possible Payouts Under						Shares of			Securities		of Option		Option
					Non-Equity Incentive Plan Awards						Equity Incentive Plan Awards						Stock or			Underlying		Awards		Awards
			Approval		Threshold		Target		Maximum		Threshold		Target		Maximum		Units			Options		($/Sh)		($)
Name	Grant Date		Date		($)		($)		($)		(#)		(#)		(#)		(#)			(#)		(1)		(2)
David H. Lissy		02/20/07		02/06/07		—		—		—		—		—		—		4,440						$	185,947
		02/20/07		02/06/07		—		—		—		—		—		—					28,800	$	41.88	$	515,246
		N/A				—	$	248,000	$	446,400		—		—		—
Mary Ann Tocio		02/20/07		02/06/07		—		—		—		—		—		—		16,675	(3)					$	465,392
		02/20/07		02/06/07		—		—		—		—		—		—					12,000	$	41.88	$	214,686
		N/A				—	$	248,000	$	446,400		—		—		—
Elizabeth J. Boland		02/20/07		02/06/07		—		—		—		—		—		—		18,900	(3)					$	395,766
		02/20/07		02/06/07		—		—		—		—		—		—					—	$	41.88		—
		N/A				—	$	138,000	$	138,000		—		—		—
Stephen I. Dreier		02/20/07		02/06/07		—		—		—		—		—		—		8,050	(3)					$	175,896
		02/20/07		02/06/07		—		—		—		—		—		—					5,285	$	41.88	$	94,551
		N/A				—	$	72,240	$	72,240		—		—		—
Danroy T. Henry		02/20/07		02/06/07		—		—		—		—		—		—		800						$	33,504
		02/20/07		02/06/07		—		—		—		—		—		—					3,400	$	41.88	$	60,828
		N/A					$	63,815
Linda A. Mason		02/20/07		02/06/07		—		—		—		—		—		—		—			8,000	$	39.44	$	134,785

(1)	Equals the closing stock price on the grant date.
(2)	Amounts shown reflect the total dollar value of the equity grant as valued under SFAS 123R. Assumptions used in the calculation of these amounts are included in Note 11, “Stockholders’ Equity and Stock-Based Compensation”, to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
(3)	Ms. Tocio, Ms. Boland and Mr. Dreier elected to purchase restricted stock with a cost of 50% of the grant date closing price of $41.88; as such, each restricted share was purchased at a cost to them of $20.94 per share, or a total of $232,958 for Ms. Tocio, $395,766 for Ms. Boland and $161,238 for Mr. Dreier.

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Outstanding Equity Awards at Fiscal Year End 2007

The following table sets forth information regarding outstanding equity awards at fiscal year end 2007.

	Option Awards											Stock Awards
																		Equity Incentive
																Equity Incentive		Plan Awards:
																Plan Awards:		Market or Payout
																Number of		Value of
	Number of Securities		Number of Securities		Equity Incentive Plan							Number of Shares		Market Value of		Unearned Shares,		Unearned Shares,
	Underlying Unexercised		Underlying Unexercised		Awards: Number of							or Units of Stock		Shares or units of		Units or Other		Units or Other
	Options		Options		Securities Underlying		Option					that Have Not		Stock That Have		Rights That Have		Rights That Have
	(#)		(#)		Unexercised Unearned		Exercise Price		Option Expiration			Vested		Not Vested		Not Vested		Not Vested
Name	Exercisable		Unexercisable		Options (#)		($)		Date			(#)		($)		(#)		($)
David H. Lissy		1,632		—		—	$	13.82		05/22/2011	(2)		34,220	$	1,181,959		—		—
		43,050		16,000		—	$	12.03		12/13/2011	(2)
		40,910		—		—	$	14.30		02/14/2012	(2)
		12,000		6,000		—	$	13.30		03/06/2013	(3)
		—		43,030		—	$	34.44		02/28/2012	(3)
		—		34,510		—	$	36.63		02/15/2013	(3)
		—		28,800		—	$	41.88		02/19/2014	(3)
Mary Ann Tocio		3,200		—		—	$	7.41		11/16/2009	(2)		39,415	$	1,361,394		—		—
		3,200		—		—	$	8.63		03/07/2010	(2)
		17,886		—		—	$	8.31		06/01/2010	(2)
		1,600		—		—	$	11.46		04/16/2011	(2)
		1,600		—		—	$	13.82		05/22/2011	(2)
		48,877		16,000		—	$	12.03		12/13/2011	(2)
		48,000		—		—	$	14.30		02/14/2012	(2)
		24,000		6,000		—	$	13.30		03/06/2013	(2)
		—		33,100		—	$	34.44		02/28/2012	(3)
		—		24,650		—	$	36.63		02/15/2013	(3)
		—		12,000		—	$	41.88		02/19/2014	(3)
Elizabeth J. Boland		4,400		—		—	$	14.30		02/14/2012	(2)		38,800	$	1,340,152		—		—
		10,612		3,200		—	$	13.30		03/06/2013	(2)
		—		14,000		—	$	34.44		02/28/2012	(3)
		—		15,225		—	$	36.63		02/15/2013	(3)
Stephen I. Dreier		8,000		—		—	$	7.41		11/16/2009	(2)		24,750	$	854,865		—		—
		8,000		—		—	$	8.63		03/07/2010	(2)
		5,836		—		—	$	11.46		04/16/2011	(2)
		6,400		—		—	$	14.30		02/14/2012	(2)
		6,400		1,600		—	$	13.30		03/06/2013	(2)
		—		4,000		—	$	34.44		02/28/2012	(3)
		—		7,550		—	$	36.63		02/15/2013	(3)
		—		5,285		—	$	41.88		02/19/2014	(3)
Danroy T. Henry		6,000				—	$	32.57		02/15/2012	(4)		2,400	$	82,896		—		—
				3,400		—	$	41.88		02/19/2014	(3)
Linda A. Mason		—		1,600		—	$	13.30		03/06/2013	(2)		1,600	$	55,264		—		—
		—		4,000		—	$	38.00		10/12/2012	(2)
		—		8,000		—	$	36.63		02/16/2013	(3)
		—		8,000		—	$	39.44		02/05/2014	(3)

1)	Restricted shares granted prior to 1/1/05 vest in five equal installments beginning on the first anniversary of the grant date. Restricted shares granted since 1/1/05 vest 100% on the third anniversary of the grant.
2)	Options granted prior to 1/1/05 vest in five equal installments beginning on the first anniversary of the grant date and expire at the end of 10 years.
3)	Options granted since 1/1/05 vest 100% on the third anniversary of the grant date and expire at the end of seven years.
4)	Options granted on 2/15/05 vested on 6/30/05 and expire at the end of seven years.

77

2007 Option Exercises and Stock Vested

The following table sets forth information regarding options exercised and stock that vested during 2007.

	Option Awards				Stock Awards
	Number of		Value		Number of
	Shares		Realized on		Shares		Value Realized
	Acquired on		Exercise		Acquired on		on Vesting
	Exercise		($)		Vesting		($)
Name	(#)		(1)		(#)		(2)
David H. Lissy		—		—		2,400	$	92,496
Mary Ann Tocio		95,000	$	2,694,047		2,400	$	92,496
Elizabeth J. Boland		—		—		1,200	$	46,248
Stephen I. Dreier		—		—		800	$	30,832
Danroy T. Henry		—		—		8,000	$	302,880
Linda A. Mason		—		—		800	$	30,832

(1)	Represents the difference between the exercise price of the options and the fair market value of the common stock at the time of exercise.
(2)	Represents the difference between the purchase price paid by the executive (if any) for the vesting shares and the fair market value of those shares at the time of vesting.

Pension Benefits

None of our named executive officers participates in or has account balances in qualified or non-qualified defined benefit plans or any other plan sponsored by us requiring disclosure in the pension benefits table under SEC regulations; however, all executive officers are eligible to participate in our 401(k) plan.

Non-Qualified Deferred Compensation

None of our named executive officers participates in or has account balances in non-qualified defined contribution or other non-qualified deferred compensation plans sponsored by us.

Potential Payments Upon Termination or Change of Control

As described below, we have severance agreements with our Chief Executive Officer, President & Chief Operating Officer, Chief Financial Officer, Chief Administrative Officer and Chief Human Resources Officer that provide them with severance benefits in certain circumstances following a Change of Control (as defined below), and in the case of the severance agreements with our Chief Executive Officer and President & Chief Operating Officer provide them with severance benefits in certain circumstances absent a Change of Control. These severance benefits will be provided by the Company. Additionally, the severance agreements also contain obligations on behalf of the executives applicable to the receipt of payments and benefits. We have no severance agreement with our Chair.

Change of Control. The severance agreements provide the following payments and benefits if employment is terminated within twenty-four (24) months following a Change of Control: (1) for any reason other than for Cause (as defined in the severance agreements) or death or disability or (2) if they terminate their own employment for Good Reason (as defined in the severance agreements):

• Accrued and unpaid base salary as of the date of termination plus a prorated portion of any bonus payable for the fiscal year in which the termination occurs;

78

• For a period of twenty-four months or until the employee secures other employment (whichever is less), severance paid on a monthly or biweekly basis equal to the average of the employee’s total salary and cash bonus for the employee’s last two years of employment with us, except that our agreement with our Chief Human Resources Officer provides for twelve months of payments or until the employee secures other employment (whichever is less) based on the last fiscal year’s total cash salary and cash bonus;

• For a period of twenty-four months or until the employee becomes eligible for participation in a group health plan of another employer (whichever is less), payment by us of the employee’s and the employee’s dependents’ premiums for continuation of health insurance coverage or participation in a substantially similar health plan, except that our agreement with our Chief Human Resources Officer provides for these premium payments for a period of twelve months or until the employee becomes eligible for participation in a group health plan of another employer (whichever is less); and

• Automatic vesting of the employee’s equity awards immediately prior to the Change of Control, notwithstanding any provision of our stock incentive plans or any option agreement, except that our agreement with our Chief Human Resources Officer does not provide for the automatic vesting of equity awards prior to a Change of Control.

A “Change of Control” will be deemed to have occurred if:

• Any person becomes the beneficial owner of 50% of the voting power of our outstanding securities;

• We are a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, pursuant to which the Board members in office prior to the transaction constitute less than a majority of the Board thereafter; or

• Certain changes to the composition of the Board occur, as more particularly described in the severance agreements.

No Change of Control. Our Chief Executive Officer’s and President’s & Chief Operating Officer’s severance agreements also provide that they will receive the same benefits set forth above (except that equity awards will not automatically vest) for a period of one year: (1) if they are terminated without Cause, or (2) if they terminate their employment for Good Reason, in both cases without a Change of Control of the Company.

The following table calculates the payments and benefits to each officer assuming that a triggering event occurred on December 31, 2007. All calculations involving stock price assume the closing price of the Company’s stock on December 31, 2007.

Executive Obligations. The severance agreements prohibit each executive from competing against us during the period in which the executive is receiving severance benefits. The severance agreements also prohibit each executive from divulging or using any of our trade secrets or other confidential information regardless of the reason for termination and regardless of whether the executive is receiving any severance benefits.

					Accelerated						Accelerated
					Vesting of						Vesting of
	Salary and		Medical		Equity		Salary and		Medical		Equity
	Bonus		Benefits		Awards		Bonus		Benefits		Awards
	Continuation		Continuation		($)		Continuation		Continuation		($)
Name	($)		($)		(1)		($)		($)		(1)
David H. Lissy	$	1,380,000	$	17,388	$	1,673,892	$	665,875	$	8,694		—
Mary Ann Tocio	$	1,380,000	$	17,388	$	1,619,377	$	665,875	$	8,694		—
Elizabeth J. Boland	$	746,400	$	14,243	$	707,274		—		—		—
Stephen I. Dreier	$	567,057	$	25,885	$	501,660		—		—		—
Danroy T. Henry	$	267,815	$	8,694		—		—		—		—

(1) Calculated by multiplying the number of unvested stock option equity awards by the difference between the grant price and the closing price of our common stock on 12/31/07, and the number of all unvested restricted stock awards by the closing price on 12/31/07.

79

Director Compensation

The Board of Directors based upon the recommendations of the Compensation Committee sets non-employee director compensation.

Initial Equity Award. Each non-employee director receives an initial award of 5,000 stock options granted as of the date of the first Board meeting they attend following their election to the Board.

Annual Retainer and Equity Awards. Each non-employee director receives an Annual Board Retainer of $10,000, 50% of which is payable in cash at the quarterly rate of $1,250, and 50% of which is payable in the form of an annual grant of restricted share units as of each annual stockholder meeting date. The number of restricted share units granted to each director is determined by dividing $5,000 by the fair market value of the Company’s common stock on the trading date immediately preceding the date of the award. The units vest immediately, but are restricted as to conversion into shares of the Company’s common stock until such time as the non-employee director completes his or her service on the Board.

In addition, non-employee directors receive a grant of 2,000 options as of the date of each annual meeting, provided that a director has attended at least 75% of the Board and committee meetings in the previous year that he or she was required to attend. These options vest 100% at the end of a three-year period and expire at the end of seven years.

Meeting and Other Fees. Each non-employee director receives $2,500 for each regularly scheduled Board meeting attended in person or $1,000 for each regularly scheduled Board meeting attended by conference call, and $500 for each specially scheduled meeting attended in person or by conference call.

Each member of the Compensation Committee also receives $1,000 for each committee meeting attended in person or $500 for each committee meeting attended by conference call. Additionally, the chair of the Compensation Committee receives an annual retainer of $5,000.

Each member of the Audit Committee also receives $1,500 for each committee meeting attended in person or $750 for each committee meeting attended by conference call. Additionally, the chair of the Audit Committee receives an annual retainer of $10,000.

Each member of the Nominating and Governance Committee also receives $1,000 for each committee meeting attended in person or $500 for each committee meeting attended by conference call. Additionally, the chair of the Nominating and Governance Committee receives an annual retainer of $2,500.

In addition to the above compensation and in recognition of the additional services provided and contributions made by the members of the Special Committee of the Board of Directors during 2007 and into 2008 in conjunction with the previously announced strategic review and Merger Agreement with affiliates of Bain, the following one-time payments were approved by the Compensation Committee and will be paid in 2008:

Marguerite Kondracke, Chair of the Special Committee	$	125,000
E. Townes Duncan, Special Committee Member	$	100,000
Ian Rolland, Special Committee Member	$	100,000

Stock Ownership Guidelines. We believe that equity ownership by directors is an important component in aligning director interests with those of our stockholders and other stakeholders. The Board set a formal policy in 2005 that within 5 years of joining the Board of Directors of the Company, or by the date of the 2010 annual meeting for then current non-employee directors, each non-employee director is required to own Company stock valued at the equivalent of 5 times the annual retainer which, under the current compensation program, equates to $50,000.

80

2007 Director Summary Compensation Table

The following table sets forth information concerning total compensation paid or earned by our non-executive directors:

											Change in Pension
											Value and Non-
			Fees Earned								Qualified Deferred
			or Paid in		Stock Awards		Option Awards		Non-Equity Incentive		Compensation
			Cash		($)		($)		Plan Compensation		Earnings		All Other Compensation		Total
Name	Year		($)		(1)(2)(3)		(1)(2)(3)		($)		($)		($)		($)
Joshua Bekenstein		2007	$	17,500	$	5,029	$	31,237		—		—		—	$	53,766
		2006	$	18,500	$	5,004	$	23,479							$	46,983
JoAnne Brandes		2007	$	26,250	$	5,029	$	31,237		—		—		—	$	62,516
		2006	$	24,500	$	5,004	$	23,479		—		—		—	$	52,983
Roger H. Brown		2007	$	15,500	$	5,029	$	38,096		—		—		—	$	58,625
		2006	$	15,500	$	5,004	$	40,136		—		—		—	$	60,640
E. Townes Duncan		2007	$	26,000	$	5,029	$	31,237		—		—		—	$	62,266
		2006	$	29,500	$	5,004	$	23,479		—		—		—	$	57,983
Fred K. Foulkes		2007	$	24,000	$	5,029	$	31,237		—		—		—	$	60,266
		2006	$	27,500	$	5,004	$	23,479		—		—		—	$	55,983
David Gergen		2007	$	13,000	$	5,029	$	35,422		—		—		—	$	53,451
		2006	$	13,000	$	5,004	$	39,371		—		—		—	$	57,375
Gabrielle E. Greene		2007	$	26,750	$	5,029	$	39,028		—		—		—	$	70,807
		2006	$	12,000	$	5,004	$	7,236		—		—		—	$	24,240
Marguerite W. Kondracke		2007	$	14,000	$	5,029	$	30,196		—		—		—	$	49,225
		2006	$	18,000	$	5,004	$	18,561		—		—		—	$	41,565
Sara Lawrence-Lightfoot		2007	$	19,000	$	5,029	$	31,237		—		—		—	$	55,266
		2006	$	21,000	$	5,004	$	23,479		—		—		—	$	49,483
Ian M. Rolland		2007	$	34,250	$	5,029	$	31,237		—		—		—	$	70,516
		2006	$	37,500	$	5,004	$	23,479		—		—		—	$	65,983

(1) Amounts shown reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007 and 2006 in accordance with Statement of Financial Accounting Standards (“SFAS”) 123R and accordingly include the expense of awards granted in and prior to 2007 and 2006. Assumptions used in the calculation of these amounts are included in Note 11, “Stockholders’ Equity and Stock-Based Compensation”, of the Consolidated Financial Statements included in this Annual Report on Form 10-K.

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(2) The details and fair values of all 2007 equity grants to directors are as follows:

							Options
							Awards:
							Number of				Grant Date
							Securities		Exercise or		Fair Value of
					Stock Awards: Number of		Underlying		Base Price of		Stock and
					Shares of Stock or Units		Options		Equity Awards		Option
Name	Grant Date		Approval Date		(#)		(#)		($/SH)		Awards
Joshua Bekenstein		05/08/07		05/08/07		132		—		—	$	5,029
		05/08/07		05/08/07				2,000	$	38.10	$	31,572
JoAnne Brandes		05/08/07		05/08/07		132		—		—	$	5,029
		05/08/07		05/08/07				2,000	$	38.10	$	31,572
Roger H. Brown		05/08/07		05/08/07		132		—		—	$	5,029
		05/08/07		05/08/07				2,000	$	38.10	$	31,572
E. Townes Duncan		05/08/07		05/08/07		132		—		—	$	5,029
		05/08/07		05/08/07				2,000	$	38.10	$	31,572
Fred K. Foulkes		05/08/07		05/08/07		132		—		—	$	5,029
		05/08/07		05/08/07				2,000	$	38.10	$	31,572
David Gergen		05/08/07		05/08/07		132		—		—	$	5,029
		05/08/07		05/08/07				2,000	$	38.10	$	31,572
Gabrielle E. Greene		05/08/07		05/08/07		132		—		—	$	5,029
		05/08/07		05/08/07				2,000	$	38.10	$	31,572
Marguerite W. Kondracke		05/08/07		05/08/07		132		—		—	$	5,029
		05/08/07		05/08/07				2,000	$	38.10	$	31,572
Sara Lawrence-Lightfoot		05/08/07		05/08/07		132		—		—	$	5,029
		05/08/07		05/08/07				2,000	$	38.10	$	31,572
Ian M. Rolland		05/08/07		05/08/07		132		—		—	$	5,029
		05/08/07		05/08/07				2,000	$	38.10	$	31,572

(a) Under our Director compensation program, each director received 132 restricted share units and 2,000 options to purchase our common stock, both granted on the 05/08/07 date of the 2007 annual meeting.

(3) The aggregate number of stock and option awards outstanding as of December 31, 2007 for each director is as follows:

	Option Awards		Stock Awards
Name	Outstanding		Outstanding
Joshua Bekenstein		28,000		275
JoAnne Brandes		24,000		275
Roger H. Brown		45,480		275
E. Townes Duncan		8,492		275
Fred K. Foulkes		28,000		275
David Gergen		16,000		275
Gabrielle E. Greene		7,000		132
Marguerite W. Kondracke		6,000		275
Sara Lawrence-Lightfoot		23,000		275
Ian M. Rolland		28,000		275

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

STOCK OWNERSHIP

The following table shows the amount of our common stock beneficially owned (unless otherwise indicated) by those stockholders who beneficially own more than 5% of our common stock, and by our directors, our executive officers named in the Summary Compensation Table, and our directors and executive officers as a group. Except as otherwise indicated, all information is as of January 31, 2008 and, as of that date and based on a review of common stock ownership and public filings, no stockholders were beneficial owners of more than 5% of our common stock.

The percentages of shares outstanding provided in the tables are based on 26,880,756 voting shares outstanding as of January 31, 2008. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated, each person or entity named in the table has sole voting and investment power, or shares voting and investment power with his or her spouse, with respect to all shares of stock listed as owned by that person. The number of shares shown does not include the interest of certain persons in shares held by family members in their own right. Shares issuable upon the exercise of options that are exercisable within 60 days of January 31, 2008 are considered outstanding for the purpose of calculating the percentage of outstanding shares of Bright Horizons Common Stock held by the individual, but not for the purpose of calculating the percentage of outstanding shares held by any other individual.

 

	Aggregate
	Number of
	Outstanding
	Shares								Options						Total		Percent of
	Beneficially		Restricted		Total		Options		Exercisable		Total				Shares, RSUs		Shares
	Owned		Shares		Shares		Exercisable		Within		Options				& Options		Outstanding
Name	(1)		(1)		(1)		Immediately		60 Days (3)		(3)		RSUs(2)		(1)(2)(3)		(4)
David H. Lissy		84,742		31,820		116,562		119,592		43,030		162,622		—		279,184		1.04	%
Mary Ann Tocio		35,030		37,015		72,045		170,363		33,100		203,463		—		275,508		1.03	%
Roger H. Brown		95,338		800		96,138		41,080		—		41,080		275		137,493		*
Linda A. Mason		95,338		800		96,138		41,080		—		41,080		275		137,493		*
Elizabeth J. Boland		23,336		37,600		60,936		18,212		14,000		32,212		—		93,148		*
Stephen I. Dreier		27,435		23,950		51,385		36,236		4,000		40,236		—		91,621		*
Joshua Bekenstein		20,812		—		20,812		22,000		—		22,000		275		43,087		*
Fred K. Foulkes		18,402		—		18,402		22,000		—		22,000		275		40,677		*
Marguerite Kondracke		32,000		—		32,000		—		—		—		275		32,275		*
Ian M. Rolland		2,000		—		2,000		22,000		—		22,000		275		24,275		*
JoAnne Brandes		1,800		—		1,800		18,000		—		18,000		275		20,075		*
Sara Lawrence-Lightfoot		1,580		—		1,580		17,000		—		17,000		275		18,855		*
David Gergen		250		—		250		10,000		—		10,000		275		10,525		*
E. Townes Duncan		5,520		—		5,520		2,667		—		2,667		275		8,462		*
Danroy T. Henry		—		2,400		2,400		6,000		—		6,000		—		8,400		*
Gabrielle Greene		—		—		—		—		—		—		132		132		—
Directors and officers as a group (16 people)		348,245		133,585		481,830		505,150		94,130		599,280		2,607		1,083,717		4.03	%

*  Less than one percent.

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(1) The number of shares shown includes shares that are individually or jointly owned, as well as shares over which the individual has either sole or shared investment or voting authority. Certain of our directors and executive officers disclaim beneficial ownership of some of the shares included in the table, as follows:

• Mr. Brown – 29,554 shares held by Mr. Brown and Linda A. Mason, his wife, as co-trustees of the Roger H. Brown, Jr. Revocable Trust, and 66,584 shares held by Ms. Mason and Mr. Brown as co-trustees of the Linda A. Mason Revocable Trust, and 1,600 shares issuable upon exercise of options held by Ms. Mason.

• Ms. Mason – 66,584 shares held by Ms. Mason and Roger H. Brown, her husband, as co-trustees of the Linda A. Mason Revocable Trust, 29,554 shares held by Mr. Brown and Ms. Mason as co-trustees of the Roger H. Brown, Jr. Revocable Trust, 275 restricted share units owned by Mr. Brown, and 39,480 shares issuable upon exercise of options held by Mr. Brown.

• Mr. Duncan – 600 shares held by his children, 1,400 shares held in accounts for the benefit of Mr. Duncan’s mother, and 912 shares held in several trusts of which his wife is trustee.

(2)	Restricted share units (“RSU’s”) vest immediately and are entitled to all rights and privileges of our common stock in regards to voting powers and dividends. Each RSU is convertible into one share of our common stock only upon the termination of a director’s service on our Board.
(3)	Reflects the number of shares that could be purchased upon exercise of options available at January 31, 2008 or within 60 days thereafter under our equity incentive plans.
(4)	Based on the number of shares outstanding at January 31, 2008.

EQUITY COMPENSATION PLANS

The following table sets forth certain information with respect to shares of common stock authorized for issuance under the Company’s equity compensation plans as of December 31, 2007:

					Number of Securities
	Number of Securities				Remaining Available for
	to be Issued Upon		Weighted-average		Future Issuance Under
	Exercise of		Exercise Price of		Equity Compensation Plans
	Outstanding Options		Outstanding Options		(Excluding Securities
Plan Category	Warrants and Rights		Warrants and Rights		Reflected in Column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		1,792,609	$	22.32		1,430,923
Equity compensation plans not approved by security holders		—		—		—
Total		1,792,609	$	22.32		1,430,923

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

Certain Relationships and Related Transactions

All related party transactions are reviewed and approved by the Audit Committee of our Board of Directors. We have an agreement with S.C. Johnson & Son, Inc. to operate and manage an early care and education center. S.C. Johnson & Son, Inc. is affiliated through common majority ownership with JohnsonDiversey, Inc. (formerly Johnson Wax Professional), a manufacturer and marketer of cleaning and sanitation products and services. In return for its services under these agreements, the Company received management fees and operating subsidies of $195,000 in 2007. JoAnne Brandes, a member of our Board of Directors, was Executive Vice President, Chief Administrative Officer and General Counsel for JohnsonDiversey, Inc. until her retirement in February of 2007.

84

Director Independence

The Board has determined that each of the following directors is an “independent director” as that term is defined under applicable FINRA rules: Joshua Bekenstein, JoAnne Brandes, E. Townes Duncan, Fred K. Foulkes, David Gergen, Gabrielle E. Greene, Sara Lawrence-Lightfoot, Ian M. Rolland and Marguerite W. Kondracke.

In light of the previously announced Merger Agreement between Bright Horizons and affiliates of Bain, Joshua Bekenstein, a member of our Board of Directors, was recused from all discussions by our Board of Directors regarding the Special Committee of the Board’s review and evaluation of strategic alternatives in recognition that one alternative was a leveraged buyout by a financial sponsor and that Mr. Bekenstein was affiliated with one such potential buyer.

ITEM 14. Principal Accounting Fees and Services

Audit and Non-Audit Fees

The following table presents fees for audit, audit-related, tax and other services rendered by Deloitte & Touche, the Company’s independent registered public accounting firm for the years ended December 31, 2007 and 2006.

	2007		2006
Audit Fees (1)	$	1,133,000	$	1,158,850
Audit Related Fees (2)		—		2,580
Tax Fees (3)		46,900		20,000
All Other Fees		—		—
Total Fees	$	1,179,900	$	1,181,430

(1)	Audit Fees for the years ended December 31, 2007 and 2006 included fees associated with the integrated audit of the consolidated financial statements and of our internal controls over financial reporting and reviews of all associated quarterly financial statements for both years.
(2)	Audit Related Fees for the year ended December 31, 2006 represent fees associated with the Company’s Form S-8 filing in June 2006.
(3)	Tax Fees for the year ended December 31, 2007 and 2006 represent fees associated with tax planning for both years.

Pre-Approval of Audit and Non-Audit Fees

SEC rules under Section 202 of the Sarbanes-Oxley Act of 2002 require the Audit Committee to pre-approve audit and non-audit services provided by our independent auditor. The Audit Committee has an Audit Committee Pre-Approval Policy which prohibits our independent auditor from performing certain non-audit services and any services that have not been approved by the Audit Committee consistent with the Section 202 rules. The policy establishes procedures to ensure that proposed services are brought before the Audit Committee for consideration and, if determined by the Audit Committee to be consistent with the auditor’s independence, approved prior to initiation, and to ensure that the Audit Committee has adequate information to assess the types of services being performed and fee amounts on an ongoing basis. The policy allows delegation of pre-approval responsibility to one or more members of the Committee, within certain financial guidelines, along with a requirement that amounts approved by the members must be presented to the full Committee within three business days.

For the year ended December 31, 2007, all services provided by our independent auditors have been subject to pre-approval by the Audit Committee.

85

PART IV

ITEM 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this Annual Report on Form 10-K:

(1)	The financial statements filed as part of this report are included in Part II, Item 8 of this Annual Report on Form 10-K.
(2)	All Financial Statement Schedules other than those listed below have been omitted because they are not required under the instructions to the applicable accounting regulations of the Securities and Exchange Commission or the information to be set forth therein is included in the financial statements or in the notes thereto. The following additional financial data should be read in conjunction with the financial statements included in Part II, Item 8 of this Annual Report on Form 10-K:
	Schedule II — Valuation and Qualifying Accounts
(3)	The exhibits filed or incorporated by reference as part of this report are set forth in the Index of Exhibits, which follows the signature page to this Annual Report on Form 10-K.

86

BRIGHT HORIZONS FAMILY SOLUTIONS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)

	Balance at		Additions
	Beginning of		Charged to Costs		Deductions-			Balance at End
I. Allowance for Doubtful Accounts	Period		and Expenses		Charge Offs			of Period
Fiscal Year 2007	$	1,209	$	1,012	$	(1,017	)	$	1,204
Fiscal Year 2006	$	1,258	$	711	$	(760	)	$	1,209
Fiscal Year 2005	$	1,756	$	180	$	(678	)	$	1,258

	Balance at							Effect of
II. Valuation Allowance	Beginning of							Currency			Balance at End
for Deferred Income Taxes	Period		Additions		Deductions			Translation			of Period
Fiscal Year 2007	$	4,505	$	1,518	$	(77	)	$	150		$	6,096
Fiscal Year 2006	$	2,869	$	1,177	$	—		$	459		$	4,505
Fiscal Year 2005	$	2,302	$	1,086	$	(201	)	$	(318	)	$	2,869

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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.

BRIGHT HORIZONS FAMILY SOLUTIONS, INC.
February 29, 2008
By:	/s/ Elizabeth J. Boland
	Elizabeth J. Boland
	Chief Financial 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/ Linda A. Mason Linda A. Mason	Chair of the Board	February 29, 2008
/s/ Roger H. Brown Roger H. Brown	Vice Chair of the Board	February 29, 2008
/s/ David H. Lissy David H. Lissy	Director, Chief Executive Officer (Principal Executive Officer)	February 29, 2008
/s/ Mary Ann Tocio Mary Ann Tocio	Director, President and Chief Operating Officer	February 29, 2008
/s/ Elizabeth J. Boland Elizabeth J. Boland	Chief Financial Officer and Treasurer (Principal Financial Officer)	February 29, 2008
/s/ Robert J. Meyer Robert J. Meyer	Chief Accounting Officer (Principal Accounting Officer)	February 29, 2008
/s/ Joshua Bekenstein Joshua Bekenstein	Director	February 29, 2008
/s/ JoAnne Brandes JoAnne Brandes	Director	February 29, 2008
/s/ E. Townes Duncan E. Townes Duncan	Director	February 29, 2008
/s/ Fred K. Foulkes Fred K. Foulkes	Director	February 29, 2008
/s/ David Gergen David Gergen	Director	February 29, 2008
/s/ Gabrielle Greene Gabrielle Greene	Director	February 29, 2008
/s/ Sara Lawrence-Lightfoot Sara Lawrence-Lightfoot	Director	February 29, 2008
/s/ Ian M. Rolland Ian M. Rolland	Director	February 29, 2008
/s/ Marguerite Kondracke Marguerite Kondracke	Director	February 29, 2008

88

INDEX OF EXHIBITS

2.1*	Amended and Restated Agreement and Plan of Merger dated as of June 17, 1998 by and among Bright Horizons Family Solutions, Inc., CorporateFamily Solutions, Inc., Bright Horizons, Inc., CFAM Acquisition, Inc., and BRHZ Acquisition, Inc.
2.2	Agreement and Plan of Merger, dated June 27, 2005, by and among Bright Horizons Family Solutions, Inc., BFAM Mergersub, Inc. and ChildrenFirst, Inc. (pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request) (Incorporated by Reference to Exhibit 2.1 of the Quarterly Report on Form 10-Q filed on August 9, 2005).
2.3	Agreement and Plan of Merger, dated as of January 14, 2008, by and among Bright Horizons Family Solutions, Inc., Swingset Holdings Corp. and Swingset Acquisition Corp. (Incorporated by Reference to Exhibit 2.1 of the Current Report on Form 8-K filed on January 14, 2008).
3.1	Certificate of Incorporation, as amended (Restated for purposes of EDGAR) (Incorporated by Reference to Exhibit 3 of the Quarterly Report on Form 10-Q filed on August 9, 2004)
3.2	Amended and Restated Bylaws (Incorporated by Reference to Exhibit 3 of the Quarterly Report on Form 10-Q filed on November 12, 1999)
4.1	Article IV of Bright Horizons Family Solutions, Inc.’s Certificate of Incorporation (Incorporated by Reference to Exhibit 3 of the Quarterly Report on Form 10-Q filed on August 9, 2004)
4.2	Article IV of Bright Horizons Family Solutions, Inc.’s Bylaws (Incorporated by Reference to Exhibit 3 of the Quarterly Report on Form 10-Q filed on November 12, 1999)
4.3	Specimen Common Stock Certificate (Incorporated by Reference to Exhibit 4.3 of the Form 8-K filed on July 28, 1998)
10.1	2006 Equity and Incentive Plan (incorporated by reference to Exhibit A to the Company’s proxy statement for its June 6, 2006 annual meeting of stockholders filed on April 28, 2006).
10.2	Form of Agreement evidencing a grant of Non-Qualified Stock Options to Executive Officers under the 2006 Equity and Incentive Plan (Incorporated by Reference to Exhibit 10.2 of the Current Report on Form 8-K filed on June 6, 2006)
10.3	Form of Agreement evidencing a grant of Non-Qualified Stock Options to Directors under the 2006 Equity and Incentive Plan (Incorporated by Reference to Exhibit 10.3 of the Current Report on Form 8-K filed on June 6, 2006)
10.4	Form of Agreement evidencing a grant of Restricted Shares to Executive Officers under the 2006 Equity and Incentive Plan (Incorporated by Reference to Exhibit 10.4 of the Current Report on Form 8-K filed on June 6, 2006)
10.5	Form of Agreement evidencing a grant of Restricted Share Units to Directors under the 2006 Equity and Incentive Plan (Incorporated by Reference to Exhibit 10.5 of the Current Report on Form 8-K filed on June 6, 2006)
10.6	Amended and Restated 1998 Stock Incentive Plan (Incorporated by Reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q filed on November 14, 2001)
10.7	Amendment to Amended and Restated 1998 Stock Incentive Plan (Incorporated by Reference to Exhibit 10.1 of the Current Report on Form 8-K filed on October 18, 2005)
10.8	Form of Agreement evidencing a grant of Incentive Stock Options to Executive Officers under the Amended and Restated 1998 Stock Incentive Plan (Incorporated by Reference to Exhibit 10.1 of the Current Report on Form 8-K filed on February 22, 2005)
10.9	Form of Agreement evidencing a grant of Non-Qualified Stock Options to Executive Officers under the Amended and Restated 1998 Stock Incentive Plan (Incorporated by Reference to Exhibit 10.2 of the Current Report on Form 8-K filed on February 22, 2005)
10.10	Form of Agreement evidencing a grant of Non-Qualified Stock Options to Directors under the Amended and Restated 1998 Stock Incentive Plan (Incorporated by Reference to Exhibit 10.3 of the Current Report on Form 8-K filed on February 22, 2005)
10.11	Form of Agreement evidencing a grant of Restricted Stock to Executive Officers under the Amended and Restated 1998 Stock Incentive Plan (Incorporated by Reference to Exhibit 10.1 of the Current Report on Form 8-K filed on February 22, 2005)
10.12	Form of Agreement evidencing a grant of Restricted Stock to Directors under the Amended and Restated 1998 Stock Incentive Plan (Incorporated by Reference to Exhibit 10.1 of the Current Report on Form 8-K filed on May 31, 2005)
10.13	Summary of Named Executive Officer and Nonemployee Director Compensation
10.14*	1998 Employee Stock Purchase Plan
10.15	Severance Agreement for Stephen I. Dreier (Incorporated by Reference to Exhibit 10.8 of the Registration Statement on Form S-1 of Bright Horizons, Inc. (Registration No. 333-14981))

89

10.16	Severance Agreement for Elizabeth J. Boland (Incorporated by Reference to Exhibit 10.9 of the Registration Statement on Form S-1 of Bright Horizons, Inc. (Registration No. 333-14981))
10.17	Severance Agreement for David H. Lissy (Incorporated by Reference to Exhibit 10.11 of the Registration Statement on Form S-1 of Bright Horizons, Inc. (Registration No. 333-14981))
10.18	Amendment to the Severance Agreement for David H. Lissy (Incorporated by Reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q filed on May 15, 2002)
10.19	Severance Agreement for Mary Ann Tocio (Incorporated by Reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q filed on May 15, 2001)
10.20*	Form of Indemnification Agreement
10.21	First Amended and Restated Credit Agreement, dated as of October 2, 2007, by and among Bright Horizons Family Solutions, Inc., the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, and JPMorgan Chase Bank, as syndication agent (certain schedules and exhibits to this document are omitted from this filing, and the Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request).
10.22	Severance Agreement for Danroy T. Henry
21	Subsidiaries of the Company
23.1	Consent of Deloitte &Touche LLP
31.1	Certification of the Company’s Chief Executive Officer pursuant to Securities and Exchange Act Rules 13a- 14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Company’s Chief Financial Officer pursuant to Securities and Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Incorporated by Reference to the Registration Statement on Form S-4 filed on June 17, 1998 (Registration No. 333-57035).

90

EX-10.21

EXHIBIT 10.21

FIRST AMENDED AND RESTATED
CREDIT AGREEMENT

By and among

BRIGHT HORIZONS FAMILY SOLUTIONS, INC.,

as the Borrower,

BANK OF AMERICA, N.A.,
as Administrative Agent, Swing Line Lender and L/C Issuer,

JPMORGAN CHASE BANK,
as Syndication Agent

and

the other Lenders party hereto

BANC OF AMERICA SECURITIES LLC,
and
J.P. MORGAN SECURITIES INC.,

As Co-lead Arrangers and Joint Book Managers

Dated as of October 2, 2007

TABLE OF CONTENTS

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ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS			1
Section 1.01	Defined Terms		1
Section 1.02	Other Interpretive Provisions		24
Section 1.03	Accounting Terms		25
Section 1.04	Rounding		25
Section 1.05	Exchange Rates; Currency Equivalents		25
Section 1.06	[Reserved]		26
Section 1.07	Change of Currency		26
Section 1.08	Times of Day		26
Section 1.09	Letter of Credit Amounts		26
ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS			27
Section 2.01	Committed Loans		27
Section 2.02	Borrowings, Conversions and Continuations of Committed Loans		27
Section 2.03	Initial Loans and Commitments		29
Section 2.04	Letters of Credit		30
Section 2.05	Swing Line Loans		39
Section 2.06	Prepayments		42
Section 2.07	Termination or Reduction of Commitments		43
Section 2.08	Repayment of Loans		43
Section 2.09	Interest		44
Section 2.10	Fees; Commitment Fee		45
Section 2.11	Computation of Interest and Fees		45
Section 2.12	Evidence of Debt		45
Section 2.13	Payments Generally; Administrative Agent’s Clawback.		46
Section 2.14	Sharing of Payments by Lenders		48
Section 2.15	Reserved.		49
Section 2.16	Increase in Commitments		49
ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY			50
Section 3.01	Taxes		50
Section 3.02	Illegality		53
Section 3.03	Inability to Determine Rates		53
Section 3.04	Increased Costs; Reserves on Eurocurrency Rate Loans		54
Section 3.05	Compensation for Losses		56
Section 3.06	Mitigation Obligations; Replacement of Lenders		56
Section 3.07	Survival		57
ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS			57
Section 4.01	Conditions Precedent to Effectiveness		57
Section 4.02	Conditions to all Credit Extensions		58
ARTICLE V. REPRESENTATIONS AND WARRANTIES			59
Section 5.01	Existence, Qualification and Power; Compliance with Laws		59
Section 5.02	Authorization; No Contravention		60
Section 5.03	Governmental Authorization; Other Consents		60
Section 5.04	Binding Effect		60

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		Page
Section 5.05	Financial Statements; No Material Adverse Effect; No Internal Control Event		60
Section 5.06	Litigation		61
Section 5.07	No Default		61
Section 5.08	Ownership of Property; Liens		61
Section 5.09	Environmental Compliance		61
Section 5.10	Insurance		62
Section 5.11	Taxes		62
Section 5.12	ERISA Compliance		62
Section 5.13	Subsidiaries; Equity Interests		63
Section 5.14	Margin Regulations; Investment Company Act; Public Utility Holding Company Act		63
Section 5.15	Disclosure		63
Section 5.16	Compliance with Laws		64
Section 5.17	Intellectual Property; Licenses, Etc		64
ARTICLE VI. AFFIRMATIVE COVENANTS			64
Section 6.01	Financial Statements		64
Section 6.02	Certificates; Other Information		65
Section 6.03	Notices		67
Section 6.04	Payment of Obligations		67
Section 6.05	Preservation of Existence, Etc		68
Section 6.06	Maintenance of Properties		68
Section 6.07	Maintenance of Insurance		68
Section 6.08	Compliance with Laws		68
Section 6.09	Books and Records		68
Section 6.10	Inspection Rights		68
Section 6.11	Use of Proceeds		69
Section 6.12	Additional Guarantors		69
Section 6.13	Depository, Payroll, Operating Account		69
ARTICLE VII. NEGATIVE COVENANTS			69
Section 7.01	Liens		69
Section 7.02	Investments		71
Section 7.03	Indebtedness		71
Section 7.04	Fundamental Changes		72
Section 7.05	Dispositions		73
Section 7.06	Restricted Payments		73
Section 7.07	Change in Nature of Business		74
Section 7.08	Transactions with Affiliates		74
Section 7.09	Burdensome Agreements; Negative Pledge		74
Section 7.10	Use of Proceeds		74
Section 7.11	Financial Covenants		74
ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES			75
Section 8.01	Events of Default		75
Section 8.02	Remedies Upon Event of Default		77
Section 8.03	Application of Funds		78
ARTICLE IX. ADMINISTRATIVE AGENT			78

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		Page
Section 9.01	Appointment and Authority		78
Section 9.02	Rights as a Lender		79
Section 9.03	Exculpatory Provisions		79
Section 9.04	Reliance by Administrative Agent		80
Section 9.05	Delegation of Duties		80
Section 9.06	Resignation of Administrative Agent		80
Section 9.07	Non-Reliance on Administrative Agent and Other Lenders		81
Section 9.08	No Other Duties, Etc		82
Section 9.09	Administrative Agent May File Proofs of Claim		82
Section 9.10	Guaranty Matters		82
ARTICLE X. MISCELLANEOUS			83
Section 10.01	Amendments, Etc		83
Section 10.02	Notices; Effectiveness; Electronic Communication		84
Section 10.03	No Waiver; Cumulative Remedies		86
Section 10.04	Expenses; Indemnity; Damage Waiver.		86
Section 10.05	Payments Set Aside		88
Section 10.06	Successors and Assigns		89
Section 10.07	Treatment of Certain Information; Confidentiality		92
Section 10.08	Right of Setoff		93
Section 10.09	Interest Rate Limitation		93
Section 10.10	Counterparts; Integration; Effectiveness		94
Section 10.11	Survival of Representations and Warranties		94
Section 10.12	Severability		94
Section 10.13	Replacement of Lenders		94
Section 10.14	Governing Law; Jurisdiction; Etc.		95
Section 10.15	Waiver of Jury Trial		96
Section 10.16	USA Patriot Act Notice		96
Section 10.17	Time of the Essence		96
Section 10.18	Judgment Currency		97
Section 10.19	ENTIRE AGREEMENT		97
Signatures			S-1
SCHEDULES
1.01	Mandatory Cost Formulae
2.01	Commitments and Applicable Percentages
5.06	Litigation
5.13	Subsidiaries; Other Equity Investments
7.01	Existing Liens
7.03	Existing Indebtedness
10.02	Administrative Agent’s Office; Certain Addresses for Notices
10.06	Processing and Recordation Fees

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		Page
EXHIBITS
Form of
A	Committed Loan Notice
C	Swing Line Loan Notice
D	Note
E	Compliance Certificate
F	Assignment and Assumption
G	Guaranty
H	[Reserved]

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FIRST AMENDED AND RESTATED
CREDIT AGREEMENT

     This FIRST AMENDED AND RESTATED CREDIT AGREEMENT (“Agreement”) is entered into as of October 1, 2007, among BRIGHT HORIZONS FAMILY SOLUTIONS, INC., a Delaware corporation (the “Borrower”); each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”); and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

     The Borrower, Lenders, the Administrative Agent, the Swing Line Lender and the L/C Issuer are parties to the Credit Agreement dated as of July 22, 2005 (as in effect immediately prior to the Closing Date, the “Existing Credit Agreement”). The Borrower has requested that the Lenders, the Administrative Agent, the Swing Line Lender and the L/C Issuer agree to amend and restate the Existing Credit Agreement to add a multicurrency subfacility, and the Lenders, the Administrative Agent, the Swing Line Lender and the L/C Issuer are willing to amend and restate the Existing Credit Agreement, all as provided herein.

     Accordingly, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend and restate the Existing Credit Agreement so that, as amended and restated, it reads in its entirety as provided herein:

ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS

     Section 1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:

     “Act” has the meaning set forth in Section 10.16.

     “Administrative Agent” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

     “Administrative Agent’s Office” means, with respect to any currency, the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02 with respect to such currency, or such other address or account with respect to such currency as the Administrative Agent may from time to time notify to the Borrower and the Lenders.

     “Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

     “Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

     “Aggregate Commitments” means the Commitments of all the Lenders as increased from time to time in accordance with the provisions of Section 2.16.

     “Agreement” means this Credit Agreement.

     “Alternative Currency” means each of Euro and Sterling.

     “Alternative Currency Equivalent” means, at any time, with respect to any amount denominated in Dollars, the equivalent amount thereof in the applicable Alternative Currency as determined by the Administrative Agent at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of such Alternative Currency with Dollars.

     “Alternative Currency Sublimit” means an amount equal to the lesser of the Aggregate Commitments and $15,000,000. The Alternative Currency Sublimit is part of, and not in addition to, the Aggregate Commitments.

     “Applicable Percentage” means with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Commitments represented by such Lender’s Commitment at such time. If the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02 or if the Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments. The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

     “Applicable Rate” means, from time to time, with respect to the Eurocurrency Rate, BBA LIBOR Daily Floating Rate, Base Rate, Letter of Credit Fee and Commitment Fee, as the context requires, the following percentages per annum, based upon the Consolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(b):

Applicable Rate

						BBA LIBOR
Pricing			Eurocurrency			Daily Floating						Letter of			Commitment
Level		Leverage Ratio	Rate			Rate			Base Rate			Credit Fee			Fee
	1	Greater than or		1.000	%		1.125	%		0.000	%		1.000	%		0.200	%
		equal to 2.00:1.00
	2	Less than 2.00:1.00		0.750	%		.875	%		0.000	%		0.750	%		0.200	%
		but greater than or equal to 1.50:1.00
	3	Less than 1.50:1.00		0.625	%		.745	%		0.000	%		0.625	%		0.125	%

     Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate delivered pursuant to Section 6.02(b) is received by

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the Administrative Agent; provided, however, that if a Compliance Certificate is not delivered when due in accordance with Section 6.02(b), then Pricing Level 1 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered, it being understood that if an overdue Compliance Certificate is delivered to the Administrative Agent, the Applicable Rate shall be maintained or decreased in accordance with such overdue Compliance Certificate effective as of the first Business Day immediately following the date such overdue Compliance Certificate is received by the Administrative Agent. Notwithstanding the immediately preceding sentence, the Applicable Rate in effect from the date hereof through the date on which the Borrower delivers financial statements and a duly completed Compliance Certificate with respect to the period ending September 30, 2007 shall be 0.625% for the Eurocurrency Rate; 0.745% for the BBA LIBOR Daily Floating Rate; 0.000% for the Base Rate; 0.625% for the Letter of Credit Fee; and 0.125% for the Commitment Fee. In addition, for purposes of calculating the Applicable Rate, EBITDA for any Test Period shall include the EBITDA of any Permitted Acquisition that has been consummated during such Test Period in the same manner as if such Permitted Acquisition had occurred on the first day of such Test Period.

     “Applicable Time” means, with respect to any borrowings and payments in any Alternative Currency, the local time in the place of settlement for such Alternative Currency as may be determined by the Administrative Agent to be necessary for timely settlement on the relevant date in accordance with normal banking procedures in the place of payment.

     “Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

     “Arrangers” means Banc of America Securities LLC and JPMorgan Securities, Inc., in their respective capacities as co-lead arrangers and joint book managers.

     “Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

     “Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06, and accepted by the Administrative Agent, in substantially the form of Exhibit F or any other form approved by the Administrative Agent.

     “Attributable Indebtedness” means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount of the obligations of such Person to pay rent or other amounts under such capital lease that are required to be classified and accounted for as a capital lease on the balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear as debt on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.

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     “Audited Financial Statements” means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2006, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Borrower and its Subsidiaries, including the notes thereto.

     “Auto-Extension Letter of Credit” has the meaning set forth in Section 2.04(b)(iii).

     “Available Commitment” means, as to any Lender, at any time, such Lender’s Commitment at such time, as reduced from time to time in accordance with Section 2.07.

     “Availability Period” means the period from and including the Closing Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments pursuant to Section 2.07, and (c) the date of termination of the commitment of each Lender to make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

     “Bank of America” means Bank of America, N.A. and its successors.

     “Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as amended from time to time, and any successor statute or statutes.

     “Base Rate” means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate.” The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

     “Base Rate Loan” means a Committed Loan that bears interest at a rate based on the a Base Rate.

     “BBA LIBOR Daily Floating Rate” means a fluctuating rate of interest equal to the rate per annum (rounded upwards to the nearest 1/100 of one percent) equal to the British Bankers Association LIBOR Rate, as published by Reuters (or other commercially available source providing quotations of such rate as selected by the Administrative Agent from time to time) as determined for each Business Day at approximately 11:00 a.m. London time two (2) London Banking Days (as defined below) prior to the date in question, for U.S. Dollar deposits (for delivery on the first day of such interest period) with a one month term, as adjusted from time to time in the Administrative Agent’s sole discretion for reserve requirements, deposit insurance assessment rates and other regulatory costs. If such rate is not available at such time for any reason, then the rate for that interest period will be determined by such alternate method as reasonably selected by the Administrative Agent. A “London Banking Day” is a day on which banks in London are open for business and dealing in offshore dollars.

     “BBA LIBOR Daily Floating Rate Loan” means a Swing Line Loan that bears interest at a rate based on the BBA LIBOR Daily Floating Rate.

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     “Borrower” has the meaning specified in the introductory paragraph hereto.

     “Borrower Materials” has the meaning specified in Section 6.02.

     “Borrowing” means a Committed Borrowing or a Swing Line Borrowing, as the context may require.

     “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office with respect to Obligations denominated in Dollars is located and:

     (a) if such day relates to any interest rate settings as to a Eurocurrency Rate Loan denominated in Dollars, any fundings, disbursements, settlements and payments in Dollars in respect of any such Eurocurrency Rate Loan, or any other dealings in Dollars to be carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan, means any such day on which dealings in deposits in Dollars are conducted by and between banks in the London interbank eurodollar market;

     (b) if such day relates to any interest rate settings as to a Eurocurrency Rate Loan denominated in Euro, any fundings, disbursements, settlements and payments in Euro in respect of any such Eurocurrency Rate Loan, or any other dealings in Euro to be carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan, means a TARGET Day;

     (c) if such day relates to any interest rate settings as to a Eurocurrency Rate Loan denominated in a currency other than Dollars or Euro, means any such day on which dealings in deposits in the relevant currency are conducted by and between banks in the London or other applicable offshore interbank market for such currency; and

     (d) if such day relates to any fundings, disbursements, settlements and payments in a currency other than Dollars or Euro in respect of a Eurocurrency Rate Loan denominated in a currency other than Dollars or Euro, or any other dealings in any currency other than Dollars or Euro to be carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan (other than any interest rate settings), means any such day on which banks are open for foreign exchange business in the principal financial center of the country of such currency.

     “Cash Collateralize” has the meaning specified in Section 2.04(g).

     “Cash Equivalent Investments” means investments, denominated in Dollars, that are:

     (a) short-term obligations of, or unconditionally guaranteed by, the United States government or its agencies;

     (b) short-term investments in tax-exempt obligations of any State of the United States of America, or any municipality of any such State, that are rated, at such date of acquisition, MIG-1 or better by Moody’s or A-1 or better by S&P;

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     (c) commercial paper notes that are rated P-1 or better by Moody’s or A-1 or better by S&P;

     (d) certificates of deposit, banker’s acceptances, demand deposit accounts and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any Lender or any commercial bank having, or which is the principal banking subsidiary of a bank holding company having, one of the two highest long-term unsecured debt ratings obtainable from Moody’s or from S&P; provided, in each case, that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest;

     (e) fully collateralized repurchase agreements, which agreements have a term of not more than 90 days, for securities described in clause (a) or (b) of this definition (it being understood that the maturity limitations in said clause (a) and (b) are not applicable for purposes of this clause (e)) and entered into with any Lender or any financial institution satisfying the criteria of clause (d) above;

     (f) short-term investments in “money market funds” within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (e) of this definition; and

     (g) short-term auction rate preferred securities and like securities rated Aaa or higher by Moody’s or AAA or higher by S&P.

     For purposes of the foregoing and Section 7.02(a), “short-term” shall refer to (1) an investment that matures or is otherwise payable not later than one year after the making

of such investment, and (2) an investment that matures or is otherwise payable not later than two years after the making of such investment and that is made at a time when the aggregate outstanding Loan balance is zero. No investment described in the preceding clause (2) shall cease to be regarded as “short-term” or be required to be redeemed or otherwise liquidated by virtue of subsequent Borrowings occurring prior to the time that the remaining time to maturity of such investment is greater than one year.

     “Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

     “Change of Management” means any event by which any two of Linda A. Mason, Roger H. Brown, David H. Lissy and Mary Ann Tocio (and any replacement for any of them reasonably acceptable to the Administrative Agent) cease to have primary responsibility for the principal executive and/or management functions of the Borrower.

     “Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01.

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     “Code” means the Internal Revenue Code of 1986.

     “Commitment” means, as to each Lender, its obligation to (a) make Committed Loans to the Borrower pursuant to Section 2.01, (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the Dollar amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

     “Committed Borrowing” means a borrowing consisting of simultaneous Committed Loans of the same Type, in the same currency and, in the case of Eurocurrency Rate Loans, having the same Interest Period, made by each of the Lenders pursuant to Section 2.01.

     “Committed Loan” has the meaning specified in Section 2.01.

     “Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a conversion of Committed Loans from one Type to the other, or (c) a continuation of Eurocurrency Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.

     “Compliance Certificate” means a certificate substantially in the form of Exhibit E.

     “Consolidated Debt Service Coverage Ratio” means, for any Test Period, the ratio of (a) Consolidated EBITDAR for the Test Period minus dividends and cash taxes paid during such Test Period, to (b) Consolidated Interest Charges for such Test Period plus scheduled principal payments in respect of Consolidated Funded Indebtedness during such Test Period, plus cash payments of rent expense of the Borrower and its Subsidiaries on a consolidated basis for such Test Period attributable to operating leases.

     “Consolidated EBITDA” means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges for such period, (ii) the provision for Federal, state, local and foreign taxes payable by the Borrower and its Subsidiaries for such period, (iii) depreciation and amortization expense for such period and (iv) other non-recurring and extraordinary non-cash expenses of the Borrower and its Subsidiaries for such period reducing Consolidated Net Income for such period minus (b) the following to the extent included in calculating Consolidated Net Income for such period, without duplication: (i) Federal, state, local and foreign tax credits of the Borrower and its Subsidiaries for such period if the aggregate amount of such credits for such period exceeds 5% of the provision for Federal, state, local and foreign taxes payable by the Borrower and its Subsidiaries for such period and (ii) all non-recurring and extraordinary non-cash items increasing Consolidated Net Income for such period.

     “Consolidated EBITDAR” means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges for such period, (ii) the provision for Federal, state, local and foreign taxes

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payable by the Borrower and its Subsidiaries for such period, (iii) depreciation and amortization expense for such period, (iv) rent expense for such period attributable to operating leases, and (v) other non-recurring and extraordinary non-cash expenses of the Borrower and its Subsidiaries for such period reducing Consolidated Net Income for such period minus (b) the following to the extent included in calculating Consolidated Net Income for such period, without duplication: (i) Federal, state, local and foreign tax credits of the Borrower and its Subsidiaries for such period if the aggregate amount of such credits for such period exceeds 5% of the provision for Federal, state, local and foreign taxes payable by the Borrower and its Subsidiaries for such period and (ii) all non-recurring and extraordinary non-cash items increasing Consolidated Net Income for such period.

     “Consolidated Funded Indebtedness” means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the sum (without duplication) of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including those that are Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) all purchase money Indebtedness, (c) all direct obligations arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments, (d) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business), (e) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations, (f) without duplication, all Guarantees with respect to outstanding Indebtedness of the types specified in clauses (a) through (e) above of Persons other than the Borrower or any Subsidiary, and (g) all Indebtedness of the types referred to in clauses (a) through (f) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Borrower or a Subsidiary is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Borrower or such Subsidiary.

     “Consolidated Interest Charges” means, for any Test Period, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses of the Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, and (b) the portion of rent expense of the Borrower and its Subsidiaries with respect to such Test Period under capital leases that is treated as interest in accordance with GAAP.

     “Consolidated Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the then applicable Test Period.

     “Consolidated Net Income” means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the net income of the Borrower and its Subsidiaries for that period.

     “Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

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     “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

     “Credit Extension” means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

     “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

     “Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

     “Default Rate” means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that with respect to a Eurocurrency Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate and any Mandatory Cost) otherwise applicable to such Loan plus 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus 0.5% per annum.

     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Committed Loans, participations in L/C Obligations or participations in Swing Line Loans required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

     “Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

     “Dollar” and “$” mean lawful money of the United States.

     “Dollar Equivalent” means, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in any Alternative Currency, the equivalent amount thereof in Dollars as determined by the Administrative Agent at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of Dollars with such Alternative Currency.

     “Domestic Subsidiary” means any Subsidiary that is organized under the laws of any political subdivision of the United States.

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     “Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent, the L/C Issuer and the Swing Line Lender, and (ii) unless an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

     “EMU” means the economic and monetary union in accordance with the Treaty of Rome 1957, as amended by the Single European Act 1986, the Maastricht Treaty of 1992 and the Amsterdam Treaty of 1998.

     “EMU Legislation” means the legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency.

     “Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

     “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

     “Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

     “ERISA” means the Employee Retirement Income Security Act of 1974.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

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     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

     “Euro” and “EUR” mean the lawful currency of the Participating Member States introduced in accordance with the EMU Legislation.

     “Eurocurrency Rate” means, for any Interest Period with respect to a Eurocurrency Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for deposits in the relevant currency (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the “Eurocurrency Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in the relevant currency for delivery on the first day of such Interest Period in Same Day Funds in the approximate amount of the Eurocurrency Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch (or other Bank of America branch or Affiliate) to major banks in the London or other offshore interbank market for such currency at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.

     “Eurocurrency Rate Loan” means a Committed Loan that bears interest at a rate based on the Eurocurrency Rate. Eurocurrency Rate Loans may be denominated in Dollars or in an Alternative Currency. All Committed Loans denominated in an Alternative Currency must be Eurocurrency Rate Loans.

     “Event of Default” has the meaning specified in Section 8.01.

     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by any jurisdiction (or any political subdivision thereof) with which such recipient has a connection (other than as a result of making or participating in Credit Extensions hereunder), (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the

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Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01(a).

     “Existing Credit Agreement” has the meaning set forth in the preamble hereto.

     “Existing Commitments” means the Commitments (as such term is defined in the Existing Credit Agreement) of the Existing Lenders under the Existing Credit Agreement.

     “Existing Lenders” means the “Lenders” (as such term is defined in the Existing Credit Agreement) party to the Existing Credit Agreement.

     “Existing Letters of Credit” means the Letters of Credit (as such term is defined in the Existing Credit Agreement) issued under the Existing Credit Agreement and outstanding as of the Closing Date.

     “Existing Loans” means Loans (as such term is defined in the Existing Credit Agreement) made by the Existing Lenders under the Existing Credit Agreement.

     “Existing Loan Documents” means the Loan Documents (as such term is defined in the Existing Credit Agreement).

     “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

     “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

     “FRB” means the Board of Governors of the Federal Reserve System of the United States.

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     “Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

     “GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

     “Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

     “Guarantee” means, as to any Person, any (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

     “Guarantors” means, collectively, Bright Horizons, Inc., a Delaware corporation, Bright Horizons Children’s Centers, Inc., a Delaware corporation, CorporateFamily Solutions, Inc., a Tennessee corporation, and each Material Domestic Subsidiary that becomes a Guarantor after the date hereof pursuant to Section 6.12.

     “Guaranty” means the Guaranty made by the Guarantors in favor of the Administrative Agent and the Lenders, substantially in the form of Exhibit G.

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     “Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

     “Immaterial Subsidiary” means any Domestic Subsidiary that is not a Material Domestic Subsidiary.

     “Increase Effective Date” has the meaning specified in Section 2.16(d).

     “Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

     (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

     (b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

     (c) net obligations of such Person under any Swap Contract;

     (d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and, in each case, not past due for more than 60 days);

     (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse (provided that if the recourse of the holder of such indebtedness is limited to such property, then the amount of such indebtedness shall be so limited);

     (f) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations of such Person;

     (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person at the option of the holder or at a fixed or determinable date, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

     (h) all Guarantees of such Person in respect of any of the foregoing.

     For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited

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liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.

     “Indemnified Taxes” means Taxes other than Excluded Taxes.

     “Indemnitees” has the meaning specified in Section 10.04(b).

     “Information” has the meaning specified in Section 10.07.

     “Initial Loans” means the Loans made on the Closing Date pursuant to Section 2.03.

     “Intangible Assets” means assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount and capitalized research and development costs.

     “Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, that if any Interest Period for a Eurocurrency Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each month, and the Maturity Date.

     “Interest Period” means, as to each Eurocurrency Rate Loan, the period commencing on the date such Eurocurrency Rate Loan is disbursed (or converted to or continued as a Eurocurrency Rate Loan) and ending on the date 7 days or one, two, three or six months thereafter (or such other period as has been consented to by all Lenders in accordance with Section 2.02), as selected by the Borrower in its Committed Loan Notice; provided that:

     (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless, in the case of a Eurocurrency Rate Loan, such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

     (ii) any Interest Period pertaining to a Eurocurrency Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

     (iii) no Interest Period shall extend beyond the Maturity Date.

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     “Internal Control Event” means a material weakness in, or fraud that involves management or other employees who have a significant role in, the Borrower’s internal controls over financial reporting, in each case as described in the Securities Laws.

     “Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

     “IP Rights” has the meaning specified in Section 5.17.

     “IRS” means the United States Internal Revenue Service.

     “ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).

     “Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Borrower (or any Subsidiary) or in favor the L/C Issuer and relating to any such Letter of Credit.

     “Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

     “L/C Advance” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage. All L/C Advances shall be denominated in Dollars.

     “L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit that has not been reimbursed on the date when made or refinanced as a Committed Borrowing. All L/C Borrowings shall be denominated in Dollars.

     “L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

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     “L/C Issuer” means Bank of America in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder.

     “L/C Obligations” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.09. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

     “Lender” has the meaning specified in the introductory paragraph hereto and, as the context requires, includes the Swing Line Lender.

     “Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

     “Letter of Credit” means any standby letter of credit issued hereunder and shall include the Existing Letters of Credit. A Letter of Credit issued hereunder shall be a standby letter of credit. Letters of Credit may be issued only in Dollars.

     “Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.

     “Letter of Credit Expiration Date” means the day that is seven days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).

     “Letter of Credit Fee” has the meaning specified in Section 2.04(i).

     “Letter of Credit Sublimit” means an amount equal to $2,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Commitments.

     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

     “Loan” or “Loans” means an extension of credit by a Lender to the Borrower under Article II in the form of a Committed Loan or a Swing Line Loan.

     “Loan Documents” means this Agreement, each Note, each Issuer Document and the Guaranty.

     “Loan Parties” means, collectively, the Borrower and each Guarantor.

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     “Mandatory Cost” means, with respect to any period, the percentage rate per annum determined in accordance with Schedule 1.01.

     “Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the results of operations, business, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole; (b) a material impairment of the ability of the Loan Parties to perform their respective obligations under the Loan Documents; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.

     “Material Domestic Subsidiary” means, at any time, any Domestic Subsidiary having, together with its Subsidiaries, consolidated assets in excess of 25% of the total assets of the Borrower and its consolidated Subsidiaries, determined on a consolidated basis as of such time.

     “Maturity Date” means July 22, 2010.

     “Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.

     “Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

     “Non-Extension Notice Date” has the meaning set forth in Section 2.04(b)(iii).

     “Note” means a promissory note made by the Borrower in favor of a Lender evidencing Loans made by such Lender, substantially in the form of Exhibit D.

     “Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or Swap Contracts to which a Lender or any Affiliate of a Lender is a party or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

     “Off-Balance Sheet Liabilities” means, with respect to any Person as of any date of determination thereof, without duplication and to the extent not included as a liability on the consolidated balance sheet of such Person and its Subsidiaries in accordance with GAAP: (a) with respect to any asset securitization transaction (including any accounts receivable purchase facility) (i) the unrecovered investment of purchasers or transferees of assets so transferred, and (ii) any other payment, recourse, repurchase, hold harmless, indemnity or similar obligation of such Person or any of its Subsidiaries in respect of assets transferred or payments made in respect thereof, other than limited recourse provisions that are customary for transactions of such type and that neither (x) have the effect of limiting the loss or credit risk of such purchasers or transferees with respect to payment or performance by the obligors of the assets so transferred nor (y) impair the characterization of the transaction as a true sale under applicable Laws

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(including Debtor Relief Laws); (b) the monetary obligations under any financing lease or so-called “synthetic,” tax retention or off-balance sheet lease transaction that, upon the application of any Debtor Relief Law to such Person or any of its Subsidiaries, would be characterized as indebtedness; (c) the monetary obligations under any sale and leaseback transaction that does not create a liability on the consolidated balance sheet of such Person and its Subsidiaries; or (d) any other monetary obligation arising with respect to any other transaction that (i) is characterized as indebtedness for tax purposes but not for accounting purposes in accordance with GAAP or (ii) is the functional equivalent of or takes the place of borrowing but that does not constitute a liability on the consolidated balance sheet of such Person and its Subsidiaries (for purposes of this clause (d), any transaction structured to provide tax deductibility as interest expense of any dividend, coupon or other periodic payment will be deemed to be the functional equivalent of a borrowing).

     “Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

     “Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

     “Outstanding Amount” means (i) with respect to Committed Loans on any date, the Dollar Equivalent amount of the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of such Committed Loans occurring on such date; (ii) with respect to Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of such Swing Line Loans occurring on such date; and (iii) with respect to any L/C Obligations on any date, the aggregate outstanding amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Borrower of Unreimbursed Amounts.

     “Overnight Rate” means, for any day, (a) with respect to any amount denominated in Dollars, the greater of (i) the Federal Funds Rate and (ii) an overnight rate determined by the Administrative Agent, the L/C Issuer, or the Swing Line Lender, as the case may be, in accordance with banking industry rules on interbank compensation, and (b) with respect to any amount denominated in an Alternative Currency, the rate of interest per annum at which overnight deposits in the applicable Alternative Currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day

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by a branch or Affiliate of Bank of America in the applicable offshore interbank market for such currency to major banks in such interbank market.

     “Participant” has the meaning specified in Section 10.06(d).

     “Participating Member State” means each state so described in any EMU Legislation.

     “PBGC” means the Pension Benefit Guaranty Corporation.

     “Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

     “Permitted Acquisition” means acquisitions by the Borrower of business, properties and assets of, or Equity Interests in, other Persons (any of the foregoing, a “Target”) so long as the Target is in substantially the same, or a related, line of business as the Borrower and its Subsidiaries and the Borrower has certified in accordance with Section 4.02(d) that no Default or Event of Default exists both before and after giving effect to such proposed transaction.

     “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

     “Platform” has the meaning specified in Section 6.02.

     “Register” has the meaning specified in Section 10.06(c).

     “Registered Public Accounting Firm” has the meaning specified in the Securities Laws and shall be independent of the Borrower as prescribed by the Securities Laws.

     “Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

     “Request for Credit Extension” means (a) with respect to a Borrowing, conversion or continuation of Committed Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.

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     “Required Lenders” means, as of any date of determination, Lenders having at least (so long as there are three or fewer Lenders) 66-2/3% and (so long as there are more than three Lenders) 51% of the Aggregate Commitments or, if the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate at least (so long as there are three or fewer Lenders) 66-2/3% and (so long as there are more than three Lenders) 51% of the Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

     “Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer or assistant treasurer of a Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

     “Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to the Borrower’s stockholders, partners or members (or the equivalent Person thereof).

     “Revaluation Date” means, with respect to any Loan, each of the following: (i) each date of a Borrowing of a Eurocurrency Rate Loan denominated in an Alternative Currency, (ii) each date of a continuation of a Eurocurrency Rate Loan denominated in an Alternative Currency pursuant to Section 2.02 and (iii) such additional dates as the Administrative Agent shall determine or the Required Lenders shall require.

     “Same Day Funds” means (a) with respect to disbursements and payments in Dollars, immediately available funds, and (b) with respect to disbursements and payments in an Alternative Currency, same day or other funds as may be determined by the Administrative Agent to be customary in the place of disbursement or payment for the settlement of international banking transactions in the relevant Alternative Currency.

     “Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

     “SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

     “Securities Laws” means the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the Public Company Accounting

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Oversight Board, as each of the foregoing may be amended and in effect on any applicable date hereunder.

     “Shareholders’ Equity” means, as of any date of determination, consolidated shareholders’ equity of the Borrower and its Subsidiaries as of that date determined in accordance with GAAP.

     “S&P” means Standard & Poor’s Ratings Service, or any successor thereto.

     “Spot Rate” for a currency means the rate determined by the Administrative Agent to be the rate quoted by the Person acting in such capacity as the spot rate for the purchase by such Person of such currency with another currency through its principal foreign exchange trading office at approximately 11:00 a.m. on the date two Business Days prior to the date as of which the foreign exchange computation is made; provided that the Administrative Agent may obtain such spot rate from another financial institution designated by the Administrative Agent if the Person acting in such capacity does not have as of the date of determination a spot buying rate for any such currency.

     “Sterling” and “£” mean the lawful currency of the United Kingdom.

     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

     “Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, that are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

     “Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap

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Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

     “Swing Line” means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.05.

     “Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.05.

     “Swing Line Lender” means Bank of America in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.

     “Swing Line Loan” has the meaning specified in Section 2.05(a).

     “Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.05(b), which, if in writing, shall be substantially in the form of Exhibit C.

     “Swing Line Sublimit” means an amount equal to the lesser of (a) $5,000,000 and (b) the Aggregate Commitments. The Swing Line Sublimit is part of, and not in addition to, the Aggregate Commitments.

     “Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but that, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

     “TARGET Day” means any day on which the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) payment system (or, if such payment system ceases to be operative, such other payment system (if any) determined by the Administrative Agent to be a suitable replacement) is open for the settlement of payments in Euro.

     “Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto that arise as a result of or otherwise are payable in connection with the transactions that are the subject of the Loan Documents.

     “Test Period” means a period of four (4) consecutive fiscal quarters ending on the last day of a fiscal quarter of the Borrower.

     “Threshold Amount” means $2,500,000.

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     “Total Outstandings” means the aggregate Outstanding Amount of all Loans and all L/C Obligations.

     “Type” means, with respect to a Committed Loan, its character as a Base Rate Loan or a Eurocurrency Rate Loan or, with respect to a Swing Line Loan, its character as a Base Rate Loan or a BBA LIBOR Daily Floating Rate Loan.

     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

     “United States” and “U.S.” mean the United States of America.

     “Unreimbursed Amount” has the meaning specified in Section 2.04(c)(i).

     Section 1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

     (a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

     (b) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

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     (c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

     Section 1.03 Accounting Terms.

     (a) Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

     (b) Changes in GAAP. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

     (c) Consolidation of Variable Interest Entities. All references herein to consolidated financial statements of the Borrower and its Subsidiaries or to the determination of any amount for the Borrower and its Subsidiaries on a consolidated basis or any similar reference shall, in each case, be deemed to include each variable interest entity that the Borrower is required to consolidate pursuant to FASB Interpretation No. 46 – Consolidation of Variable Interest Entities: an interpretation of ARB No. 51 (January 2003) as if such variable interest entity were a Subsidiary as defined herein.

     Section 1.04 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

     Section 1.05 Exchange Rates; Currency Equivalents.

     (a) The Administrative Agent shall determine the Spot Rates as of each Revaluation Date to be used for calculating Dollar Equivalent amounts of Credit Extensions and Outstanding Amounts denominated in Alternative Currencies. Such Spot Rates shall become effective as of such Revaluation Date and shall be the Spot Rates employed in converting any amounts between the applicable currencies until the next

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Revaluation Date to occur. Except for purposes of financial statements delivered by Loan Parties hereunder or calculating financial covenants hereunder or except as otherwise provided herein, the applicable amount of any currency (other than Dollars) for purposes of the Loan Documents shall be such Dollar Equivalent amount as so determined by the Administrative Agent.

     (b) Wherever in this Agreement in connection with a Committed Borrowing, conversion, continuation or prepayment of a Eurocurrency Rate Loan, an amount, such as a required minimum or multiple amount, is expressed in Dollars, but such Committed Borrowing or Eurocurrency Rate Loan is denominated in an Alternative Currency, such amount shall be the relevant Alternative Currency Equivalent of such Dollar amount (rounded to the nearest unit of such Alternative Currency, with 0.5 of a unit being rounded upward), as determined by the Administrative Agent.

     Section 1.06 [Reserved].

     Section 1.07 Change of Currency.

     (a) Each obligation of any Loan Party to make a payment denominated in the national currency unit of any member state of the European Union that adopts the Euro as its lawful currency after the date hereof shall be redenominated into Euro at the time of such adoption (in accordance with the EMU Legislation). If, in relation to the currency of any such member state, the basis of accrual of interest expressed in this Agreement in respect of that currency shall be inconsistent with any convention or practice in the London interbank market for the basis of accrual of interest in respect of the Euro, such expressed basis shall be replaced by such convention or practice with effect from the date on which such member state adopts the Euro as its lawful currency; provided that if any Committed Borrowing in the currency of such member state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Committed Borrowing, at the end of the then current Interest Period.

     (b) Each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be appropriate to reflect the adoption of the Euro by any member state of the European Union and any relevant market conventions or practices relating to the Euro.

     (c) Each provision of this Agreement also shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be appropriate to reflect a change in currency of any other country and any relevant market conventions or practices relating to the change in currency.

     Section 1.08 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

     Section 1.09 Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more

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automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

ARTICLE II.
THE COMMITMENTS AND CREDIT EXTENSIONS

     Section 2.01 Committed Loans. Subject to the terms and conditions set forth herein, each Lender severally agrees to make loans (each such loan, a “Committed Loan”) to the Borrower in Dollars or in one or more Alternative Currencies from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Commitment (as such Commitment may from time to time increase in accordance with the provisions of Section 2.16 below); provided, however, that after giving effect to any Committed Borrowing, (i) the Total Outstandings shall not exceed the Aggregate Commitments, (ii) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Commitment, and (iii) the aggregate Outstanding Amount of all Committed Loans denominated in Alternative Currencies shall not exceed the Alternative Currency Sublimit. Within the limits of each Lender’s Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01, prepay under Section 2.06, and reborrow under this Section 2.01. Committed Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.

     Section 2.02 Borrowings, Conversions and Continuations of Committed Loans.

     (a) Each Committed Borrowing, each conversion of Committed Loans from one Type to the other, and each continuation of Eurocurrency Rate Loans shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 11:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurocurrency Rate Loans denominated in Dollars or of any conversion of Eurocurrency Rate Loans denominated in Dollars to Base Rate Loans, (ii) four Business Days prior to the requested date of any Borrowing or continuation of Eurocurrency Rate Loans denominated in Alternative Currencies, and (iii) on the requested date of any Borrowing of Base Rate Loans; provided, however, that if the Borrower wishes to request Eurocurrency Rate Loans having an Interest Period other than 7 days or one, two, three or six months in duration as provided in the definition of “Interest Period”, the applicable notice must be received by the Administrative Agent not later than 11:00 a.m. (i) four Business Days prior to the requested date of such Borrowing, conversion or continuation of Eurocurrency Rate Loans denominated in Dollars, or (ii) five Business Days prior to the requested date of such Borrowing, conversion or continuation of Eurocurrency Rate Loans denominated in Alternative Currencies, whereupon the Administrative Agent shall give prompt notice to the Lenders of such request and determine whether the requested Interest Period is acceptable to all of them. Not later than 11:00 a.m., (i) three Business Days before the requested date of such Borrowing, conversion or continuation of Eurocurrency Rate Loans denominated in

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Dollars, or (ii) four Business Days prior to the requested date of such Borrowing, conversion or continuation of Eurocurrency Rate Loans denominated in Alternative Currencies, the Administrative Agent shall notify the Borrower (which notice may be by telephone) whether or not the Interest Period requested pursuant to the preceding sentence has been consented to by all the Lenders. Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Each Borrowing of, conversion to or continuation of Eurocurrency Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $1,000,000 in excess thereof. Except as provided in Sections 2.04(c) and 2.05(c), each Committed Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of Eurocurrency Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Committed Loans to be borrowed, converted or continued, (iv) the Type of Committed Loans to be borrowed or to which existing Committed Loans are to be converted, (v) if applicable, the duration of the Interest Period with respect thereto and (vi) the currency of the Committed Loans to be borrowed. If the Borrower fails to specify a currency in a Committed Loan Notice requesting a Borrowing, then the Committed Loans so requested shall be made in Dollars. If the Borrower fails to specify a Type of Committed Loan in a Committed Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Committed Loans shall be made as, or converted to, Base Rate Loans; provided, however, that in the case of a failure to timely request a continuation of Committed Loans denominated in an Alternative Currency, such Loans shall be continued as Eurocurrency Rate Loans in their original currency with an Interest Period of one month. Any automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurocurrency Rate Loans. If the Borrower requests a Borrowing of, conversion to, or continuation of Eurocurrency Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month. No Committed Loan may be converted into or continued as a Committed Loan denominated in a different currency, but instead must be prepaid in the original currency of such Committed Loan and reborrowed in the other currency.

     (b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount (and currency) of its Applicable Percentage of the applicable Committed Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans or continuation of Committed Loans denominated in a currency other than Dollars, in each case as described in the preceding subsection. In the case of a Committed Borrowing, each Lender shall make the amount of its Committed Loan available to the Administrative Agent in Same Day Funds at the Administrative Agent’s Office for the applicable currency not later than 1:00 p.m., in the case of any Committed Loan denominated in

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Dollars, and not later than the Applicable Time specified by the Administrative Agent in the case of any Committed Loan in an Alternative Currency, in each case on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower; provided, however, that if, on the date the Committed Loan Notice with respect to such Borrowing denominated in Dollars is given by the Borrower, there are L/C Borrowings outstanding, then the proceeds of such Borrowing, first, shall be applied to the payment in full of any such L/C Borrowings, and, second, shall be made available to the Borrower as provided above.

     (c) Except as otherwise provided herein, a Eurocurrency Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurocurrency Rate Loan. During the existence of a Default, no Loans may be requested as, converted to or continued as Eurocurrency Rate Loans (whether in Dollars or any Alternative Currency) without the consent of the Required Lenders, and the Required Lenders may demand that any or all of the then outstanding Eurocurrency Rate Loans denominated in an Alternative Currency be prepaid, or redenominated into Dollars in the amount of the Dollar Equivalent thereof, on the last day of the then current Interest Period with respect thereto.

     (d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurocurrency Rate Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

     (e) After giving effect to all Committed Borrowings, all conversions of Committed Loans from one Type to the other, and all continuations of Committed Loans as the same Type, there shall not be more than ten Interest Periods in effect with respect to Committed Loans.

     Section 2.03 Initial Loans and Commitments. Subject to the satisfaction of the conditions precedent specified in Sections 4.01 and 4.02, effective as of the Closing Date, (i) the Initial Loan of each Lender shall be in the amount set forth opposite the name of such Lender in Schedule 2.01, (ii) the Commitment of each Lender shall be in the amount set forth opposite the name of such Lender in Schedule 2.01 (and the Borrower acknowledges that such Commitments have been utilized in amounts equal to the respective Initial Loans on and as of the Closing Date), and (iii) each Existing Lender sells and assigns to the Lender set forth opposite such Existing Lender’s name in Schedule 2.01 its Existing Commitment and its Existing Loans (or applicable portion thereof), and such Lender, by assignment from such Existing Lender, purchases such Existing Commitment and such Existing Loans to such extent, such that such

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Lender has a Commitment and holds a Loan in an amount equal to the respective amounts set forth opposite its name in Schedule 2.01. Such assignments shall be deemed to occur hereunder automatically, and without any requirement for additional documentation, on the Closing Date notwithstanding anything to contrary in Section 10.06. Each Lender agrees that the Existing Lenders make no representation or warranty and assume no responsibility (x) with respect to any statements, warranties or representations made in or in connection with the Existing Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Existing Loan Documents or any other instrument or document furnished pursuant thereto or (y) with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under the Existing Loan Documents, or any other instrument or document furnished pursuant thereto.

     Section 2.04 Letters of Credit.

     (a) The Letter of Credit Commitment.

     (i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the Lenders set forth in this Section 2.04, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit denominated in Dollars for the account of the Borrower, and to amend or extend Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (x) the Total Outstandings shall not exceed the Aggregate Commitments, (y) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit. Each request by the Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed. All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be subject to and governed by the terms and conditions hereof.

     (ii) The L/C Issuer shall not issue any Letter of Credit if:

     (A) Subject to Section 2.04(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the

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date of issuance or last extension, unless the Required Lenders have approved such expiry date; or

     (B) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date.

     (iii) The L/C Issuer shall not be under any obligation to issue any Letter of Credit if:

     (A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense that was not applicable on the Closing Date and that the L/C Issuer in good faith deems material to it;

     (B) except as otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter of Credit is in an initial stated amount less than $100,000;

     (C) such Letter of Credit is to be denominated in a currency other than Dollars;

     (D) such Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder; or

     (E) a default of any Lender’s obligations to fund under Section 2.04(c) exists or any Lender is at such time a Defaulting Lender hereunder, unless the L/C Issuer has entered into satisfactory arrangements with the Borrower or such Lender to eliminate the L/C Issuer’s risk with respect to such Lender.

     (iv) The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.

     (v) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary

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of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

     (vi) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article IX included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer.

     (b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.

     (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower. Such Letter of Credit Application must be received by the L/C Issuer and the Administrative Agent not later than 11:00 a.m. at least two Business Days (or such later date and time as the Administrative Agent and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the L/C Issuer may reasonably require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may reasonably require. Additionally, the Borrower shall furnish to the L/C Issuer and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the Administrative Agent may reasonably require.

     (ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the

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Administrative Agent with a copy thereof. Unless the L/C Issuer has received written notice from any Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower (or the applicable Subsidiary) or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Letter of Credit.

     (iii) If the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the L/C Issuer shall not permit any such extension if (A) the L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.04(a) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is five Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.

     (iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

     (c) Drawings and Reimbursements; Funding of Participations.

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     (i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Borrower and the Administrative Agent thereof. Not later than 11:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing. If the Borrower fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Applicable Percentage thereof. In such event, the Borrower shall be deemed to have requested a Committed Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice). Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.04(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

     (ii) Each Lender shall upon any notice pursuant to Section 2.04(c)(i) make funds available to the Administrative Agent for the account of the L/C Issuer, in Dollars, at the Administrative Agent’s Office for Dollar-denominated payments in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.04(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the L/C Issuer in Dollars.

     (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Committed Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Lender’s payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.04(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.04.

     (iv) Until each Lender funds its Committed Loan or L/C Advance pursuant to this Section 2.04(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Applicable Percentage of such amount shall be solely for the account of the L/C Issuer.

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     (v) Each Lender’s obligation to make Committed Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.04(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Committed Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Borrower of a Committed Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.

     (vi) If any Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(ii), the L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation. A certificate of the L/C Issuer submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.

     (d) Repayment of Participations.

     (i) At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.04(c), if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Applicable Percentage thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s L/C Advance was outstanding) in Dollars and in the same funds as those received by the Administrative Agent.

     (ii) If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.04(c)(i) is required to be returned under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Applicable

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Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

     (e) Obligations Absolute. The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

     (i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;

     (ii) the existence of any claim, counterclaim, setoff, defense or other right that the Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

     (iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

     (iv) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or

     (v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or any Subsidiary.

     The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will immediately notify the L/C Issuer. The Borrower shall be conclusively deemed to have waived any

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such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.

     (f) Role of L/C Issuer. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties or any correspondent, participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties or any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.04(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower that the Borrower proves were caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason.

     (g) Cash Collateral. Upon the request of the Administrative Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an unpaid L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations. Sections 2.06 and 8.02(c) set forth certain additional requirements to deliver Cash Collateral hereunder. For purposes of this Section 2.04, Section 2.06 and Section 8.02(c), “Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form

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and substance satisfactory to the Administrative Agent and the L/C Issuer (which documents are hereby consented to by the Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked deposit accounts at Bank of America.

     (h) Applicability of ISP and UCP. Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of the ISP shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance shall apply to each commercial Letter of Credit.

     (i) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage a Letter of Credit fee (the “Letter of Credit Fee”) for each standby Letter of Credit equal to the Applicable Rate for Eurocurrency Rate Loans times the daily amount available to be drawn under such Letter of Credit. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.09. Letter of Credit Fees shall be (i) computed on a quarterly basis in arrears and (ii) due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. If there is any change in the Applicable Rate during any quarter, the daily amount available to be drawn under each standby Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect. Notwithstanding anything to the contrary contained herein, upon the request of the Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.

     (j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The Borrower shall pay directly to the L/C Issuer for its own account a fronting fee with respect to each standby Letter of Credit, at the rate per annum agreed to by the Borrower and the L/C Issuer, computed on the daily amount available to be drawn under such Letter of Credit on a quarterly basis in arrears Such fronting fee shall be due and payable on the tenth Business Day after the end of each March, June, September and December in respect of the most recently-ended quarterly period (or portion thereof, in the case of the first payment), commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.09. In addition, the Borrower shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect generally for letters of credit issued by the L/C Issuer. Such

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customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

     (k) Conflict with Issuer Documents. In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

     (l) Letters of Credit Issued for Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary, the Borrower shall be obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.

     Section 2.05 Swing Line Loans.

     (a) The Swing Line. Subject to the terms and conditions set forth herein, the Swing Line Lender agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.05, to make loans in Dollars (each such loan, a “Swing Line Loan”) to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Applicable Percentage of the Outstanding Amount of Committed Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Commitment; provided, however, that after giving effect to any Swing Line Loan, (i) the Total Outstandings shall not exceed the Aggregate Commitments, and (ii) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Commitment, and provided, further, that the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.05, prepay under Section 2.06, and reborrow under this Section 2.05. Each Swing Line Loan shall be a Base Rate Loan or, if requested by the Borrower, BBA LIBOR Daily Floating Rate Loan. Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Swing Line Loan.

     (b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Borrower’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000, and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the Swing

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Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Lender) prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso to the first sentence of Section 2.05(a), or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 3:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower at its office by (i) crediting the account of the Borrower on the books of the Swing Line Lender or (ii) wire transfer of such funds in immediately available funds.

     (c) Refinancing of Swing Line Loans.

     (i) The Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Lender make a Base Rate Loan in an amount equal to such Lender’s Applicable Percentage of the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02. The Swing Line Lender shall furnish the Borrower with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent. Each Lender shall make an amount equal to its Applicable Percentage of the amount specified in such Committed Loan Notice available to the Administrative Agent in Same Day Funds for the account of the Swing Line Lender at the Administrative Agent’s Office for Dollar-denominated payments not later than 1:00 p.m. on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.05(c)(ii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Swing Line Lender.

     (ii) If for any reason any Swing Line Loan cannot be refinanced by such a Committed Borrowing in accordance with Section 2.05(c)(i), the request for Base Rate Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Lenders fund its risk participation in the relevant Swing Line Loan and each Lender’s payment

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to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.05(c)(i) shall be deemed payment in respect of such participation.

     (iii) If any Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.05(c) by the time specified in Section 2.05(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the BBA LIBOR Daily Floating Rate and a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation. A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

     (iv) Each Lender’s obligation to make Committed Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.05(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Committed Loans pursuant to this Section 2.05(c) is subject to the conditions set forth in Section 4.02. No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.

     (d) Repayment of Participations.

     (i) At any time after any Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Applicable Percentage of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s risk participation was funded) in the same funds as those received by the Swing Line Lender.

     (ii) If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Lender shall pay to the Swing Line Lender its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per

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annum equal to the Federal Funds Rate. The Administrative Agent will make such demand upon the request of the Swing Line Lender. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

     (e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Lender funds its Base Rate Loan or risk participation pursuant to this Section 2.05 to refinance such Lender’s Applicable Percentage of any Swing Line Loan, interest in respect of such Applicable Percentage shall be solely for the account of the Swing Line Lender.

     (f) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

     Section 2.06 Prepayments.

     (a) The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Committed Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of Eurocurrency Rate Loans denominated in Dollars, (B) four Business Days prior to any date of prepayment of Eurocurrency Rate Loans denominated in Alternative Currencies, and (C) on the date of prepayment of Base Rate Committed Loans; (ii) any prepayment of Eurocurrency Rate Loans denominated in Dollars shall be in a principal amount of $1,000,000 or a whole multiple of $1,000,000 in excess thereof; (iii) any prepayment of Eurocurrency Rate Loans denominated in Alternative Currencies shall be in a minimum principal amount of $1,000,000 or a whole multiple of $1,000,000 in excess thereof; and (iv) any prepayment of Base Rate Committed Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Committed Loans to be prepaid. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurocurrency Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Committed Loans of the Lenders in accordance with their respective Applicable Percentages.

     (b) The Borrower may, upon notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the date of the prepayment, and (ii) any such prepayment shall be in a

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minimum principal amount of $100,000 or, if less, the entire principal amount then outstanding. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.

     (c) If for any reason the Total Outstandings at any time exceed the Aggregate Commitments then in effect, the Borrower shall immediately prepay Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.06(c) unless after the prepayment in full of the Committed Loans and Swing Line Loans the Total Outstandings exceed the Aggregate Commitments then in effect.

     (d) If the Administrative Agent notifies the Borrower at any time that the Outstanding Amount of all Loans denominated in Alternative Currencies at such time exceeds an amount equal to 105% of the Alternative Currency Sublimit then in effect, then, within two Business Days after receipt of such notice, the Borrower shall prepay Loans in an aggregate amount sufficient to reduce such Outstanding Amount as of such date of payment to an amount not to exceed 100% of the Alternative Currency Sublimit then in effect.

     Section 2.07 Termination or Reduction of Commitments. The Borrower may, upon notice to the Administrative Agent, terminate the Aggregate Commitments, or from time to time permanently reduce the Aggregate Commitments; provided that (i) any such notice shall be received by the Administrative Agent not later than 11:00 a.m. five Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the Borrower shall not terminate or reduce the Aggregate Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Outstandings would exceed the Aggregate Commitments, and (iv) if, after giving effect to any reduction of the Aggregate Commitments, the Alternative Currency Sublimit, Letter of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the Aggregate Commitments, such Sublimit shall be automatically reduced by the amount of such excess. The Administrative Agent will promptly notify the Lenders of any such notice of termination or reduction of the Aggregate Commitments. The amount of any such Aggregate Commitment reduction shall not be applied to the Alternative Currency Sublimit or the Letter of Credit Sublimit unless otherwise specified by the Borrower. Any reduction of the Aggregate Commitments shall be applied to the Commitment of each Lender according to its Applicable Percentage. All fees accrued until the effective date of any termination of the Aggregate Commitments shall be paid on the effective date of such termination.

     Section 2.08 Repayment of Loans.

     (a) The Borrower shall repay to the Lenders on the Maturity Date the aggregate principal amount of Committed Loans outstanding on such date.

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     (b) The Borrower shall repay each Swing Line Loan on the earlier to occur of (i) the date five Business Days after such Loan is made and (ii) the Maturity Date.

     Section 2.09 Interest.

     (a) Subject to the provisions of subsection (b) below, (i) each Eurocurrency Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period therefor at a rate per annum equal to the Eurocurrency Rate for such Interest Period plus the Applicable Rate plus (in the case of a Eurocurrency Rate Loan of any Lender that is loaned from a Lending Office in the United Kingdom or a Participating Member State) the Mandatory Cost; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate; (iii) each Swing Line Loan that is a BBA LIBOR Daily Floating Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the BBA LIBOR Daily Floating Rate plus the Applicable Rate; and (iv) each Swing Line Loan that is not a BBA LIBOR Daily Floating Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate.

     (b) (i) If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

     (ii) If any amount (other than principal of any Loan) payable by the Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required Lenders, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

     (iii) Without duplication of the foregoing, upon the request of the Required Lenders, while any Event of Default exists, the Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

     (iv) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

     (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

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     Section 2.10 Fees; Commitment Fee. In addition to certain fees described in subsections (i) and (j) of Section 2.04, the Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage, a commitment fee equal to the Applicable Rate times the actual daily amount by which the Aggregate Commitments exceed the sum of (i) the Outstanding Amount of Committed Loans and (ii) the Outstanding Amount of L/C Obligations. The commitment fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date. The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.

     Section 2.11 Computation of Interest and Fees. All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America’s “prime rate” shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year), or, in the case of interest in respect of Committed Loans denominated in Alternative Currencies as to which market practice differs from the foregoing, in accordance with such market practice. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is repaid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.13(a), bear interest for one day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

     Section 2.12 Evidence of Debt.

     (a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be presumed correct absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount, currency and maturity of its Loans and payments with respect thereto.

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     (b) In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

     Section 2.13 Payments Generally; Administrative Agent’s Clawback.

     (a) General. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein and except with respect to principal of and interest on Loans denominated in an Alternative Currency, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agent’s Office in Dollars and in Same Day Funds not later than 2:00 p.m. on the date specified herein. Except as otherwise expressly provided herein, all payments by the Borrower hereunder with respect to principal and interest on Loans denominated in an Alternative Currency shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agent’s Office in such Alternative Currency and in Same Day Funds not later than the Applicable Time specified by the Administrative Agent on the dates specified herein. Without limiting the generality of the foregoing, the Administrative Agent may require that any payments due under this Agreement be made in the United States. If, for any reason, the Borrower is prohibited by any Law from making any required payment hereunder in an Alternative Currency, the Borrower shall make such payment in Dollars in the Dollar Equivalent of the Alternative Currency payment amount. The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent (i) after 2:00 p.m., in the case of payments in Dollars, or (ii) after the Applicable Time specified by the Administrative Agent in the case of payments in an Alternative Currency, shall in each case be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

     (b) Funding by Lenders; Presumption by Administrative Agent.

     (i) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Committed Borrowing of Eurocurrency Rate Loans (or, in the case of any Committed Borrowing of Base Rate Loans, prior to 12:00 noon on the date of such Committed Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Committed Borrowing, the Administrative Agent may assume that such Lender

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has made such share available on such date in accordance with Section 2.02 (or, in the case of a Committed Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Committed Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in Same Day Funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the Overnight Rate, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the applicable Committed Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Committed Loan included in such Committed Borrowing (and, to the extent such amount has been previously remitted to the Administrative Agent by the Borrower, such amount shall be paid to the Borrower). Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

     (ii) Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuer hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the L/C Issuer, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the L/C Issuer, in Same Day Funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Overnight Rate.

     A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

     (c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in

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the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

     (d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make Committed Loans, to fund participations in Letters of Credit and Swing Line Loans and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Committed Loan, to fund any such participation or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Committed Loan, to purchase its participation or to make its payment under Section 10.04(c).

     (e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

     Section 2.14 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Committed Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Committed Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Committed Loans and subparticipations in L/C Obligations and Swing Line Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Committed Loans and other amounts owing them, provided that:

     (i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

     (ii) the provisions of this Section shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Committed Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply).

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     Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.

     Section 2.15 Reserved.

     Section 2.16 Increase in Commitments.

     (a) Request for Increase. Provided there exists no Default, upon notice to the Administrative Agent (which shall promptly notify the Lenders), the Borrower may from time to time, request an increase in the Aggregate Commitments by an amount aggregate (for all such requests) not exceeding $40,000,000; provided that (i) any such request for an increase shall be in a minimum amount of $5,000,000, and (ii) there shall be no more than 8 such increases. At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders).

     (b) Lender Elections to Increase. Each Lender shall notify the Administrative Agent within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to, greater than, or less than its Applicable Percentage of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its Commitment.

     (c) Notification by Administrative Agent; Additional Lenders. The Administrative Agent shall notify the Borrower and each Lender of the Lenders’ responses to each request made hereunder. To achieve the full amount of a requested increase and subject to the approval of the Administrative Agent and the L/C Issuer (which approvals shall not be unreasonably withheld), the Borrower may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent and its counsel.

     (d) Effective Date and Allocations. If the Aggregate Commitments are increased in accordance with this Section, the Administrative Agent and the Borrower shall determine the effective date (the “Increase Effective Date”) and the final allocation of such increase. The Administrative Agent shall promptly notify the Borrower and the Lenders of the final allocation of such increase and the Increase Effective Date.

     (e) Conditions to Effectiveness of Increase. As a condition precedent to such increase, the Borrower shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of such Loan Party (i) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase, and (ii) in the case of the Borrower, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article V and the other Loan

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Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Section 2.16, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01, and (B) no Default exists. In addition, the Borrower shall (i) prepay any Committed Loans outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to Section 3.05) to the extent necessary to keep the outstanding Committed Loans ratable with any revised Applicable Percentages arising from any nonratable increase in the Commitments under this Section 2.16 and (ii) execute (and cause each of the other Loan Parties to execute), such amendments to this Agreement and the other Loan Documents as the Administrative Agent shall reasonably deem appropriate.

     (f) Conflicting Provisions. This Section shall supersede any provisions in Sections 2.14 or 10.01 to the contrary.

ARTICLE III.
TAXES, YIELD PROTECTION AND ILLEGALITY

     Section 3.01 Taxes.

     (a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrower shall be required by applicable law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or L/C Issuer, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

     (b) Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

     (c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Lender and the L/C Issuer, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A

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certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the L/C Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be conclusive absent manifest error.

     (d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

     (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

     Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,

     (ii) duly completed copies of Internal Revenue Service Form W-8ECI,

     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or

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     (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

     Without limiting the obligations of the Lenders set forth above regarding delivery of certain forms and documents to establish each Lender’s status for U.S. withholding tax purposes, each Lender agrees promptly to deliver to the Administrative Agent or the Borrower, as the Administrative Agent or the Borrower shall reasonably request, on or prior to the Closing Date, and in a timely fashion thereafter, such other documents and forms required by any relevant taxing authorities under the Laws of any other jurisdiction, duly executed and completed by such Lender, as are required under such Laws to confirm such Lender’s entitlement to any available exemption from, or reduction of, applicable withholding taxes in respect of all payments to be made to such Lender outside of the U.S. by the Borrower pursuant to this Agreement or otherwise to establish such Lender’s status for withholding tax purposes in such other jurisdiction. Each Lender shall promptly (i) notify the Administrative Agent of any change in circumstances that would modify or render invalid any such claimed exemption or reduction, and (ii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Laws of any such jurisdiction that the Borrower make any deduction or withholding for taxes from amounts payable to such Lender. Additionally, the Borrower shall promptly deliver to the Administrative Agent or any Lender, as the Administrative Agent or such Lender shall reasonably request, on or prior to the Closing Date, and in a timely fashion thereafter, such documents and forms required by any relevant taxing authorities under the Laws of any jurisdiction, duly executed and completed by the Borrower, as are required to be furnished by such Lender or the Administrative Agent under such Laws in connection with any payment by the Administrative Agent or any Lender of Taxes or Other Taxes, or otherwise in connection with the Loan Documents, with respect to such jurisdiction.

     (f) Treatment of Certain Refunds. If the Administrative Agent, any Lender or the L/C Issuer determines, in its sole discretion, that it has received a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent, such Lender or the L/C Issuer, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or the L/C Issuer in the event the Administrative Agent, such Lender or the L/C Issuer is required to repay such refund to such Governmental Authority. This

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subsection shall not be construed to require the Administrative Agent, any Lender or the L/C Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

     Section 3.02 Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurocurrency Rate Loans (whether denominated in Dollars or an Alternative Currency), or to determine or charge interest rates based upon the Eurocurrency Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars or any Alternative Currency in the applicable interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurocurrency Rate Loans in the affected currency or currencies or, in the case of Eurocurrency Rate Loans in Dollars, to convert Base Rate Loans to Eurocurrency Rate Loans, shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable and such Loans are denominated in Dollars, convert all Eurocurrency Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurocurrency Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

     Section 3.03 Inability to Determine Rates. If the Required Lenders determine that for any reason in connection with any request for a Eurocurrency Rate Loan or a conversion to or continuation thereof that (a) deposits (whether denominated in Dollars or an Alternative Currency) are not being offered to banks in the applicable offshore interbank market for such currency for the applicable amount and Interest Period of such Eurocurrency Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan (whether denominated in Dollars or an Alternative Currency), or (c) the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurocurrency Rate Loans in the affected currency or currencies shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurocurrency Rate Loans in the affected currency or currencies or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein.

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     Section 3.04 Increased Costs; Reserves on Eurocurrency Rate Loans.

     (a) Increased Costs Generally. If any Change in Law shall:

     (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except (A) any reserve requirement contemplated by Section 3.04(e) and (B) the requirements of the Bank of England and the Financial Services Authority or the European Central Bank reflected in the Mandatory Cost, other than as set forth below) or the L/C Issuer;

     (ii) subject any Lender or the L/C Issuer to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurocurrency Rate Loan made by it, or change the basis of taxation of payments to such Lender or the L/C Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the L/C Issuer);

     (iii) result in the failure of the Mandatory Cost, as calculated hereunder, to represent the cost to any Lender of complying with the requirements of the Bank of England and/or the Financial Services Authority or the European Central Bank in relation to its making, funding or maintaining Eurocurrency Rate Loans; or

     (iv) impose on any Lender or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Eurocurrency Rate Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Rate Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Borrower will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.

     (b) Capital Requirements. If any Lender or the L/C Issuer determines that any Change in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the L/C Issuer’s capital or on the capital of such Lender’s or the L/C Issuer’s holding

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company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the L/C Issuer’s policies and the policies of such Lender’s or the L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company for any such reduction suffered.

     (c) Certificates for Reimbursement. A certificate of a Lender or the L/C Issuer setting forth the amount or amounts necessary to compensate such Lender or the L/C Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender or the L/C Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

     (d) Delay in Requests. Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than six months prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof).

     (e) Reserves on Eurocurrency Rate Loans. The Borrower shall pay to each Lender, without duplication, (i) as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurocurrency Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent manifest error), and (ii) as long as such Lender shall be required to comply with any reserve ratio requirement or analogous requirement of any other central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the Eurocurrency Rate Loans, such additional costs (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) equal to the actual costs allocated to such Commitment or Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which in each case shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Administrative Agent) of such additional interest or costs from such Lender. If a Lender fails to give notice 10 days

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prior to the relevant Interest Payment Date, such additional interest or costs shall be due and payable 10 days from receipt of such notice.

     Section 3.05 Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

     (a) any continuation, conversion, payment or prepayment of any Eurocurrency Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

     (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Eurocurrency Rate Loan on the date or in the amount notified by the Borrower;

     (c) any failure by the Borrower to make payment of any Loan (or interest due thereon) denominated in an Alternative Currency on its scheduled due date or any payment thereof in a different currency; or

     (d) any assignment of a Eurocurrency Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.13;

including any loss of anticipated profits, any foreign exchange losses and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan, from fees payable to terminate the deposits from which such funds were obtained or from the performance of any foreign exchange contract. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

     For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurocurrency Rate Loan made by it at the Eurocurrency Rate for such Loan by a matching deposit or other borrowing in the offshore interbank market for such currency for a comparable amount and for a comparable period, whether or not such Eurocurrency Rate Loan was in fact so funded.

     Section 3.06 Mitigation Obligations; Replacement of Lenders.

     (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such

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Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

     (b) Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender delivers a notice pursuant to Section 3.02, the Borrower may replace such Lender in accordance with Section 10.13.

     Section 3.07 Survival. All of the Borrower’s obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.

ARTICLE IV.
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

     Section 4.01 Conditions Precedent to Effectiveness. The (i) effectiveness of the amendment and restatement of the Existing Credit Agreement provided for hereby as of the Closing Date, (ii) obligations of the Existing Lenders to assign to the Lenders, and the Lenders to purchase from the Existing Lenders, the Existing Commitments and Existing Loans as contemplated in Section 2.03 on the Closing Date, and (iii) the obligations of the Lenders to make the Initial Loans as contemplated in Section 2.03 and of the L/C Issuer to make its initial Credit Extension hereunder, are subject to the satisfaction of the following conditions precedent:

     (a) The Administrative Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders:

     (i) executed counterparts of this Agreement, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower;

     (ii) a ratification and confirmation of the Guaranty by each Guarantor, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower;

     (iii) a Note executed by the Borrower in favor of each Lender requesting a Note;

     (iv) such certificates of board resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party;

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     (v) copies of any changes to each Loan Party’s constitutive documents effected since the date such constitutive documents were last delivered to Administrative Agent, such that Administrative Agent shall have received a copy of each Loan Party’s constitutive documents as amended or supplemented to the Closing Date, certified by a Responsible Officer of the applicable Loan Party;

     (vi) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is validly existing, in good standing and qualified to engage in business in the jurisdiction of its incorporation and each jurisdiction in which it conducts business;

     (vii) a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, and (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect; and

     (viii) such other assurances, certificates, documents, consents or opinions as the Administrative Agent, the L/C Issuer, the Swing Line Lender or the Required Lenders reasonably may require.

     (b) Any fees required by any Loan Document to be paid on or before the Closing Date shall have been paid.

     (c) Unless waived by the Administrative Agent, the Borrower shall have paid all reasonable fees, charges and disbursements of counsel to the Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent).

     Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

     Section 4.02 Conditions to all Credit Extensions. The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to another Type, or a continuation of Eurocurrency Rate Loans) is subject to the following conditions precedent:

     (a) The representations and warranties of the Borrower (and each other Loan Party) contained in Article V or any other Loan Document, or that are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct on and as of the date of such Credit Extension, except to the extent that

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such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01;

     (b) No Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof;

     (c) The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof;

     (d) In the case of a Credit Extension to be denominated in an Alternative Currency, there shall not have occurred any change in national or international financial, political or economic conditions or currency exchange rates or exchange controls that in the reasonable opinion of the Administrative Agent or the Required Lenders (in the case of any Loans to be denominated in an Alternative Currency) would make it impracticable for such Credit Extension to be denominated in the relevant Alternative Currency; and

     (e) In the case of any Request for Credit Extension (including a Letter of Credit Application) in connection with any Permitted Acquisition, the Administrative Agent shall have received, at least five (5) Business Days prior to the date of such Request for Credit Extension, a certificate signed by a Responsible Officer of the Borrower certifying that, after giving effect to the transactions effecting such Permitted Acquisition, no Default or Event of Default will exist or arise therefrom.

     Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to another Type or a continuation of Eurocurrency Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.

ARTICLE V.
REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Administrative Agent and the Lenders that:

     Section 5.01 Existence, Qualification and Power; Compliance with Laws. Each Loan Party and each Subsidiary thereof (a) is duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, and (d) is in compliance with all applicable Laws; except in each case referred to in clauses (b)(i), (c)

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or (d), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

     Section 5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any material Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law applicable to any Loan Party or its properties, except to the extent that such violation could not reasonably be expected to have a Material Adverse Effect. Each Loan Party and each Subsidiary thereof is in compliance with all Contractual Obligations referred to in clause (b)(i), except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

     Section 5.03 Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, except for such as have been obtained and are in full force and effect and except to the extent that a failure to obtain the same could not reasonably be expected to have a Material Adverse Effect.

     Section 5.04 Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors’ rights and (b) the application or general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

     Section 5.05 Financial Statements; No Material Adverse Effect; No Internal Control Event.

     (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including Off-Balance Sheet Liabilities to the extent required by GAAP, liabilities for taxes, material commitments and Indebtedness.

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     (b) The unaudited consolidated balance sheet of the Borrower and its Subsidiaries dated March 31, 2007, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.

     (c) Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

     (d) To the best knowledge of the Borrower, no Internal Control Event has occurred since the date of the Audited Financial Statements, except (i) as disclosed in the Borrower’s public filings with the SEC or (ii) to the extent that the same could not reasonably be expected to have a Material Adverse Effect.

     Section 5.06 Litigation. Except as disclosed on Schedule 5.06, there are no actions, suits, proceedings, claims or disputes pending or, to the best knowledge of the Borrower, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect. There has been no material adverse change in the status, or financial effect on any Loan Party or any Subsidiary thereof, of the matters described on Schedule 5.06.

     Section 5.07 No Default. Neither the Borrower nor any Subsidiary is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

     Section 5.08 Ownership of Property; Liens. Each of the Borrower and each Subsidiary has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The property of the Borrower and its Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01.

     Section 5.09 Environmental Compliance. Each of the Borrower and its Subsidiaries has obtained all environmental, health and safety permits, licenses and other authorizations required under all Environmental Laws to carry on its business as now being or as proposed to be conducted, except to the extent failure to have any such permit, license or authorization could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except for matters that could not reasonably be expected to have, individually or in the

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aggregate, a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any applicable permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received written notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. Notwithstanding any other provision of this Agreement, this Section 5.09 shall be the exclusive representation and warranty by Borrower herein with respect to matters related to Environmental Laws.

     Section 5.10 Insurance. The properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts, with such self-insurance, deductibles and coverages as are customarily maintained by companies engaged in similar businesses and owning similar properties in localities where the Borrower or the applicable Subsidiary operates.

     Section 5.11 Taxes. The Borrower and its Subsidiaries have filed all Federal and other material tax returns and reports required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP and except to the extent that a failure to do so could not reasonably be expected to have a Material Adverse Effect. To the best knowledge of the Borrower, there is no proposed tax assessment against the Borrower or any Subsidiary that would, if made, have a Material Adverse Effect. Neither any Loan Party nor any Subsidiary thereof is party to any tax sharing agreement.

     Section 5.12 ERISA Compliance.

     (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. The Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

     (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. To the best knowledge of the Borrower, here has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

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     (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

     Section 5.13 Subsidiaries; Equity Interests. The Borrower has no Subsidiaries other than those specifically disclosed in Schedule 5.13 (as such schedule may be supplemented in writing from time to time). All such Subsidiaries are, directly or indirectly, beneficially and of record, wholly-owned by the Borrower. All of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Borrower or a Subsidiary of the Borrower as shown in Schedule 5.13, free and clear of all Liens. The Borrower has no equity investments in any other corporation or entity other than those specifically disclosed in Schedule 5.13. On the date of this Agreement, no Subsidiary that is not a Domestic Subsidiary has, together with its Subsidiaries, consolidated assets in excess of 25% of the total assets of the Borrower and its consolidated Subsidiaries, determined on a consolidated basis. All of the outstanding Equity Interests in the Borrower have been validly issued, and are fully paid and nonassessable.

     Section 5.14 Margin Regulations; Investment Company Act.

     (a) The Borrower is not engaged and will not engage, principally or as one of its activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.

     (b) Neither the Borrower nor any Subsidiary is or is required to be registered as an “investment company”, or subject to regulation, under the Investment Company Act of 1940.

     Section 5.15 Disclosure. There is no fact known to the Borrower or any of its Subsidiaries in respect of the Borrower and its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect and that has not been disclosed in the Loan Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated by the Loan Documents. No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished), when taken as a whole, contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not

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misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

     Section 5.16 Compliance with Laws. Each of the Borrower and each Subsidiary is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

     Section 5.17 Intellectual Property; Licenses, Etc. The Borrower and its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, “IP Rights”) that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person, except to the extent that a failure to do so could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower or any Subsidiary infringes upon any rights held by any other Person. No claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

ARTICLE VI.
AFFIRMATIVE COVENANTS

     So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each Subsidiary to:

     Section 6.01 Financial Statements. Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent:

     (a) as soon as available, but in any event within 120 days after the end of each fiscal year of the Borrower (commencing with the fiscal year ended December 31, 2007), a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by (i) a report and opinion of a Registered Public Accounting Firm of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with generally accepted auditing standards and applicable Securities Laws and shall not be subject to any “going concern” or like qualification or

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exception or any qualification or exception as to the scope of such audit and (ii) an attestation report of such Registered Public Accounting Firm as to the Borrower’s internal controls pursuant to Section 404 of Sarbanes-Oxley expressing a conclusion to which the Required Lenders do not reasonably object; and

     (b) as soon as available, but in any event within 45 days after the end of each fiscal quarter of the Borrower (commencing with the fiscal quarter ended June 30, 2007), a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal quarter and for the portion of the Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, such consolidated statements to be certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries at such date and for such period in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes; and

     (c) as soon as available, but in any event before the end of each fiscal year of the Borrower, forecasts prepared by management of the Borrower, in form reasonably satisfactory to the Administrative Agent and the Required Lenders, of consolidated balance sheets and statements of income or operations and EBITDA of the Borrower and its Subsidiaries on a quarterly basis for the immediately following fiscal year (including the fiscal year in which the Maturity Date occurs).

     As to any information contained in materials furnished pursuant to Section 6.02(c), the Borrower shall not be separately required to furnish such information under clauses (a) or (b) above, but the foregoing shall not be in derogation of the obligation of the Borrower to furnish the information and materials described in clauses (a) and (b) above at the times specified therein.

     Section 6.02 Certificates; Other Information. Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

     (a) [reserved];

     (b) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the delivery of the financial statements for the fiscal quarter ended June 30, 2007), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower;

     (c) promptly after any request by the Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Borrower by independent accountants in connection with the accounts or books of the Borrower or any Subsidiary, or any audit of any of them;

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     (d) promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements that the Borrower files with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto;

     (e) promptly, and in any event within five Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation or other inquiry by such agency regarding financial or other operational results of any Loan Party or any Subsidiary thereof; and

     (f) promptly, such additional information regarding the business, financial or corporate affairs of the Borrower or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may from time to time reasonably request.

     Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a governmental or commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) the Borrower shall deliver paper copies of such documents on a case-by-case basis to the Administrative Agent or any Lender requesting the same and (ii) the Borrower shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and, if requested, provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Administrative Agent. Except for such Compliance Certificates, the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

     The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arrangers will make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”) and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a “Public Lender”). The Borrower hereby agrees that so long as the Borrower is the issuer

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of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent, the Arrangers, the L/C Issuer and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor;” and (z) the Administrative Agent and the Arrangers shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.”

     Section 6.03 Notices. Promptly notify the Administrative Agent and each Lender:

     (a) of the occurrence of any Default;

     (b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Borrower or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws;

     (c) of the occurrence of any ERISA Event;

     (d) of any material change in accounting policies or financial reporting practices by the Borrower or any Subsidiary; and

     (e) of the occurrence of any Internal Control Event; and

     (f) of the execution of any offer, letter of intent or similar agreement or documentation in connection with any Permitted Acquisition.

     Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

     Section 6.04 Payment of Obligations. Pay and discharge before the same shall become delinquent or in default, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such

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Subsidiary; (b) all lawful claims that, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness.

     Section 6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

     Section 6.06 Maintenance of Properties. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities.

     Section 6.07 Maintenance of Insurance. Maintain with financially sound and reputable insurance companies not Affiliates of the Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types, in such amounts and with such self-insurance and deductibles as are customarily maintained under similar circumstances by such other Persons and providing for not less than 30 days’ prior notice to the Administrative Agent of termination, lapse or cancellation of such insurance.

     Section 6.08 Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

     Section 6.09 Books and Records. (a) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or such Subsidiary, as the case may be.

     Section 6.10 Inspection Rights. Permit representatives and independent contractors of the Administrative Agent and its designees to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrower and at such reasonable times during

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normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice.

     Section 6.11 Use of Proceeds. Use the proceeds of the Credit Extensions for general corporate purposes and Permitted Acquisitions of the Borrower, in both instances not in contravention of any Law or of any Loan Document.

     Section 6.12 Additional Guarantors. Notify the Administrative Agent, promptly and in any event within 20 Business Days after the last day of the Borrower’s fiscal quarter in which any Person becomes a Material Domestic Subsidiary, and cause such Person, within 30 Business Days after the last day of the Borrower’s fiscal quarter in which such Person becomes a Material Domestic Subsidiary, to (a) become a Guarantor by executing and delivering to the Administrative Agent a counterpart of the Guaranty or such other document as the Administrative Agent shall deem appropriate for such purpose, and (b) deliver to the Administrative Agent documents of the types referred to in clauses (iii) and (iv) of Section 4.01(a) and favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in clause (a)), all in form, content and scope reasonably satisfactory to the Administrative Agent.

     Section 6.13 Depository, Payroll, Operating Account. Maintain the Borrower’s primary depository, payroll and other operating bank deposit and securities accounts with the Lenders, to the extent such accounts and services rendered in connection therewith are of sufficient quality to meet the business requirements of the Borrower and are priced within a reasonable level of the then prevailing market rates for such accounts and services.

ARTICLE VII.
NEGATIVE COVENANTS

     So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly:

     Section 7.01 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:

     (a) Liens pursuant to any Loan Document;

     (b) Liens existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof, provided that (i) the property covered thereby is not changed, (ii) the amount secured or benefited thereby is not increased, (iii) the direct or any contingent obligor with respect thereto is not changed, and (iv) any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.03(b);

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     (c) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

     (d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens imposed by law in respect of property of the Borrower or any Subsidiary, arising in the ordinary course of business, and (i) which do not secure Indebtedness for borrowed money, (ii) which do not in the aggregate materially detract from the value of such property and do not materially impair the use thereof in the operation of the business of the Borrower and its Subsidiaries, and (iii) which are not overdue for a period of more than 60 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person;

     (e) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA;

     (f) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

     (g) easements, rights-of-way, restrictions and other similar encumbrances affecting real property, and lessor’s or lessee’s liens in respect of real property or personal property leases entered into by the Borrower or any Subsidiary in the ordinary course of business and covering only assets located at or constituting a part of the property so leased, which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;

     (h) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h); and

     (i) Liens securing Indebtedness permitted under Section 7.03(e); provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (ii) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition;

     (j) conditional mortgages and other similar Liens entered into by the Borrower or a Subsidiary in favor of their clients in the ordinary course of business to secure the performance by the Borrower or such Subsidiary of their respective contractual obligations arising from client sponsor transition of assets, client prepayments or client funding of construction and/or operating expenses; provided that in each case (i) any such Lien does not at any time encumber any property other than the property that is the subject of such contractual obligations, (ii) any such Lien secures only the obligations of the Borrower or such Subsidiary to the corresponding client in connection with such

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contractual obligations and (iii) any such client’s recourse in respect of such contractual obligations is limited solely to the property subject to such Lien and such client does not have any other recourse to the Borrower, any Subsidiary or any of their properties in respect of any deficiency; and

     (k) additional Liens securing Indebtedness of the Borrower or any Subsidiary up to but not exceeding $5,000,000 in the aggregate at any time.

     Section 7.02 Investments. Make any Investments, except:

     (a) Investments held by the Borrower or such Subsidiary in the form of Cash Equivalent Investments or short-term marketable debt securities;

     (b) Reasonable advances to officers, directors and employees of the Borrower and Subsidiaries in the ordinary course of business for travel, entertainment, relocation and similar ordinary business purposes;

     (c) (i) Investments of the Borrower in any Guarantor and Investments of any Guarantor in the Borrower or in another Guarantor and (ii) Investments of the Borrower and its Subsidiaries in Subsidiaries that are not Guarantors but are, directly or indirectly, wholly-owned by the Borrower;

     (d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

     (e) Guarantees permitted by Section 7.03;

     (f) Investments in Permitted Acquisitions; and

     (g) other Investments not exceeding $5,000,000 in the aggregate in any fiscal year of the Borrower.

     Section 7.03 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:

     (a) Indebtedness under the Loan Documents;

     (b) Indebtedness outstanding on the date hereof and listed on Schedule 7.03 and any refinancings, refundings, renewals or extensions thereof; provided that (i) the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder and (ii) the terms relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms, taken as a whole,

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of any such refinancing, refunding, renewing or extending Indebtedness, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Loan Parties or the Lenders than the terms of the agreements or instruments governing the Indebtedness being refinanced, refunded, renewed or extended and the interest rate applicable to any such refinancing, refunding, renewing or extending Indebtedness does not exceed the then applicable market interest rate;

     (c) Guarantees of the Borrower in respect of Indebtedness of any Guarantor otherwise permitted hereunder;

     (d) obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person, and not for purposes of speculation or taking a “market view;” and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party;

     (e) Indebtedness in respect of capital leases, Synthetic Lease Obligations and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(i); provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $10,000,000;

     (f) Indebtedness secured by Liens permitted under Section 7.01 (j); and

     (g) other Indebtedness of the Borrower or its Subsidiaries in an aggregate principal amount not to exceed $10,000,000 at any time outstanding.

     Section 7.04 Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result therefrom, and subject to Section 6.12:

     (a) any Subsidiary or other Person may merge with (i) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries, provided that when any Guarantor is merging with another Subsidiary or other Person, the Guarantor shall be the continuing or surviving Person;

     (b) any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Subsidiary; provided that if the transferor in such a transaction is a Guarantor, then the transferee must either be the Borrower or a Guarantor;

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     (c) any Immaterial Subsidiary may liquidate or dissolve if (i) the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders and (ii) any corresponding Disposition is permitted under Section 7.05(a), (c), (f) or (g); and

     (d) any Immaterial Subsidiary may be merged with another Person that is not a Material Domestic Subsidiary as the means by which a Disposition permitted by Section 7.05(f) is accomplished.

     Section 7.05 Dispositions. Make any Disposition or enter into any agreement to make any Disposition, except:

     (a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business;

     (b) Dispositions of equipment or real property to the extent that (i) such property is exchanged for credit against the purchase price of replacement property or (ii) the proceeds of such Disposition are reasonably promptly applied to the purchase price of replacement property;

     (c) Dispositions of property by the Borrower to any Guarantor; and Dispositions of property by any Subsidiary to the Borrower or to a wholly-owned Subsidiary; provided that if the transferor of such property is a Guarantor, the transferee thereof must either be the Borrower or a Guarantor;

     (d) Dispositions permitted by Section 7.04;

     (e) non-exclusive licenses of IP Rights in the ordinary course of business and substantially consistent with past practice for terms not exceeding five years;

     (f) Dispositions by the Borrower and its Subsidiaries not otherwise permitted under this Section 7.05; provided that (i) at the time of such Disposition, no Default shall exist or would result from such Disposition and (ii) the aggregate book value of all property Disposed of in reliance on this clause (f) in any fiscal year shall not exceed an amount equal to 5% of the consolidated assets of the Borrower and its Subsidiaries as of the end of the preceding fiscal year; and

     (g) Closures of child care facilities by the Borrower or any Subsidiary in the exercise of the Borrower’s good faith business judgment.

provided, however, that any Disposition pursuant to clauses (b) through (f) shall be in compliance with (if and to the extent applicable) Section 7.08.

     Section 7.06 Restricted Payments. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom:

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     (a) each Subsidiary may make Restricted Payments to the Borrower, the Guarantors and any other Person that owns an Equity Interest in such Subsidiary, ratably according to their respective holdings of the type of Equity Interest in respect of which such Restricted Payment is being made;

     (b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person;

     (c) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire Equity Interests issued by it with the proceeds received from the substantially concurrent issue of new shares of its common stock or other common Equity Interests;

     (d) the Borrower may declare and pay cash dividends or other distributions to its stockholders; and

     (e) the Borrower may purchase, redeem or otherwise acquire for cash Equity Interests issued by it.

     Section 7.07 Change in Nature of Business. Engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the date hereof or any business reasonably related or incidental thereto.

     Section 7.08 Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate.

     Section 7.09 Burdensome Agreements; Negative Pledge. Enter into any Contractual Obligation (other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any Subsidiary to make Restricted Payments to the Borrower or any Guarantor or otherwise to transfer property to the Borrower or any Guarantor, (ii) of any Subsidiary to Guarantee the Indebtedness of the Borrower or (iii) of the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person; provided, however, that this clause (iii) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under Section 7.03(e) solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person.

     Section 7.10 Use of Proceeds. Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of any of the regulations of the FRB, including Regulation U.

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     Section 7.11 Financial Covenants.

     (a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as of the end of any fiscal quarter of the Borrower to be greater than 2.50:1.00.

     (b) Consolidated Debt Service Coverage Ratio. Permit the Consolidated Debt Service Coverage Ratio as of the end of any fiscal quarter of the Borrower to be less than 1.50:1.00.

     (c) Shareholders’ Equity. Permit Shareholders’ Equity at any time to be less than $100,000,000.

ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES

     Section 8.01 Events of Default. Any of the following shall constitute an Event of Default:

     (a) Non-Payment. The Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, and in the currency required hereunder, any amount of principal of any Loan or any L/C Obligation, or (ii) within three Business Days after the same becomes due, any interest on any Loan or on any L/C Obligation, or any fee due hereunder, or (iii) within three Business Days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or

     (b) Specific Covenants. The Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.01, 6.02, 6.03, 6.05(a), 6.10, 6.11 or 6.12 or Article VII; or

     (c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days ; or

     (d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading when made or deemed made; or

     (e) Cross-Default. (i) The Borrower or any Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any

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instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which the Borrower or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which the Borrower or any Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by the Borrower or such Subsidiary as a result thereof is greater than the Threshold Amount; or

     (f) Insolvency Proceedings, Etc. Any Loan Party or any of its Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or

     (g) Inability to Pay Debts; Attachment. (i) The Borrower or any Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or

     (h) Judgments. There is entered against the Borrower or any Subsidiary (i) a final judgment or order for the payment of money in an aggregate amount exceeding $1,000,000 (to the extent enforcement of such judgment is not stayed by judicial order within 90 days or such judgment is not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 20 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or

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     (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount; or

     (j) Invalidity of Loan Documents. Any provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document; or

     (k) Change of Management. There occurs any Change of Management.

     Section 8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:

     (a) declare the commitment of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;

     (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;

     (c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and

     (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents;

provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.

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     Section 8.03 Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

     First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;

     Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal, interest and Letter of Credit Fees) payable to the Lenders and the L/C Issuer (including fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuer and amounts payable under Article III), ratably among them in proportion to the respective amounts described in this clause Second payable to them;

     Third, to payment of that portion of the Obligations constituting accrued and unpaid Letter of Credit Fees and interest on the Loans, L/C Borrowings and other Obligations, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Third payable to them;

     Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Fourth held by them;

     Fifth, to the Administrative Agent for the account of the L/C Issuer, to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit;

     Sixth, to the Administrative Agent for the account of any Lender or Affiliate of any Lender party to a Swap Contract with the Borrower, to Cash Collateralize all Obligations of the Borrower under such Swap Contract; and

     Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.

     Subject to Section 2.04(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.

ARTICLE IX.
ADMINISTRATIVE AGENT

     Section 9.01 Appointment and Authority. Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take

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such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuer, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.

     Section 9.02 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

     Section 9.03 Exculpatory Provisions. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:

     (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

     (b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and

     (c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

     The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower, a Lender or the L/C Issuer.

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     The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

     Section 9.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

     Section 9.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

     Section 9.06 Resignation of Administrative Agent. The Administrative Agent may at any time give notice of its resignation to the Lenders, the L/C Issuer and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with (so long as no Default has occurred and is continuing) the consent (not to be unreasonably withheld or delayed) of the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders and the L/C Issuer, appoint a successor

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Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Administrative Agent, its sub agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.

     Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also constitute its resignation as L/C Issuer and Swing Line Lender. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer and Swing Line Lender, (b) the retiring L/C Issuer and Swing Line Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to the retiring L/C Issuer to effectively assume the obligations of the retiring L/C Issuer with respect to such Letters of Credit.

     Section 9.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender and the L/C Issuer acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the L/C Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

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     Section 9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of the Book Managers or Arrangers listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the L/C Issuer hereunder.

     Section 9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise

     (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections 2.04(i) and (j), 2.10 and 10.04) allowed in such judicial proceeding; and

     (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.10 and 10.04.

     Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

     Section 9.10 Guaranty Matters. The Lenders and the L/C Issuer irrevocably authorize the Administrative Agent, at its option and in its discretion, to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder. Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.10.

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ARTICLE X.
MISCELLANEOUS

     Section 10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

     (a) waive any condition set forth in Section 4.01(a) without the written consent of each Lender;

     (b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender;

     (c) postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Lenders (or any of them) or any mandatory reduction of the Aggregate Commitments hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

     (d) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary (i) to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest or Letter of Credit Fees at the Default Rate or (ii) to amend any financial covenant hereunder (or any defined term used therein) even if the effect of such amendment would be to reduce the rate of interest on any Loan or L/C Borrowing or to reduce any fee payable hereunder ;

     (e) change Section 2.14 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender;

     (f) amend the definition of “Alternative Currency” without the written consent of each Lender;

     (g) change any provision of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; or

     (h) release all or substantially all of the value of the Guaranty (except in accordance with Section 9.10) without the written consent of each Lender;

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and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer as such under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender as such under this Agreement; and (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent as such under this Agreement or any other Loan Document. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender.

     Section 10.02 Notices; Effectiveness; Electronic Communication.

     (a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

     (i) if to the Borrower, the Administrative Agent, the L/C Issuer or the Swing Line Lender, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02;

     (ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire; and

     (iii) if such notice relates to Agency Servicing, wire instructions, Agency Management or any L/C Credit Extension, to the applicable Person, address, telecopier number, electronic mail address or telephone number specified on Schedule 10.02.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

     (b) Electronic Communications. Notices and other communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e mail and Internet or intranet websites) pursuant to

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procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent and/or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

     (c) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower, any Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to the Borrower, any Lender, the L/C Issuer or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

     (d) Change of Address, Etc. Each of the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender may change its address, electronic mail address, telecopier or telephone number for notices and other communications hereunder

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by notice to the other parties hereto. Each other Lender may change its address, electronic mail address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

     (e) Reliance by Administrative Agent, L/C Issuer and Lenders. The Administrative Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify the Administrative Agent, the L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

     Section 10.03 No Waiver; Cumulative Remedies. No failure by any Lender, the L/C Issuer or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

     Section 10.04 Expenses; Indemnity; Damage Waiver.

     (a) Costs and Expenses. The Borrower shall pay (i) all reasonable out of pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out of pocket expenses incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out of pocket expenses incurred by the Administrative Agent, any Lender or the L/C Issuer (including the fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the L/C Issuer), and shall pay all fees and time charges for attorneys who may be employees of the Administrative Agent, any Lender or the L/C Issuer, in connection

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with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

     (b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the L/C Issuer, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

     (c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the L/C Issuer or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the L/C Issuer or such Related

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Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or the L/C Issuer in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or L/C Issuer in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.12(d).

     (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

     (e) Payments. All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.

     (f) Survival. The agreements in this Section shall survive the resignation of the Administrative Agent and the L/C Issuer, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

     Section 10.05 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative Agent, the L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent, the L/C Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the applicable Overnight Rate from time to time in effect, in the applicable currency of such recovery or payment. The obligations of the Lenders and the L/C

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     Issuer under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

     Section 10.06 Successors and Assigns.

     (a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder or under any other Loan Document without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

     (b) Assignments by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this subsection (b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that

     (i) except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met;

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     (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned, except that this clause (ii) shall not apply to rights in respect of Swing Line Loans;

     (iii) any assignment of a Commitment must be approved by the Administrative Agent, the L/C Issuer and the Swing Line Lender unless the Person that is the proposed assignee is itself a Lender (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and

     (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount, if any, required as set forth in Schedule 10.06, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.

     (c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by each of the Borrower and the L/C Issuer at any reasonable time and from time to time upon reasonable prior notice. In addition, at any time that a request for a consent for a material or substantive change to the Loan Documents is pending, any Lender may request and receive from the Administrative Agent a copy of the Register.

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     (d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries ) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.13 as though it were a Lender.

     (e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01(e) as though it were a Lender.

     (f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

     (g) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be,

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to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

     (h) Resignation as L/C Issuer or Swing Line Lender after Assignment. Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Commitment and Loans pursuant to subsection (b) above, Bank of America may, (i) upon 30 days’ notice to the Borrower and the Lenders, resign as L/C Issuer and/or (ii) upon 30 days’ notice to the Borrower, resign as Swing Line Lender. In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be. If Bank of America resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)). If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c). Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.

     Section 10.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction

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relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender, the L/C Issuer or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.

     For purposes of this Section, “Information” means all information received from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary, provided that, in the case of information received from the Borrower or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

     Each of the Administrative Agent, the Lenders and the L/C Issuer acknowledges that (a) the Information may include material non-public information concerning the Borrower or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.

     Section 10.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer, irrespective of whether or not such Lender or the L/C Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender or the L/C Issuer different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have. Each Lender and the L/C Issuer agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

     Section 10.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining

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whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

     Section 10.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

     Section 10.11 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

     Section 10.12 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     Section 10.13 Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender delivers a notice pursuant to Section 3.02, or if any Lender is a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an

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Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

     (a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b);

     (b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

     (c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and

     (d) such assignment does not conflict with applicable Laws.

     A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

     Section 10.14 Governing Law; Jurisdiction; Etc.

     (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS.

     (b) SUBMISSION TO JURISDICTION. THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS SITTING IN SUFFOLK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE DISTRICT OF MASSACHUSETTS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH COMMONWEALTH OF MASSACHUSETTS COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER

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LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

     (c) WAIVER OF VENUE. THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

     (d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

     Section 10.15 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     Section 10.16 USA Patriot Act Notice. Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act.

     Section 10.17 Time of the Essence. Time is of the essence of the Loan Documents.

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     Section 10.18 Judgment Currency. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of each Loan Party in respect of any such sum due from it to the Administrative Agent or any Lender hereunder or under the other Loan Documents shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by the Administrative Agent or such Lender, as the case may be, of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent or such Lender, as the case may be, may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent or any Lender from any Loan Party in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or such Lender, as the case may be, against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Administrative Agent or any Lender in such currency, the Administrative Agent or such Lender, as the case may be, agrees to return the amount of any excess to the Borrower (or to any other Person who may be entitled thereto under applicable law).

     Section 10.19 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as an instrument under seal of the date first above written.

BRIGHT HORIZONS FAMILY SOLUTIONS, INC.
By:	/s/ Elizabeth J. Boland
Name:	Elizabeth J. Boland
Title:	Chief Financial Officer

BANK OF AMERICA, N.A., as Administrative Agent
By:	/s/ Kalens Herold
Name:	Kalens Herold
Title:	Assistant Vice President

BANK OF AMERICA, N.A., as a Lender, L/C Issuer and Swing Line Lender
By:	/s/ Jean S. Manthorne
Name:	Jean S. Manthorne
Title:	Senior Vice President

JPMORGAN CHASE BANK, as a Lender
By:	/s/ Peter M. Killea
Name:	Peter M. Killea
Title:	Vice President

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EX-10.22

EXHIBIT 10.22

BRIGHT HORIZONS FAMILY SOLUTIONS, INC.

SEVERANCE AGREEMENT

January 24, 2008

Danroy Henry
15 Symphony Drive
Easton, MA 02356

Dear Dan:

     WHEREAS the Board of Directors (the “Board”) of Bright Horizons Family Solutions, Inc. (the “Company”) has determined that it is in the best interests of the Company and its stockholders for the Company to agree to provide benefits to certain members of management, including yourself, who are responsible for certain senior team functions for the Company and the overall viability of the Company’s business, in the event that you should leave the employ of the Company under the circumstances described below;

     WHEREAS the Board recognizes that the possibility of a change of control of the Company is unsettling to such members of management, including yourself, and desires to make these arrangements at this time to help assure a continuing dedication by you and your fellow members of management to your duties to the Company and its stockholders, notwithstanding the occurrence hereafter of attempts to gain control of the Company and the resultant disruptive effects on the management of the Company’s business;

     WHEREAS the Board believes it important, should the Company receive proposals from third parties with respect to its future, to enable you, without being influenced by the uncertainties of your own employment situation and in addition to your regular duties, to assess and advise the Board whether such

     proposals would be in the best interests of the Company and its stockholders and to take such other action regarding such proposals as the Board might determine to be appropriate; and

     WHEREAS the Board also wishes to demonstrate to executives of the Company that the Company is concerned with the welfare of its executives and intends to see that loyal senior team employees are treated fairly;

     NOW, THEREFORE, to assure the Company that it will have your continued dedication and the availability of your advice and counsel notwithstanding the possibility, threat or occurrence of a bid to take over control of the Company, and to induce you to remain in the employ of the Company, and for other good and valuable consideration, the Company and you agree as follows:

     1. Employee’s Undertaking. You agree that, in the event that any Person enters into an acquisition agreement to acquire the Company, or substantially all of its assets, begins a tender or exchange offer, circulates a proxy to the Company’s stockholders or takes other steps to effect a Change of Control, you will not voluntarily leave the employ of the Company and will faithfully and diligently render the services contemplated in the recitals to this Agreement until such Person has abandoned or terminated his efforts to effect a Change of Control or until a Change of Control has occurred.

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     2. Severance Benefits. In the event that, within twenty-four (24) months after a Change of Control, (a) your employment with the Company is terminated for any reason other than for Cause, death or disability or (b) you terminate your employment for Good Reason within ninety (90) days of the occurrence of the event which constitutes Good Reason, then the Company will provide you the following severance pay and benefits, subject to your continued performance under this Agreement and to the further provisions of this Agreement:

          2.1 Within thirty (30) days of such termination of employment, the Company will pay your base salary accrued through the date of such termination to the extent not theretofore paid and a prorated portion of any bonus payable for the fiscal year in which the date of termination occurs.

          2.2 So long as you are not in breach of any provision of this Agreement, the Company will provide you severance pay following the termination of your employment for a period equal to twelve (12) months (the “Severance Payment Period”). Biweekly, in accordance with the customary payroll schedule, severance pay shall equal the current annual salary plus most recent full fiscal year’s cash bonus divided by twenty-six (26). Severance payments shall be made in accordance with the Company’s regular payroll practices and shall be reduced by taxes and all other legally-required deductions.

          2.3 If you elect to continue your participation and that of your eligible dependents in the Company’s group health plans in accordance with applicable federal law (including Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”)) following termination of your employment, then, for a period of twelve (12) months from the date your employment terminates or until you become eligible for coverage under the group health plans of another employer, whichever is less, the Company will continue to pay the same share of the premiums for such participation; provided, however, that if your continued participation in the Company’s group health plans is not possible under the terms of those plans, the Company shall instead arrange to provide you and your dependents substantially similar benefits upon comparable terms or pay you an amount equal to the full cash value thereof in cash which cash amount shall be paid within 90 days of your termination of employment under this Section 2. Your participation in all other employee benefits plans will cease on the date your employment terminates, in accordance with the terms of those plans.

     3. Competitive Activities and Other Claims.

          3.1 You agree that at any time during the Severance Payment Period, you will not, directly or indirectly, whether as owner, partner, investor, consultant, agent, employee or otherwise, compete with the business of the Company or any of its subsidiaries or affiliates or undertake any active planning for any business competitive with that of the Company or any of its subsidiaries or affiliates in any geographic area in which the Company does business or is formally planning at any time prior to the termination of your employment to do business, without the prior written consent of the Board, which consent may be withheld at the Board’s sole discretion.

          3.2 In the event of termination of your employment under the circumstances described herein, the arrangements provided for by this Agreement, by any stock option or other written agreement between you and the Company in effect at that time and by any applicable employee benefit plans of the Company in effect at that time (in each case as modified by this Agreement) will constitute the entire obligation of the Company to you and performance by the Company will constitute full settlement of any claim that you might otherwise assert against the Company or any of its subsidiaries or affiliates on account of such termination.

     4. Confidentiality.

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     You acknowledge that the Company and its subsidiaries and affiliates continually develop Confidential Information, that you may develop Confidential Information for the Company or its subsidiaries and affiliates, and that you may learn of Confidential Information during the course of employment. You agree that all Confidential Information that you create or to which you have access as a result of your employment is and shall remain the sole and exclusive property of the Company and that you will comply with the policies and procedures of the Company and its subsidiaries and affiliates for protecting Confidential Information. You further agree that, except as required for the proper performance of your duties for the Company or as required by applicable law (and then only to the extent required), you will not, directly or indirectly, use for your own benefit or gain, or assist others in the application of or disclose any Confidential Information. You understand and agree that these restrictions will continue to apply after your employment terminates, regardless of the reason for termination and regardless of whether you are receiving or are entitled to receive any payments or other benefits under this Agreement.

     5. Enforceability and Remedies.

          5.1 You agree that the restrictions on, and other provisions relating to, your activities contained in this Agreement are fully reasonable and necessary to protect the goodwill, Confidential Information and other legitimate interests of the Company. You also acknowledge and agree that, were you to breach the provisions of this Agreement, the harm to the Company would be irreparable. You therefore agree that in the event of such a breach or threatened breach the Company shall, in addition to any other remedies available to it, have the right to obtain preliminary and permanent injunctive relief against any such breach without having to post bond. You further agree that, in addition to any other relief awarded to the Company as a result of your breach of any of the provisions of this Agreement, the Company shall be entitled to recover all payments made to you or on your behalf hereunder.

          5.2 You hereby agree that in the event any provision of this Agreement shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too long a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law.

     6. Definitions. Words or phrases which are initially capitalized or within quotation marks shall have the meanings provided in this Section 6 and as provided elsewhere herein. For purposes of this Agreement, the following definitions apply:

          6.1 “Cause” shall mean (i) your failure to comply with the policies of the Company or any Affiliate or your failure to perform your duties in substantial compliance with your responsibilities, which failure is not cured to the reasonable satisfaction of the Company within fifteen (15) days of written notice to Employee of such failure to so comply; (ii) your commission of any act of dishonesty or breach of trust in connection with performance of employment-related duties as determined by the Board, in its sole discretion; and (iii) your conviction of, or pleading guilty or nolo contendere to, any felony or crime of moral turpitude.

          6.2. “Change of Control” shall be deemed to take place if hereafter (i) any Person becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Act”)) of securities of the Company representing more than 50% of the combined voting power of the Company’s then-outstanding securities, (ii) the Company is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which

3

members of the Board in office immediately prior to such transaction or event constitute less than a majority of the Board thereafter, or (iii) individuals who, at the date hereof, constitute the Board (the “Continuing Directors”) cease for any reason to constitute a majority thereof, provided, however, that any director who is not in office at the date hereof but whose election by the Board or whose nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the date hereof or whose election or nomination for election was previously so approved shall be deemed to be a Continuing Director for purposes of this Agreement. Notwithstanding the foregoing provisions of this paragraph, a “Change of Control” will not be deemed to have occurred solely because of the acquisition of securities of the Company (or any reporting requirement under the Act relating thereto) by an employment benefit plan maintained by the Company for its employees.

          6.3 “Confidential Information” means any and all information of the Company, its subsidiaries and affiliates that is not generally known by others with whom they compete or do business, or with whom they plan to compete or do business and any and all information, publicly known in whole or in part or not, which, if disclosed by the Company or any of its subsidiaries or affiliates, would assist in competition against any of them. Confidential Information includes without limitation such information relating to (i) the financial performance and strategic plans of the Company, its subsidiaries and affiliates, (ii) the identity and special needs of their customers and the structure of any contractual relationship with such customers and (iii) the people and organizations with whom they have business relationships and those relationships. Confidential Information also includes any and all information that the Company or any of its subsidiaries or affiliates has received from others with any understanding that it would not be disclosed.

          6.4 “Good Reason” means any material diminution in your base salary or position or nature or scope of responsibilities (other than by inadvertence) as to which you have provided written notice to the Board within thirty (30) days of the initial existence of such diminution, which notice shall set forth in reasonable detail the nature of such Good Reason and the Board shall not have remedied such diminution within thirty (30) days of receiving such written notice.

          6.5 “Person” means an individual, a corporation, an association, a partnership, an estate, a trust or other entity or organization (including a “group” as defined in Section 13(d)(3) or 14(d)(2) of the Act), other than the Company or any of its subsidiaries or affiliates.

     7. Assignment. Neither the Company nor you may make any assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other; provided, however, that the Company may assign its rights and obligations under this Agreement without your consent in the event that the Company shall hereafter affect a reorganization, or consolidate with, or merge into any Person or other entity or transfer all or substantially all of its property or assets to any Person. This Agreement shall inure to the benefit of and be binding upon the Company, its successors (including without limitation any transferee of all or substantially all of its assets) and permitted assigns and upon you, your executors, administrators, heirs and permitted assigns.

     In the event of any merger, consolidation, or sale of assets as described above, nothing contained in this Agreement will detract from or otherwise limit your right to participate or privilege of participation in any stock option or purchase plan or any bonus, profit sharing, pension, group insurance, hospitalization, or other incentive or benefit plan or arrangement which may be or become applicable to executives of the corporation resulting from such merger or consolidation or the corporation acquiring such assets of the Company.

4

     In the event of any merger, consolidation or sale of assets as described above, references to the Company in this Agreement, shall unless the context suggests otherwise, be deemed to include the entity resulting from such merger or consolidation or the acquirer of such assets of the Company.

     All payments required to be made, or other benefits required to be provided, by the Company hereunder to you or your dependents, beneficiaries, or estate will be subject to the withholding of such amounts relating to tax and/or other payroll deductions as may be required by law.

     8. Notices. Any and all notices, requests, demands, acceptances, appointments and other communications provided for by this Agreement shall be in writing (including telex, telecopy or similar tele-transmission) and shall be effective when actually delivered in person or, if mailed, five (5) days after having been deposited in the United States mail, postage prepaid, registered or certified and addressed to you at your last known address on the books of the Company or, in the case of the Company, addressed to its principal place of business, attention of Chief Executive Officer, or to such other address as either party may specify by notice to the other.

     9. Section 409A. It is intended that (1) each installment of the payments provided under this Agreement is a separate “payment” for purposes of Section 409A of the Code and (2) that the payments satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code, including those provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(9)(iii), and 1.409A-1(b)(9)(v). Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on the date your employment with the Company terminates or at such other time that the Company determines to be relevant, you are a “specified employee” (as such term is defined under Treasury Regulation 1.409A-1(i)(1)) of the Company and (ii) that any payments to be provided to you pursuant to this Agreement are or may become subject to the additional tax under Section 409A(a)(1)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code if provided at the time otherwise required under this Agreement then such payments shall be delayed until the date that is six (6) months after the date of your “separation from service” (as such term is defined under Treasury Regulation 1.409A-1(h)) with the Company. Any payments delayed pursuant to this Section 9 shall be made in a lump sum on the first day of the seventh month following your “separation from service” (as such term is defined under Treasury Regulation1.409A-1(h)), and any remaining payments required to be made under this Agreement will be paid upon the schedule otherwise applicable to such payments under the Agreement.

     10. Miscellaneous. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement. This Agreement may not be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by you and such officer as may be specifically designated by the Board. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Massachusetts. The parties agree that in the event it becomes necessary to seek judicial remedies for the breach or threatened breach of this Agreement, the prevailing party will be entitled, in addition to all other remedies, to recover from the non-prevailing party reasonable attorneys’ fees and costs upon the entry of a final nonappealable judgment. Each party shall perform such further acts and execute and deliver such further documents as may be reasonably necessary to carry out the provisions of this Agreement. All payments to you under this Agreement shall be reduced by all applicable withholding required by federal, state or local law. By accepting this Agreement, you hereby agree and acknowledge that neither the Company nor its Affiliates makes any representations with respect to the application of Section 409A of the Code or the Treasury Regulations promulgated thereunder to any tax, economic or legal consequences of any payments payable to you hereunder (including, without limitation, payments pursuant to Section 2 above) and, by the acceptance of this Agreement, you agree to accept the potential application of Section 409A of the Code and the Treasury Regulations promulgated

5

thereunder to the tax and legal consequences of payments payable to you hereunder (including, without limitation, payments pursuant to Section 2 above). The parties agree to cooperate in good faith to amend such documents and to take such actions as may be necessary or appropriate to comply with Section 409A of the Code and the Treasury Regulations promulgated thereunder.

     This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together constitute one and the same instrument. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.

     If you are in agreement with the foregoing, please so indicate by signing and returning to me the original of this Agreement, whereupon this Agreement shall constitute a binding agreement between you and the Company.

     The second copy is for your records.

		Very truly yours,
		BRIGHT HORIZONS FAMILY SOLUTIONS, INC.
			/s/ Steve Dreier
		Name:	Steve Dreier
		Title:	Chief Administrative Officer
ACCEPTED AND AGREED:
/s/ Dan Henry
Name:	Dan. Henry

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EX-21

EXHIBIT 21

SUBSIDIARIES OF THE COMPANY

Access Management, Inc. (a Michigan corporation)
Allmont Ltd. (an Ireland corporation)
Beehive Day Nurseries, Ltd. (a United Kingdom corporation)
BHFS One Limited (a United Kingdom corporation)
BHFS Two Limited (a United Kingdom corporation)
BHFS Three Limited (an Ireland corporation)
Bright Horizons, Inc. (a Delaware corporation)
Bright Horizons Children’s Centers, Inc. (a Delaware corporation)
Bright Horizons Corporation (a Puerto Rico corporation)
Bright Horizons Family Solutions, Ltd. (a Canada corporation)
Bright Horizons Family Solutions, Ltd. (a United Kingdom corporation)
Bright Horizons Family Solutions Ireland, Ltd. (an Ireland corporation)
Bright Horizons Limited Partnership (a Massachusetts partnership)
Bright Horizons Livingston, Ltd. (a United Kingdom corporation)
Bright Horizons Support Services, Ltd. (a United Kingdom corporation)
Child & Co. (Oxford), Ltd. (a United Kingdom corporation)
ChildrenFirst, Inc. (a Massachusetts corporation)
ChildrenFirst, Ltd. (a Canadian corporation)
CorporateFamily SB, Inc. Corporation (a Connecticut Tennessee corporation)
CorporateFamily Solutions, Inc. (a Tennessee corporation)
Creative Movement and Art Center, Inc. (a Massachusetts corporation)
Crocus Early Years Centre Ltd. (a United Kingdom corporation)
Daisies Day Nurseries, Ltd. (a United Kingdom corporation)
Elsie Inglis Red Apple Nursery, Ltd. (a United Kingdom(a Scotland corporation)
Enchanted Forest Day Care, Inc. (a Connecticut corporation)
GreenTree ChildcareChild Care Services, Inc. (a Delaware corporation)
Kidstop at Boynton Beach, Inc. (a Florida corporation)
LakeShore Preparatory School, Inc. (an IllinoisLipton Corporate Child Care Centers, Inc. (a
Delaware corporation)
Lipton Corporate Child Care Centers (JC), Inc. (a Delaware corporation)
Lipton Corporate Child Care Centers (Park Ave.), Inc. (a New York corporation)
Lipton Corporate Child Care Centers (Reston), Inc. (a Delaware corporation)
Lipton Corporate Child Care Centers (Metropolitan Square), Inc. (a District of Columbia
corporation)
Lipton Corporate Childcare, Inc. (New York) (a Delaware corporation)
Lipton Corporate Child Care Centers (WP), Inc. (a Delaware corporation)
Lipton Corporate Child Care Centers (Tysons Corner), Inc. (a Virginia corporation)
Lipton Corporate Child Care Centers (Morris County), Inc. (a Delaware corporation)
Lipton Corporate Child Care Centers (Oakwood at the Windsor), Inc. (a Pennsylvania corporation)
Nurseryworks, Ltd. (a United Kingdom corporation)
Nurseryworks Associates, Ltd. (a United Kingdom corporation)
OxfordPitco 004, Ltd. (a United Kingdom corporation)
Resources in Active Learning, Inc. (a California corporation)
Rutland Red Apple Nursery, Ltd. (a United Kingdom corporation)
Staffquest, Ltd. (a United Kingdom corporation)
The Birrell Collection, Ltd. (a United Kingdom corporation)
Daisies Day Nurseries Ltd. (a United Kingom corporation)
Beehive Day Nurseries Ltd. (a United KingomScotland corporation)

91

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-102320, 333-86170, 333-60023, 333-126210 and 333-134778 on Form S-8 of our reports dated February 29, 2008, relating to the consolidated financial statements and financial statement schedule of Bright Horizons Family Solutions, Inc. (which report expresses an unqualified opinion and includes and explanatory paragraph relating to the adoption of Financial Accounting Standards Board Interpretation No. 48 “Accounting for Uncertainty in Income Taxes”, effective January 1, 2007 and Statement of Financial Accounting Standards No. 123 (R), “Share-Based Payment,” effective January 1, 2006), and the effectiveness of the Bright Horizons Family Solution, Inc. internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Bright Horizons Family Solutions, Inc. for the year ended December 31, 2007.

/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 29, 2008

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EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CEO PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, David H. Lissy, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Bright Horizons Family Solutions, Inc.;
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 functions):

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.

Date: February 29, 2008

/s/ David H. Lissy David H. Lissy

Chief Executive Officer

93

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CFO PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Elizabeth J. Boland, certify that:

1.	I have reviewed this annual report on Form 10-K of Bright Horizons Family Solutions, Inc.;
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 functions):

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.

Date: February 29, 2008

/s/ Elizabeth J. Boland Elizabeth J. Boland Chief Financial Officer

94

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 Annual Report of Bright Horizons Family Solutions, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David H. Lissy, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, 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.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ David H. Lissy David H. Lissy

Chief Executive Officer

February 29, 2008

95

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 Annual Report of Bright Horizons Family Solutions, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elizabeth J. Boland, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, 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.

     A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Elizabeth J. Boland Elizabeth J. Boland

Chief Financial Officer

February 29, 2008

96