Exhibit 10.40


 


October 30,
2009


 


Mr. Dan
Devine

Chief Financial Officer

Bridgepoint Education, Inc.

13500 Evening Creek Dr North, Suite 600

San Diego, CA  92128


 


RE:          Bridgepoint Education, Inc. (“Borrower”)


Obligor
Number 158 (Revolving Line of Credit)


 


Dear
Mr. Devine:


 


Comerica
Bank  (the “Bank”) has approved the
extension of the maturity date of the above referenced credit facility as
evidenced by that certain note/agreement, dated April 12, 2004 (as such
may be amended, restated, modified, supplemented or revised from time to time,
the “Agreement”) from October 31, 2009 to December 31, 2009.  Upon your execution of a counterpart of this
letter, the maturity date shall be so amended.


 


The
Agreement, as modified and amended hereby, shall be and remain in full force
and effect in accordance with its respective terms and hereby is ratified and
confirmed in all respects.  Except as
expressly set forth herein or in Schedule A (Exceptions) attached hereto, the
execution, delivery, and performance of this modification and amendment shall
not operate as a waiver of, or as an amendment of, any right, power, or remedy
of Bank under the Agreement, as in effect prior to the date hereof.  Borrower ratifies and reaffirms the continuing
effectiveness of all promissory notes, guaranties, security agreements,
mortgages, deeds of trust, environmental agreements, and all other instruments,
documents and agreements entered into in connection with the Agreement.


 


By
execution of a counterpart of this letter, Borrower further represents and
warrants (1) that the representations and warranties contained in the
Agreement are true and correct as of the date hereof, and (2) that no
event of default has occurred and is continuing under the Agreement or any
other document, instrument or agreement entered into in connection therewith,
in each case except as set forth on Schedule A (Exceptions) attached hereto.


 


Sincerely,


Comerica
Bank


 


 


	
  By:

  	
  /s/ Greg Park

  	
   

  
	
   

  	
  Greg
  Park

  	
   

  
	
   

  	
  Vice
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Acknowledged
  and accepted on October 30, 2009:

  	
   

  
	
   

  	
   

  
	
  Bridgepoint
  Education, Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Daniel J. Devine

  	
   

  
	
   

  	
  Dan Devine

  	
   

  
	
   

  	
  Chief
  Financial Officer

  	
   

  



 

















 


Schedule A


Exceptions


 


This
Schedule A (this “Schedule”) is made with reference to the Loan and
Security Agreement dated April 12, 2004, as amended to date (the “Agreement”),
by and between Comerica Bank ( “Bank”) and Bridgepoint Education, Inc.,
a Delaware corporation (“Borrower,” or “we”).  The section numbers used in this Schedule
refer to sections in the Agreement. 
Capitalized terms used in this Schedule without definition shall have
the meanings set forth for such terms in the Agreement.


 


This
Schedule is attached to that certain Letter Agreement between Bank and Borrower
and dated as of October 30, 2009 (the “Extension Agreement”) and is
incorporated into and made a part of the Extension Agreement.


 


The
representations and warranties of the Borrower set forth in the Extension
Agreement and made subject to the exceptions and qualifications set forth
herein.  To the extent relevant,
information provided herein with respect to any section of the Agreement is
incorporated by reference into each other section, whether or not such
cross-reference is expressly stated.


 


The
inclusion of any information in this Schedule shall not be deemed to be an admission
or acknowledgment by the Borrower that such information is material to or
outside the ordinary course of business of the Borrower, nor shall such
information be deemed to establish a standard of materiality for purposes of
the Agreement.


 


By
accepting this Schedule, Bank acknowledges and agrees that none of the
exceptions described herein constitute an Event of Default under the Agreement.


 


	
  NO.

  	
   

  	
  SECTION

  	
   

  	
  DESCRIPTION
  OF EXCEPTION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Due
  Organization and Qualification

  	
   

  	
  Each
  Subsidiary of Borrower is a limited liability company, not a corporation.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.6

  	
   

  	
  Intellectual
  Property Collateral

  	
   

  	
  We
  currently have no Patents. 

  We have some Trademarks which are registered and some which are unregistered.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.12

  	
   

  	
  Environmental
  Condition

  	
   

  	
  We
  use hazardous materials at our ground campuses and generate small quantities
  of waste, such as used oil, antifreeze, paint, car batteries and laboratory
  materials. As a result, we are subject to a variety of environmental laws and
  regulations governing, among other things, the use, storage and disposal of
  solid and hazardous substances and waste and the clean-up of contamination at
  our facilities or off-site locations to which we send or have sent waste for
  disposal.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.14

  	
   

  	
  Subsidiaries

  	
   

  	
  On
  March 12, 2009, we formed a new Subsidiary known as Waypoint Outcomes,
  LLC, a Delaware limited liability company.

  



 


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  6.3

  	
   

  	
  Financial
  Statements, Reports, Certificates.

  	
   

  	
  (d) We
  have reserved $50,000 for a claim arising out of an accident at the Ashford
  University campus. 



  Settlement
  of Stockholder Dispute. In February 2009, certain holders of common
  stock and warrants to purchase common stock asserted various claims against
  the Company, its directors and officers and Warburg Pincus based primarily on
  allegations of breach of fiduciary duty and violations of corporate
  governance requirements involving amendments to the Company’s certificate of
  incorporation made in connection with financings in 2005 and by certain stock
  options granted by the Company to its employees. On March 29, 2009, the
  Company reached a settlement with the claimants regarding these claims. The
  terms of the settlement were approved by the Company’s board of directors
  upon the recommendation of a special committee comprised of independent
  directors not affiliated with Warburg Pincus.  



  In exchange for a
  general release of claims against the Company, its directors and officers and
  Warburg Pincus, the Company and Warburg Pincus signed settlement agreements with
  the claimants pursuant to which the Company agreed:  



  (1) to issue an
  aggregate of 710,097 shares of common stock to the holders of common stock as
  of July 27, 2005, of which the claimants held approximately 90%;  



  (2) to make a cash
  payment to holders of warrants to purchase common stock as of July 27,
  2005 (other than holders who have been the Company’s employees, or related to
  the Company’s employees) in an amount equal to $0.63 per share of common
  stock underlying each such warrant, resulting in a total cash payment of
  $433,000, of which the claimants would receive approximately 59%;  



  (3) to amend the
  Amended and Restated Registration Rights Agreement dated January 9, 2009
  (Registration Rights Agreement), among the Company, Warburg Pincus and certain
  other security holders, to provide that the shares of common stock to be sold
  in the Company’s initial public offering would be allocated (i) first,
  to the Company, (ii) second, to members of the Company’s management team
  (in an amount not to exceed 10% of each member’s vested holdings as of
  April 30, 2009, assuming the vesting in full of all exit options held by
  such members as of that date), (iii) third, to all holders of common
  stock and warrants that are parties to the Registration Rights Agreement except
  Warburg Pincus (in an amount not to exceed 50% of the “Registrable
  Securities” held by such holders) and (iv) fourth, to Warburg Pincus;
  and  



  (4) to pay the
  reasonable fees and expenses of counsel to the security holders, not to
  exceed $50,000.  



  The settlement did not
  constitute an admission of guilt or liability on the Company’s part or on the
  part of Warburg Pincus or any of the Company’s officers or directors.

  



 


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  The Company recorded a
  total expense of $11.1 million in the first quarter of 2009 related to
  the stockholder dispute. The amount recorded included a non-cash expense of
  approximately $10.6 million related to the issuance of 710,097 shares of
  common stock (638,093 shares to claimants that have signed settlement
  agreements and 72,004 shares to the remaining common stockholders of record
  or their transferees as of July 27, 2005) based on the estimated fair
  value of the Company’s common stock on the date of settlement.  



  After settling with the
  claimants, we notified the other holders of common stock and other holders of
  warrants to purchase shares of common stock, in each case as of July 27,
  2005, regarding these claims, the settlement terms and their ability to
  participate in the settlement. In April 2009, we reached settlement with
  all of the remaining holders of the common stock and of the shares subject to
  warrants outstanding, in each case as of July 27, 2005, at which time we
  ceased to be a potential obligor related to the claims asserted by these
  security holders. No additional expense was recorded in connection with this
  further settlement.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.5

  	
   

  	
  Taxes

  	
   

  	
  We
  are currently not delinquent in the payment of any taxes applicable to
  Borrower or any Subsidiary. In the past, we have received notices of
  delinquency regarding late tax payments. These delinquencies were immaterial
  and have all been remedied in full with no significant impact on our results
  of operations or standing with any taxing authority.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.10

  	
   

  	
  Intellectual
  Property Rights

  	
   

  	
  We
  have not notified the Bank of each and every occurrence of applications or
  registrations with the United States Copyright Office. 



  On
  October 3, 2009, pursuant to the Digital Millennium Copyright Act, we
  filed with the United States Copyright Office an Interim Designation of Agent
  to Receive Notification of Claimed Infringement for all domain names owned by
  or used by Borrower, Ashford University, LLC and University of the Rockies,
  LLC. 



  On
  September 10, 2008, we entered into a Settlement Agreement and Mutual
  Release relating to a successful claim of trademark infringement and unfair
  competition brought by Borrower against Professional Career Development
  Institute, LLC, arising out of their use of the name “Ashworth University.”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.12

  	
   

  	
  Accounts

  	
   

  	
  To
  our knowledge, none of the accounts we have outside of the Bank are subject
  to account control agreements.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.2

  	
   

  	
  Change
  in Business; Change in Control or Executive Office

  	
   

  	
  Borrower
  has relocated its headquarters to 13500 Evening Creek Drive North,
  Suite 600, San Diego, CA 92128.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.3

  	
   

  	
  Mergers
  or Acquisitions

  	
   

  	
  On
  March 12, 2009, we formed a new Subsidiary known as Waypoint Outcomes,
  LLC, a Delaware limited liability company, to acquire substantially all of
  the assets of Subjective Metrics, Inc., including certain intellectual
  property assets. The acquisition closed on April 14, 2009.

  



 


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  7.6

  	
   

  	
  Distributions

  	
   

  	
  Upon the closing of our
  initial public offering on April 20, 2009, we paid to the holders of
  Series A Convertible Preferred Stock, out of the net proceeds of the
  offering, the accreted value of $27.7 million of the Series A
  Convertible Preferred Stock, which the holders elected to receive in cash.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.7

  	
   

  	
  Investments

  	
   

  	
  We
  have no account control agreements in place for any of our investments.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.8

  	
   

  	
  Transactions
  with Affiliates

  	
   

  	
  The
  following is a description of transactions since January 1, 2006, to
  which we have been a party, in which the amount involved exceeds $120,000 in
  any year and in which any of our directors, executive officers or holders of
  more than five percent of our common stock, on an as-converted basis, or any
  member of the immediate family of any of the foregoing persons has had or
  will have a direct or indirect material interest. 



  Second
  Amended and Restated Registration Rights Agreement 



  We are a party to a Second Amended and Restated
  Registration Rights Agreement dated August 26, 2009 with Warburg Pincus,
  Andrew S. Clark, Daniel J. Devine, Christopher L. Spohn, Jane McAuliffe,
  Rodney T. Sheng, Ross L. Woodard, Charlene Dackerman, Ryan Craig and certain
  other security holders. Under this agreement, security holders are entitled
  to registration rights with respect to their shares of common stock under
  certain circumstances (including shares of common stock issuable upon the
  exercise of certain options and warrants). 



  Indemnification
  Agreements 



  Our certificate of incorporation and bylaws
  require us to indemnify our directors and executive officers to the fullest
  extent permitted by Delaware law. Additionally, as permitted by Delaware law,
  we have entered into indemnification agreements with each of our directors
  and executive officers. 



  Nominating
  Agreement 



  In February 2009, we entered into a
  nominating agreement with Warburg Pincus. Under the nominating agreement, as
  long as Warburg Pincus beneficially owns at least 15% of the outstanding
  shares of common stock after the closing of this offering, we agree, subject
  to our fiduciary obligations, to nominate and recommend to our stockholders
  that two individuals designated by Warburg Pincus be elected to the board. If
  at any time, Warburg Pincus beneficially owns less than 15% but more than 5%
  of the outstanding shares of common stock, we agree, subject to our fiduciary
  obligations, to nominate and recommend to our stockholders that one
  individual designated by Warburg Pincus be elected to the board.

  



 


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  Line
  of Credit with Warburg Pincus 



  In March 2007, we entered into a line of
  credit with Warburg Pincus under which we could borrow up to $3.0 million in
  principal at any time prior to March 2008. Under the line of credit,
  interest accrued at the prime rate plus 1.50%. During 2007, we borrowed a
  total of $2.0 million under the line of credit. As of December 31, 2007,
  all amounts were repaid and the line of credit was cancelled. We paid a total
  of $0.1 million in interest under the line of credit before it was cancelled.
  



  Warburg
  Pincus Guarantee 



  In May 2004, Warburg Pincus entered into a
  guarantee in favor of a postsecondary college in the Connecticut state
  college system pursuant to which it agreed to guarantee our obligations to
  such college arising from an agreement we entered into with such college in May 2004.
  No amounts have been paid under the guarantee. The maximum amount payable
  under the guarantee was $1.0 million from May 2004 to June 2006 and
  $0.5 million from July 2006 to December 2006. Since
  January 2007, the maximum amount payable under the guarantee has been
  $0.1 million. 



  November 2003
  Loan from Warburg Pincus to Andrew Clark 



  In November 2003, Warburg Pincus loaned
  $75,000 to Andrew Clark to finance Mr. Clark’s purchase of 75,000 shares
  of Series A Convertible Preferred Stock from us. In connection with such
  loan, Mr. Clark entered into a Secured Recourse Promissory Note and
  Pledge Agreement with Warburg Pincus which provided that the principal amount
  due under the note would accrue simple interest at a rate of 8% per year
  until November 26, 2005, the maturity date, after which time interest
  would accrue at a penalty rate of 16% per year, compounded monthly. The loan
  was secured by 75,000 shares of Series A Convertible Preferred Stock
  held by Mr. Clark. Mr. Clark repaid the loan in full on March 10,
  2009, at which time the amount due under the note was $146,740 (including
  accrued interest of $71,740). 



  We
  have not disclosed above any agreements which have been terminated before the
  date of the Agreement.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.10

  	
   

  	
  Inventory
  and Equipment

  	
   

  	
  Equipment
  is stored at all of our locations, including: 



  13480
  Evening Creek Drive North, San Diego, California 

  13500 Evening Creek Drive North, San Diego, California 

  13520 Evening Creek Drive North, San Diego, California 

  8620 Spectrum Center Lane, San Diego, California (Sunroad) 

  555 East Pikes Peak Avenue, Colorado Springs, Colorado 

  559 East Pikes Peak Avenue, Colorado Springs, Colorado 

  400 North Bluff Blvd., Clinton, Iowa 

  1310 19th Avenue N.W., Clinton, Iowa 

  Two Bala Plaza Suite 300, Bala Cynwyd, Pennsylvania

  



 


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